The increasingly abstract economics of fashion - Financial Times

Don’t know about you, but it seems to me the economics of fashion are becoming increasingly abstract â€" and I’m not talking about the highly subjective concept of “brand value” (yes, I know there are equations to convert this into numbers, but boiled down to its essence it’s in the eye of the beholder, no?). I’m talking about celebrity endorsement investment, and a new concept I discovered last week: retail endorsement investment.

Let me explain.

Like the celebrity ambassador, retail endorsement investment says that if a very special store selects you to be in their racks, it is so meaningful in marketing terms that said store doesn’t need to pay for what they buy. Or, as the young brand who revealed this new strategy (and who shall remain anonymous) told me vis-a-vis one store that was considering stocking their product: “we’ve heard they never pay you for what they order, but that’s ok! Everyone checks out who they stock, so to be there is worth it. It’s like advertising, but actually cheaper.”

Normally, of course, a store places an order for some stock, a designer produces the order, and then the designer is paid on delivery (some lucky designers get half up front). This isn’t ideal, financially-speaking, since the designer has to front their costs, but it isn’t loss-making either.

So I have to say, I was a little taken aback when the no-payment rationale came out of the new designer’s mouth. The more I thought about it, however, the more I saw it as the inevitable product of the celeb culture that has grown up in fashion over the last few years.

In the latter, paying a celebrity to wear your clothes, or even just
giving a celebrity some clothes for free, is seen as a strategic
investment that creates returns in the form of paparazzi coverage that can be monetised on the basis of advertising equivalent (ie, a quarter page ad costs X; a quarter page picture is thus worth X²). Once you are used to thinking of endorsements that way, it’s not a big leap to seeing the same value in a much-scrutinised store.

Put another way: it’s barter. The trade is reputation and a seal of
approval for stuff. On the balance sheet, however, I bet it appears as a marketing expense.