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MA Fashion Management and Communication International Marketing and Brand Management Hongying Lu 24041949

Analysis of Balenciaga and Alexander Wang in luxury market

Hongying Lu

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P h o t o b y W S J .C O M

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The Global Market Place

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P h o t o b y Vo g u e . c o m

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P h o t o b y Ya n n i s V l a m o s / I n d i g i t a l i m a g e s . c o m

Executive Summary

ith people’s income and living standards continuing to improve, more consumers consume luxury goods to reflect their lifestyle and social status, which has pushed the rapid development of the luxury industry. W Kolodko (2003) compared in the past, the center of the world’s leading luxury brands was only located in Europe and America. Nowadays, developing countries such as China, India, and Mexico have become the emerging luxury market in recent

years. This case study is an analysis of: This report is going to analyze Alexander Wang (an emerging brand) and Balenciaga (an established brand) in the luxury industry through taking the overall situation of the luxury industry into consideration. The history, competitiveness, and basic marketing strategies will be discussed.

The theoretical approaches adopted in the report are the PEST model and Porter’s five forces model.

Key words: Balenciaga, Alexander Wang, global fashion market, marketplace, and success factors Methodology: secondary and primary research: observation in Alexander Wang and Balenciaga stores, which are location in London.

Secondary research: websites sources and books sources.

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1.Introduction

2.Description of company analysis

2.1Business structure 2.2 Location and scope 2.3 Product ranges

3. Market analysis

3.1 Alexander Wang 3.2 Balenciaga 3.3 Comparisons of two brand

4.Company external environment

4.1 PEST model 4.2 Porters five forces model

5. The competitive advantages

5.1 The competitive advantages of Balenciaga 5.2 How Alexander Wang to learn it

6. The short and long terms forecast for two brands 6.1Alexander Wang 6.2 Balenciaga

7. Conclusion

8.Recommendations

9. References Photo by Steven Klein

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The Global Market Place

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1. Introduction

All Photo by Steven Klein

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Today, luxury fashion goods are playing an increasingly important part of modern people’s daily life. High brand value and cultural connotation of luxury goods have attracted a large number of consumers. According to Keegan (2015), the 21st century has seen the fading of the consumption of luxury goods in the Eu-

ropean countries. China, Russia, India, and Brazil become the main emerging market of luxury consumption. The annual sales of the luxury goods in these emerging countries are $230 billion (£152billion), which takes up a large proportion of the market.

The aim of this report is to compare an emerging international fashion brand with an established international fashion brand. It has been reported that the difference between them, as well as How the emerging brand to learn from established brand. First of all, this report starts with a description of the two company’s analysis. The second part will discuss the key consumers of the two brands and the main factors affecting the purchase of luxury goods. Then, the PEST model and Porter’s model are employed to analyze Alexander Wang and Balenciaga. The fifth part of the report covers the innovation approaches and brand competitive advantages of the two brands. Besides, it will discuss how the emerging brand can learn from the success of the established brand. Short-term and long-term market analysis will also be done. Finally, this report will make a conclusion of the report and offer some advice to the emerging brand.

IMAG E C APT IONS are impor tant to contex tuali ze th e selec ted photo to the ar ti c le w i th out break i n g u p the flow of the copy.

PH O TO BY N A M E

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2. Description of Company Analysis

All photo by Vogue.com

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.1 The business structures of the two brands

Alexander Wang has a relatively shorter development history compared to Balenciaga.

It is in 2004 that Alexander Wang created his brand of the same name in New York and launched 2005 spring and summer clothing collection, which achieved a too great success and attracted the attention of fashion buyers and customers in the fashion field. In contrast, Balenciaga has a long history. In 1919, the Spanish designer established the brand of the same name and set up it’s headquarter in Paris who is Cristóbal Balenciaga. Due to Balenciaga has a long history, it has talented designers, unique product, and fixed customer groups, it has gained more popularity than Alexander Wang does. For example, the Motorcycle Bags of Balenciaga was launched in 2000; female star, socialite lady, and Model have been loved and recommended it. Until now, the Motorcycle Bags is still one of the hot sales handbags.

