Amid the enduring changeups at luxury goods companies’ creative director level, Jacques Roizen, the Managing Director of China Consulting at DLG, shed some light this week on how the musical chairs may affect consumers. For Chinese shoppers, the “here and now” of a brand’s design is more important than its historical context, Roizen told Reuters. As is the case for many Chinese consumers (and I would argue, many younger Western consumers, as well – even if they have historically placed more value on “the continuity of a brand’s identity” than Chinese luxury clients, per Roizen), brand continuity and heritage are not as strong drivers for consumers as they once were.
As Roizen states, in an era of “superstar” creative directors, these big-name creatives “shape the identity of brands and even overshadow a brand’s heritage.” And if the appointment of Demna – the controversial former Balenciaga creative director who is known for everything from banal designs to fantastical, oversized apparel and accessories – to the top spot at Gucci is any indication, brands seem to be fine with that, assuming that significant revenue growth follows, of course.
Kering is not putting it this way, with management saying, among other things, Demna’s “ability to honor the iconic legacy of a brand while embracing a modern sensibility is extraordinary.”
A few key soundbites from analysts in the wake of Demna’s appointment on March 14 …
> “Demna’s hype-driven, streetwear-centric playbook made Balenciaga a sensation in China, but Gucci’s broader audience and deeper heritage necessitate a more refined approach,” said Alexis Bonhomme, CEO of China-based luxury consultancy Trinity Asia.
> “This in-house solution might appear to have been taken in lack of better options, but is also a bold move given Balenciaga’s success,” said Ariane Hayate, European Equity Fund Manager at investment bank Edmond de Rothschild.
> “Some investors are wondering: ‘Who is driving the bus?’”, Bernstein analyst Luca Solca said, citing “a string of expensive brand and real estate acquisitions, several profit warnings and now the upheaval around Gucci’s design chief.”
Maybe even more telling: Kering’s Euronext Paris-traded stock shares closed down 10.7% last Friday, paring earlier losses of 12.4% – making for the stock’s biggest decline since October 2008, according to Reuters.
Clothing prices have been falling for consumers for 25 years – but broad tariffs are being touted as potentially capable of reversing that trend. In a talk earlier this month, Treasury Secretary Scott Bessent said, “Access to cheap goods is not the essence of the American Dream.” It is easy to see how this sentiment could impact the apparel market, as an estimated 98% of clothing sold in the U.S. is imported and Trump has leveraged tariffs on imports from critical markets and closed the loophole that allows for “de minimis” shipments (those under $800) to enter the U.S. tax-free.
Part of the Trump administration’s aim here is to prioritize American-made goods. The potential problem here, according to domestic apparel companies, is a lack of infrastructure. “Domestic manufacturing at every level of the supply chain, from fiber through to fabric through to garments, has been methodically dismantled over the last 30 years to maintain low prices for North American customers,” garment industry veteran Karuna Scheinfeld told Axios.
How could a resurgence of “Made in USA” fashion work? Some say that advanced technologies like 3D printing could shift some production back to the U.S.
> Shein’s Take: Since Shein has garnered no shortage of headlines in connection with the de minimis loophole (and specifically, how the closing of the loophole will impact its business), it is worth considering. Executive chairman Donald Tang put on a confident face recently, telling the AFP the company will continue to deliver for customers despite trade uncertainty, citing its ability to successfully navigate previous disruptions like the COVID-19 pandemic. The key quote from Tang: “We’re not focusing on customs policy.”
Some signs suggest that the company has focused (to some extent at least) on tariffs/customs, including by diversifying production locales beyond China and encouraging some Chinese suppliers to move to Vietnam. At the same time, the company also participates in a U.S. pilot program to speed up customs clearance for small shipments.
There has been a bit of activity on the legal front involving Amazon this week. Here’s a quick snapshot …
> Joyce v. Amazon.com: A federal district court in Seattle granted Amazon’s motion to dismiss a securities fraud class action, ruling that the plaintiffs failed to adequately plead scienter (i.e., intent to deceive), and thus dismissed the case with prejudice despite the plaintiffs filing multiple amended complaints with additional allegations.
> Amazon v. Consumer Product Safety Commission: Amazon filed a complaint seeking to block a Consumer Product Safety Commission order that classified Amazon as a distributor and required it to conduct a recall of third-party products sold through its Fulfillment by Amazon service, arguing the agency exceeded its legal authority and violated Amazon’s constitutional rights.
GlobalData’s latest report highlights Shein and Adidas as the standout winners in market share growth during a year where economic pressures made shoppers more selective. Among some of the key takeaways from the data analytics and consultancy’s report …
> Shein’s Market Surge: The ultra-fast fashion giant gained 0.24 percentage points, reaching 1.53% market share – the largest growth among all brands on GlobalData’s list. Its success was driven by low prices and fast turnaround, despite ongoing criticism of labor practices and environmental impact. In particular, Shein took significant share from online rivals ASOS and Boohoo, both of which have seen sharp sales declines.
> Traditional Fast Fashion Shake-Up: Zara gained 0.05 points to 1.24%, helped by agile supply chains and broad appeal; H&M slipped slightly to 1.06%, with designs that failed to capture consumer interest; and Uniqlo rose to 0.92%, benefiting from value pricing and global expansion.
> Nike. Adidas: adidas’ market share rose by 0.17 points to 1.79%, fueled by demand for its Originals lifestyle footwear. 2024 marked a strong recovery for the sportswear titan after a sales slump in 2023. Meanwhile, Nike remains the largest sportswear brand with 2.85% market share but saw the biggest loss, dropping 0.15 points. According to GlobalData, Nike struggled with stagnant innovation and fading fashion relevance.
> Luxury Market Splits: Chanel (0.59%) and Hermès (0.55%) increased their shares as wealthier shoppers remained active. On the other hand, Gucci saw the steepest decline in luxury, falling 0.10 points to 0.38%, as muted styles and economic strain on aspirational luxury shoppers took a toll.
Analyst Insight: Pippa Stephens of GlobalData noted that brands combining value with trend responsiveness thrived in 2024, with Shein’s rapid ascent continuing to reshape the market.