After years of excellent growth, designer fashion houses worldwide are now feeling the pressures of tough economic times and global uncertainty. The Iraq conflict, economic downturns, a weaker dollar, a stronger euro and stock market declines have made consumers unconfident about spending, especially on discretionary items like clothing.

An increase in the number of luxury brands on the market has not helped matters, with the sector becoming more democratised and effectively more exposed to economic cycles and investment markets. Luxury companies had been resilient but there has been a real shift at retail level, where many 'luxury' goods are not so exclusive and more affordable, and thus more exposed to cyclical change.

The designerwear market has also been hit by an increasingly sophisticated and tempting high street, with profitability crashing for many companies because of the huge costs associated with maintaining their image and desirability.

Designerwear underperforms overall clothing market
Market analysis firm Mintel estimates that the designerwear market in the UK was worth £1.4 billion in 2002, which is 3.1 per cent up on 2001. This is split between womenswear (which takes a 58.2 per cent share of the total at £816 million and which is 3.3 per cent up on 2001) and menswear (at £586 million and which is 2.8 per cent up on 2001). These growth rates underperform the clothing market as a whole, and Mintel estimates that growth rates for the past year will be lower than those of 2002 on 2001.

Few consumers buying more designerwear
Designerwear is very much discretionary spending, boosted when consumer confidence is booming and cut back when sentiment turns down. Mintel's exclusive consumer research shows that just seven per cent of all UK adults were currently buying more designerwear than they used to, split evenly between men and women.

However, much higher percentages of younger people were in this category (17 per cent of 15- to 19-year-olds, 10 per cent of 20- to 24-year-olds and 12 per cent of 25- to 34-year-olds), who tended to have higher disposable incomes than those in their 30s and 40s.

Defining a 'designer' brand
A favourite image of the luxury industry, of which the designerwear market is a part, is the pyramid. This image represents the base having lots of people and the top scaled by just a few, as in a designer brand which goes from jeanswear to couture, such as Giorgio Armani.

Some products like haute couture or a Hermes Kelly or Birkin bag remain out of reach for most, but today, in general, luxury is aspirational but attainable.

In discussing the difference between a 'brand' and a 'designer', Mintel's trade interviewees agreed that the latter is founded on innovation and design that drives the consumer to buy, while 'luxury' is primarily about scarcity. In other words, 'design' can be more democratic.

Still, this democratisation of designer brands can be a dangerous path and many companies have suffered from over-proliferation, with products being sold in 'undesirable' outlets because of widespread diffusion lines and international licensing nets. Now, most are spending significant money on buying back licences, opening more directly-operated stores and controlling their own production.

Selling more through a 'pyramid' structure
However, the big international houses have to support their huge infrastructures and costs, and so selling more to more people is essential. In order not to devalue the luxury of the mainline there are diffusion ranges, and so the 'pyramid' of the designer brand has to match the 'pyramid' of the buying public.

This also affects channels of distribution, with entry-price merchandise (at the bottom of the pyramid) being more accessible and more widely sold, the designer diffusion more widely available, the designer mainline in a few selected stores and of course couture for purely personal service (right at the pinnacle of the pyramid with very few very rich customers).

The arrival of designers in department stores like Debenhams has significantly widened the base, while towards the top end many of the international designer houses are opening luxury stores to promote their mainlines.

On the other hand, there is only so far one designer brand can be spread without being too ubiquitous and potentially devalued. Therefore, there is a trend towards multi-brand strategies in the sector and fashion companies are buying up other designers to build a portfolio of designers (each with different looks and pricing points) under one umbrella.

Most popular designers
Calvin Klein remains by far the most popular designer in terms of the percentage of adults buying the label's products (14 per cent), which is perhaps unsurprising given its wide distribution and broad product range.

Similarly, Polo Ralph Lauren (seven per cent of all adults) and Tommy Hilfiger (six per cent of all adults) are widely distributed in the UK and are high profile designer brands. Like Klein, both have a greater percentage of male shoppers than female.