Alexander Wang is a private company that has no external supporters or family wealth. The main designer is Alexander Wang, with his mother and brother being the main presidents and his sister-in-law being the accountant. However, Kering group bought Balenciaga (a famous luxury group) in 2001. The CEO was Isabelle Guichot and Alexander Wang just worked as the creative designer. But he left in 2015. The interesting thing is these two brands of designers are the same person, who is Alexander Wang. A fashion website commented that when Balenciaga employed him, he more clearly understands the international fashion company operation and marketing, he also can build social relations from this work. It is better for he to run own brand (Vogue. 2012). Whereas, in comparison with Alexander Wang, because Balenciaga gets the support of a mature luxury group, it has a more professional management team and more technical support and strong social relations than Alexander Wang does.

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All photo by Vogue.com

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.2 Location and scope of two brands investigated

According to the statistics offered by Haibao website (2010), the flagship stores of Alexander Wang are mainly located in New York, London, and some countries in Europe and Asia. For example, there are eight stores in China. In contrast, Balenciaga has flagship stores in the world, such as Paris, New York, London, China. It has 22 stores in China. From the statistics, it showed that Balenciaga’s influence could be seen all over the world while Alexander Wang’s impact is mainly limited to Europe and Asia.

All Photo by fashionisers.com

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.3 Product ranges of the two brands investigated.

The main products of Alexander Wang are menswear, women swear, accessories, shoes, and bags. The price ranges from £199 to £1000. At the same time, It also has a vice line brand called T whose price ranges from £46 to £53. The product series of Balenciaga are high-level women swear and menswear, leather goods, accessories, cosmetics, eyewear, perfume, whose price ranges from £57 to £6700. From these statistics compared that Alexander Wang’s price is relatively lower than that of Balenciaga and its product range is narrower than that of Balenciaga. Because Alexander Wang is an emerging brand, it need use low price to compete with established brand, and it is a new private company that does not have an abundant capital to product wiled range products.

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3. Market analysis Alexander Wang and Balenciaga

Photo by Steven Klein

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.1Alexander Wang

In the interview with Teen Vogue (2013), Alexander Wang said that its main consumers are young people ranging from 20 to 30 years old. The main route through which they get access to the brand is from magazines, celebrities’ effect and brand cooperation. For example, Anna Wintour, the editor-in-chief of American Vogue, appreciates Chinese designers, especially Alexander Wang. Because of that, she has given a lot of help for him, for instance, after Alexander Wang set up his studio, Anna Wintour also went to his studio to give he guidance, and Vogue has recommended this brand. Besides, celebrities’ support of the brand has also helped it to widen its popularity. These popular idols include Rachel Bilson, Victoria Traina, Lindsay Lohan, Bingbing Fan, and Yuchun Li. According to China’s luxury market survey(2015), a lot of Chinese people to buy luxury goods because of the celebrity effect.

They like to follow the star If the stars wear clothes look good. Their desire will be stronger, even if not to buy, also, will want to know more about this brand.

Regarding brand cooperation, Alexander Wang once cooperated with H&M in 2014 and cooperated with Evian to release bottles of a limited edition in November 2015. In December 2015, this brand will launch a partnership with the famous singer. Because of the cooperation with popular brands, more people begin to know and pay attention to Alexander Wang. For example, Alexander Wang cooperated with H&M in 2014”I arrived at four am, and the number is eighty-fifth.” Kevin is a university student in Nanjing, who to buy Alexander Wang. He was excited and also did not sleep at last night. When a reporter asked if there is no particular and suited for Kevin, but he said that just focused on the design for Alexander Wang, because he can use the price of H&M to buy Alexander Wang’s design.

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.2Balenciaga

Alexander Wang said: “My main consumers are young people, who are about 18-27 years old.

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.3 Comparison of two brands

Regarding the key consumers, Alexander Wang’s main consumers are American and Chinese young people while Balenciaga has a wider range of customers, who are from all over the world.

Regarding the factors influencing consumers’ behavior, for example, Chinese has become the main consumers in the luxury fashion market, firstly, more Chinese focuses on product quality. Sometimes, the brand is the guarantee of quality. But the main influencing is they like following stars, because if they dressed like them, that think to become more fashionable. Also, they both have employed celebrities’ effect and magazines to wide their popularity. However, there are also some differences. Alexander Wang mainly promotes it image through cooperating with other high-profile brands while Balenciaga mainly relies on its professional advertising and communication.

Photo by Steven Klein

In the past, the key consumer groups of Balenciaga were queens, such as the queen of Spain, Belgium Queen, Duchess of Windsor. Because, at the same time, Balenciaga pays more attention to haute couture clothing, compare with nowadays, there were no various channels to understand fashion. Not everyone can afford and know them.

Nowadays, the main consumers, are wealthy people, fans of handbag, and people who love fashion. The pursuers of the brand range widely in age. Its main customers range from 16 and 55 years old. The main reason is fashion is more close to people’s life, and more young consumers like to buy luxury fashion products, so Balenciaga employed the young designer to attract younger customers. However, Balenciaga attracts the public’s attention mainly through

advertisement, celebrities’ effect, magazines, and social media. Because Balenciaga belongs to the Kering group, it has a more professional team to manage the operation of the brand and has enough money to invite famous photographers, directors, and stars to shoot professional advertisements. For instance, the photographer of Balenciaga’s Spring 2015 advertisement is Klein Steven and the model invited is Pivovarova Sasha. Besides, a lot of super stars like to use the products of this brand such as Nicole Richie,Jennifer Connelly,Paris Hilton, and Sarah Jessica Parker. On Nicole Kidman and Keith Urban’s high-profile wedding, Nicole Kidman wore a Balenciaga dress, which has drawn great attraction to the brand from the public. Furthermore, Balenciaga has been strongly recommended by magazines such as Vogue, ELLE, and WWD. There are also a lot of fashion bloggers who also like the brand and recommend it on their blogs.

The key cause that is the unique design of this brand, they like and recommend it

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4.Company external environment Alexander Wang and Balenciaga 4.1 PEST model

Photo by Steven Klein spring-summer 2014 campaign

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olitical tors

The headquarter is set up in New York. The Europe crisis has affected its American market and the sales of luxury goods.

American luxury tax system: Tax revenue is an important part of the United States to provide financial support for the maintenance of the normal operation of the economy, which is an important part of the United States in the United States. Since the 1960s, the federal tax rate in GDP has averaged 18.2%The luxury goods custom duties are about 10%-20% in the US. It is a small number of famous Chinese fashion designers in Europe. He has gotten some help from the Chinese government.

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ocial-culture factors

fac-

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Cooperating with

conomic fac- other popular brands and tors superstars.

The Bain Capital of American survey report (2009) shows that due to the global financial crisis, even the richest consumers are cutting spending. This may lead to the shrinking of the global luxury retail market.

Magazine introduction: when Alexander Wang built his brand, he got some help from the editor of Vogue.

Celebrity effect: Lady Gaga, Rachel Bilson, Victoria Traina, Lindsay Lohan.

When it was built in 2005, it has received the fashion fund prize (£134360) and professional business consultant service, which is the brand’s first wealth and professional guidance, which is beneficial to its management and running.

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echnological factors

The development of science and technology and the emergence of mobile internet: Yoox group is a famous luxury electric business, which cooperates with the Alexander Wang official website in these countries and districts such as China, Hong Kong, Taiwan ,Japan and Australia.

1. 2.Photo by Steven Klein 3. Photo by Nitrolicious.com 4.Photo bySteven Klein Hongying Lu

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Photo by fashiongonerogue.com

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olitical tors

fac-

The headquarter is set up in Paris. The Europe crisis has had an impact on Paris. In recent years, the luxury market also has been affected.

Balenciaga has 22 stores in China. However, the Chinese government is fighting against corruption. Deng Yongqiang, the “Financial Times” columnist, pointed out that because of the fight against corruption, a lot of luxury stores are gradually closed, including the Balenciaga stores in Nanjing.