Hugo Boss continues to be a strong menswear label (six per cent of all adults, eight per cent of men) and Burberry makes a strong showing at five per cent (five per cent of men and six per cent of women), while Armani, Paul Smith, YSL and Dolce & Gabbana all register four per cent of adults who have bought their clothing in the last 12 months.

However, some 74 per cent of the consumers interviewed for Mintel agreed that they thought designerwear was overpriced (72 per cent of men and 75 per cent of women) and this was fairly evenly spread across age and socio-economic groups. While this is of concern, even more damning was that just four per cent agreed that 'designer labels offer better value for money than mainstream high street retailers'.

This raises the key issue of what exactly is 'value'? Designerwear is never going to be cheap, but consumers now expect excellent 'value for money' whatever the price. This is exacerbated by increased competition from the middle mainstream retail and brand market.

Importance of department stores increasing
Department stores are becoming much more important as channels of distribution for designerwear. It is the leading channel for women's designerwear (30 per cent market share) and the second most important for men's designerwear (19 per cent market share).

Independents are the second most important channel (eight per cent of all adults, split between nine per cent of men and six per cent of women), showing that while clothing independents as a whole are quite challenged by the huge competition in the clothing sector, those that are focused on the upmarket brands and labels that they can stock in glamorous environments with excellent service can flourish.

Designer stores are shopped at by four per cent of all adults (five per cent of men and three per cent of women) and their numbers are also increasing, with openings, extensions and refurbishments around the UK. Designers believe that flagship stores are crucial to a brand's success as they can portray the whole lifestyle and brand image that is not possible though any other channel.

Expert Analysis

Designerwear Retailing in the UK 2003

In an increasingly competitive and mature market, real growth and increased profitability is proving harder to come by. Consumers are much better informed about designers, the latest fashion trends and where to buy them which, while a real positive for retailers, also means consumers have more choice and are less loyal.

Ensuring that your business thrives in these conditions will ultimately boil down to your understanding of this retail sector and its consumers and your ability to respond to their dynamics. Find out more here.


Factory outlet centres (six per cent of all adults, with equal penetrations of men and women) provide the family with a 'day out' shopping and leisure experience, with clothing being a key element of their retail offer.

These centres appeal to a broad consumer base where the chance of picking up a bargain - albeit rarely from the current season's collection - is an attractive proposition. These centres continue to grow in number.

Mainstream high street stores, meanwhile, are increasingly seen as a competitor to designer houses in that they have gotten much faster at reacting to trends and interpreting them well for their target market - at a more than acceptable level of quality. Zara, Top Shop and H&M have upped the stakes by getting catwalk copies into stores within weeks and selling at low prices.

Are mainstream diffusion lines harmful?
If designer diffusion lines are in mainstream stores, does this signify the gradual erosion of the distinction between high and low fashion?

There is no easy answer and views in the industry are divided. If the ranges are pitched and marketed correctly, it should be possible for the high-end and low-end ranges to feed off one another.

Counterfeiting and parallel trading
Both counterfeiting and parallel trading are thorns in the side of designer brand management, and a symbol of success. While the level of counterfeiting is probably no more than it was five years ago, it appears to have been accepted that there is little that can be done about it. Still, major brands and designers have taken action and continue to do so.

In order to control parallel trading (where goods may come from the brand's officially licensed factory using oversupply of labels), brands are working hard to control their avenues of distribution by buying back licences and controlling their own production.

The future
The industry is unsure whether the turbulence in the market over the last 18 months is part of a cyclical downturn or part of a much bigger change. Certainly there is much change in the sector, including multi-brandstrategies, taking back greater control, a new 'deluxe ready-to-wear' level and greater focus on retail.

With so much more competition in the market now and a much more sophisticated high street, the emphasis for designer companies is to ensure they can deliver real 'added value' to consumers who are increasingly attracted to quality and creativity, but who will nonetheless remain cautious about how they spend their money for the foreseeable future.