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conomic factors

BBC(2015) has included a report made by the UK Public Policy Research Institute IPPR. It shows that there is high unemployment in Europe and insufficient employment, which will cause a longterm risk. The economic crisis has an impact on every field. The luxury industry is one of them.

However, this brand is supported by the Kering group, which is an international company.

Therefore, Balenciaga can get capital injection from it.

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echnological factors

ocial-culture factors Professional official web-

Magazines: from 1990 to now, Vogue has introduced Balenciaga. The ELLE and WWD also like to recommend it.

Celebrity effect: Kylie Minogue, the superstar, wore a Balenciaga dress in her single MV and tour concerts.

Professional advertising is in each quarter.

sites, IT system and Internet popularization.

The spreading of products’ information through social networks, e-mail, fashion blog and advertising

1.Photo byWWD 2. Photo by Fashionista.com 3.Photo byVestido de tafetán y plumas de Balenciaga (1967). / COLLECTION MUSÉE GALLIERA 4.Photo by Vogue.com

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4.2 Porters five forces model

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3 1

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1. Photo by ftape.com 2. Photo by mapltd.com 3.Photo by Inez & Vinoodh / Courtesy of Jason Wu 4.Photo by fashiongonerogue

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Alexander Wang Threat of new entry

As an emerging brand, Alexander Wang is popular. However, it is not as good as other established luxury brands. So, price of this brand is lower and the products range is more marrow than established brand.

The Bargaining power of suppliers

For the emerging brand, suppliers are not fixed and carried high prices is a great impact.

The Bargaining power of Buyer

When the bargaining power of buyers is strong, it will also produce threat to the industry’s profits and make producers compete against each other by demanding cheaper prices or product and service improvements. For emerging brands, customers will pay more attention to the design and price of their products.

Threats of substitution

Many brands have lunched or will launch different styles of design in order to attract more customers.such as MO&CO Lauched American style garment in 2015.

Competitive

Other similar styled brands, and Chinese designer brands, such as Jil Sander, Helmut Lang, Jason Wu and Philip Lim all pose threat to Alexander Wang.

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1.2Photo by wmagazine.com 3. Photo by Hongying Lu

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Balenciaga Threat of new entry

Balenciaga is an established brand, which has a long history. Its brand awareness and product identification are relatively higher. The new entry into the clothing accessories company will pose the challenge to other counterparts in the industry. As the brand image is very important in this industry, it is important for the company to build its leadership brand so as to gain advantages over other new competitors.

The Bargaining power of suppliers

Balenciaga pays attention to handcrafts and the use of high-grade leather production.

Manufacturers are distributed around the world, including China, Italy, Spain, and

Turkey. Since Balenciaga is going to buy a large number of goods from these manufacturers, it should have the ability to negotiate with different manufacturers.

The Bargaining power of Buyer

Because the price is relatively high, and fashion goods are mainly offered to aristo-

cratic ladies, the customers’ bargaining power is very weak. They are less sensitive to the price change of its products; in fact, customers buy Balenciaga products because of its brand image, quality, and popular style. They do not care much about its price.

Threats of substitution

There are two types of alternative products that might threaten Balenciaga: that alternative brands and fashion copycats.

Competitive

According to a financial report(2010-2015) the sale of leather bags take up about 65% of the whole sales. Prada and Gucci is similar it . But in the United States market, it

faces competition from high-end fashion brands such as Taylor Ann, Klein Calvin, Dooney & Bourke . And in the UK, according to observe Balenciaga’s stores in London, it is interesting thing that is Celine always beside Balenciaga.

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5. The competitive advantages

H

ow Alexander Wang to learn Balenciaga Alexander Wang is a private and family run

company, which may limit its development. The

most important thing that should be done by it is to find an investor so as to improve the brand in the international field. Besides, Alexander Wang should release more representative and unique designs. However, the disadvantage is that Alexander Wang is the designer of two brands. He may not have enough time to run his brand. When Alexander Wang left Balenciaga in 2015, the Chinese newspaper (2014) points out that Alexander Wang knows how to make the brand more international when he was the creative director at Balenciaga. At present, he has enough time, professional knowledge and rich experience to run this brand.

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The competitive advantages of Balenciaga Firstly, Balenciaga is a brand that has a long history.

So, it has accumulated a certain degree of popularity and reputation, and has fixed customers. Secondly,

it has products of excellent design. For instance, the

Motorcycle Bag sells the best among the products of the brand, until now, it still is one of the best selling products. Thirdly, it has a strong economic strength and a professional team to manage the company.

When it was bought by Kering group in 2001, it has enough money and professional marketing solutions to run the boutiques allover the world.

Photo by Steven Klein/Balenciaga Spring/Summer 2014 Campalgn Hongying Lu

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2 2 1 Photo by Upscalehype.com 2 Photo by Willy Vanderperre 3 Photo by Marie D 4 Photo by Steven Klein Balenciaga Spring/Summer 2014 Ad Campaign.

5 Photo by Steven Klein/Alenxander Wang Pre-Fall 2016

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6.The short and long terms forecast for two brands

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lexander Wang

Balenciaga employed Alexander Wang in 2012. It is the first time that Balenciaga invited a Chinese American designer to act as the creative director who advocates

the American street style. Because of joining the company, Alexander Wang has increased his popularity and widened his social relation in the international arena, which is good for the building up of his brand.

After he left Balenciaga in 2015, Alexander Wang cooperated with the Weekend and pushed out a new series of products. Regarding its short-term forecast, it aims to get more public attention and increases its sales Vogue.com (2015).

Regarding his long-term forecast, Alexander Wang said he would build flagship stores in South Korea and Japan shortly in the interview with Vogue.com (2015).

President and CEO of Balenciaga, stated: “I am very pleased to welcome Demna Gvasalia as the artistic director of Balenciaga’s collections. He has quickly emerged as the best choice for the new artistic direction of the maison.

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alenciaga

Since the creative designer left in 2015, people in the fashion field all think about who would be the next designer? The Vogue pointed out that Demna Gvasalia is the new creative designer. Getting wider attention and higher expectation are the

company’s short-term forecast. The long -term forecast is to bring more new elements to the brand to attract more consumers.

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5 1.2.3 Photo by Balenciaga Resort 2016 Collection Photos-Vogue 4.5.6 Photo by Steven Klein

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7.Conclusion

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o sum up, luxury con- brother of Alexander Wang are sumption not only the company’s presidents, and shows people’s con- his sister-in-law is the accounsumption level but tant of the company. From 2012

also shows consumers’ confidence to 2015, Alexander Wang has index and life attitude. Balenciaga is worked for Balenciaga. During an established brand and has a long the 5 five years, he has learned history, so it is very famous in the in- how to build and operate an international fashion field. Balenciaga ternational brand and improve belongs to the Kering group and its international reputation. The has a series of famous international reason the brand can be underproducts that include luxury prod- stood in such a short period is ucts, sports and lifestyle products, that magazines and celebrities and retail brands. Its products are have recommended it, and the sold in more than 120 countries. Be- brand also cooperates with other sides, a strong financial and profes- brands and superstars to widen sional team to help it improve brand its influence. awareness and promote its international status supports Balenciaga.

A

lexander Wang is a brand, which has been established for ten years. It is a fam-

ily company where the mother and 1. Photo by Ba lenc iaga.com. / Ba lenc iaga shoes 2 . Photo by Ba lenc iaga.com / Ba lenc iaga

per f ume 3 Photo by A lexander Hongying Lu

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Photo by Steven Klein

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8.Recommendation According to the financial statement of Balenciaga, its sales amounted up to about 3.5billion last year. When Balenciaga employed Alexander Wang as the creative designer, his designs have received great popularity. However, people have a deeper impression on the design of the Motorcycle Bags. It must be noted that Balenciaga needs to launch new creative products to attract consumers. Moreover, it should create its APP brand store because more and more people are relying on mobile phones to go shopping. Balenciaga should not miss these customers.

On the other hand, from 2012 to 2015, Alexander Wang works as the designer of two brands, which are Balenciaga and the same name brand. Balenciaga has increased Alexander Wang’s popularity in the international fashion field and teaches him how to operate a brand in the international fashion field. The only limit is that he had no time to run his brand. However, since Alexander Wang left Balenciaga, he will have enough time to run his brand.

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R

eference.

1. ARZALLUZ, Miren and CAROL Ungar (2011). Cristobal Balenciaga: the making of a master (1895-1936). London: V&A Publishing 2. BLASZCZYK, Regina Lee (2008). Producing fashion: commerce, culture, and consumers. Philadelphia, Pa.: University of Pennsylvania Press.

3. BREWARD, Christopher, et al. (2010). British Asian style: fashion and textiles, past and present. London: V&A. 4. BURNS, Leslie Davis., et al. (2011). The business of fashion: designing, manufacturing, and marketing. 4th ed., New York: Fairchild.

5. GIBSON Pamela church (2012). Fashion and celebrity culture. London: Berg.

6. KEEGAN Warren J and GREEN Mark C. (2014) Global marketing.

Boston: Pearson.

7. MILLER, Lesley (2007). Cristóbal Balenciaga (1895-1972): the couturiers’ couturier. London: V&A. 8. WILEY John and LTD Sons (2015). Foundations of strategy.2th ed., Hoboken, N.J.: Wiley.

9. WILLIAMS, Gemma A (2015). Fashion China. London: Thames & Hudson.

10. W. KOLODKO, Grzegorz (2003). Emerging market economies: globalization and development. Aldershot : Ashgate.

11. STORY. Jonathan (2003). China: the race to market: what China’s transformation means for business, markets and the new world order. London: FT Prentice Hall.

12. Alexanderwang.cn,. “Latest News | Alexander Wang”. N.p., 2015. Web. 10Dec. 2015.

13. Balenciaga: Ready-to-wear and Accessories for Women and Men,.

“Balenciaga: Ready-To-Wear And Accessories For Women And Men”. N.p.,

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14. Fashionista.com,. N.p., 2015. Web.3 Dec. 2015.

15. Fmcg-marketing.blogspot.co.uk,. “The FMCG & RETAIL Marketing Blog: Brand Identity Prism (Kapferer)”. N.p., 2015. Web. 9 Dec. 2015.

12. Alexanderwang.cn,. “Latest News | Alexander Wang”. N.p., 2015. Web. 10Dec. 2015.

16. Gleborschina.com. N.p., 2015. Web. 11 Dec. 2015.

17. Haibao.com,. “Alexander Wang_”. N.p., 2015. Web. 13 Dec. 2015.

18. Hutzler, Kayla. “Balenciaga Unveils Web Site Redesign Targeting Fashionsitas - Luxury Daily - Internet”. Luxurydaily.com. N.p., 2015. Web.2 Dec. 2015.

19. Madden, Aemilia. “Kate Moss, Kim Kardashian, And More Pose For Alexander Wang’s Massive Campaign”. POPSUGAR Fashion UK. N.p., 2015.

Web. 3 Dec. 2015 20. The Business of Fashion,. “Balenciaga And Alexander Wang Confirm Joint Decision To End Contract”. N.p., 2015. Web. 2 Dec. 2015.

21. Thisrecording.com,. “In Which Cristobal Balenciaga And Christian Dior Bring A New Dawn - Home - This Recording”. N.p., 2015. Web. 10 Dec. 2015.

22. Vogue UK,. “Balenciaga’s New Name: What To Know”. N.p., 2015. Web. 17 Dec. 2015.

23. Vogue UK,. “Suzypfw: Balenciaga - Wang Leaves On A Romantic Note”.

N.p., 2015. Web. 17 Dec. 2015.

24. Vogue UK,. “Vetements Designer Named At Balenciaga”. N.p., 2015.

Web. 8 Dec. 2015.

25. Vogue Uk,. “What Does Alexander Wang’S Reported Exit From Balenciaga Mean For The Business?”. N.p., 2015. Web. 4 Dec. 2015.

26. Wikipedia,. “Alexander Wang (Brand)”. N.p., 2015. Web. 10 Dec. 2015.

27. Wikipedia,. “Balenciaga (Brand)”. N.p., 2015. Web. 11 Dec. 2015.

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