The process of design is complex and multidimensional, even more so since the making of products in recent years has come to mean, “a practice associated with having a human-centered approach to problem-solving in contrast to being technology- or organization-centered. Designers are seen as using an iterative process that moves from generating insights about end users, to idea generation and testing, to implementation” (Kozlowski, Searcy & Bardecki 2018, p. 195).
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Design thinking is regarded as a means of fostering innovation, at the same time as being expansive, flexible, and explorative. In the context of fashion, a range of opportunities can be generated to apply new practices and concepts to create garments that will capture the interest of potential consumers. To capitalize on this design thinking, developing a business model canvas is essential in providing a tool for describing, inventing, challenging, and re-positioning the proposed business model. Without creating a cohesive business model canvas, fashion entrepreneurs will find it challenging to identify the segments of operations necessary for a flawless integration of all aspects of their new business.
Explanation of a Business Model Canvas
The Business Model Canvas (BMC) is a tool used for the visualization of the key components when starting a business, ranging from customer segments to the cost structure (see Figure 1). Each of the components of the BMC is carefully considered and documented, enabling them to be revisited on a regular basis and, thus, ensuring that the selected model aligns with day-to-day activities. The BMC incorporates the following components:
- Key partners;
- Key activities;
- Value propositions;
- Customer relationships;
- Customer segments;
- Key resources;
- Cost structure;
- Revenue streams.
The Use of BMC in the Fashion Industry
To start up a fashion brand, an entrepreneur should be conscious of the current consumer trends and demands. Most start-up designers acknowledge the wide popularity of e-commerce and, therefore, focus on the online sales of their businesses. For instance, in designing their BMC, Revolve clothing based its operations on such resources as online followers, page visits, the company website, and their product catalogue (Revolve business model canvas 2018).
Customer relationships are enhanced through feedback, and the enticement of consumers through service-driven concepts of retail, online applications, as well as the management of VIP customers. Important value propositions for Revolve include free shipping for orders over $100, brand authenticity, warranties, the Revolve social club, and special orders. The company developed a BMC that reflects a close orientation to the needs of customers rather than on design or innovation. Loyalty programs that encourage customers to buy, such as free shipping offers, are more effective in making customers buy rather than the actual designs, and this strategy is right for Revolve.
The example of Revolve shows that a fashion brand needs to find its orientation. If a start-up designer wants to focus on the quality and complexity of the garments they make, the BMC should reflect that. Instead of free shipping, a designer can offer customized items such as monogramming options or personalized colours. In this scenario, the brand should foster strong connections with supplies and influencers since promoting unique designs is complex.
One of the largest fashion retailers, Zara, also employs the BMC approach to strategic management to stay relevant within the industry. The breakdown of key components of the business model allows for the clear identification of strategic components and areas for improvement. The revenue streams of the retailer are differentiated into online and physical stores, which is a strategy that a start-up business can implement once its online sales bring in revenue. Zara, on the other hand, had to branch out into online retail once the capacity of its physical stores could not match the demand from the number of customers. Customer relationships and segments are directly tied to revenue streams. Their identification will help an emerging design company choose how to proceed with its operations.
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Target Audience Considerations Within BMC
In starting up a fashion company, knowing the target customer audience is essential for understanding the potential market segments to be addressed, as well as defining the value of the product offered to them. In the BMC approach, target customer segments can include a range of clients. In the fashion industry in particular, there is a wide variety of customers who may be interested in purchasing different garments from a start-up brand.
Women represent the largest target group of potential customers when it comes to fashion items. However, in order to cover a larger audience and address the existing gaps in the market, it is recommended for a fashion brand to broaden their orientation on customer segments to include both men and children as well (Frison 2017). Through conducting wider research into potential customer segments, a fashion brand can reveal a lot about clients that can be targeted in marketing campaigns. Information that can be used range from the level of household income to the design criteria that customers value, all of which can help fashion brands establish an effective BMC strategy.
Value Proposition within the BMC Approach
The unique value proposition of a fashion brand is what distinguishes it from the other available companies. For instance, Mango’s value proposition addresses six important aspects of customer expectations to attract a wider audience. These range from the jobs that clients want their clothing to perform, to the expected gains customers have in regards to the clothing they purchase. For instance, a client may have the expectation of accessing fashionable clothing at reasonable prices, and Mango offers this opportunity by following the latest design trends and opening as many shopping locations around the globe as possible.
Relevant Partners and Resources
Fostering close connections with partners and finding relevant resources is key to the success of any start-up. Through clearly identifying the partners with which the fashion entrepreneur will work, a smooth supply chain can be developed. For a small business, this may mean working with local suppliers because they are not reliant on “the short-term interests of investors, or the stock market – and make longer-term decisions that are right for customers and staff” (Aldred 2017, par. 6).
While there may be limitations to working with local suppliers in any type of industry, a small business can benefit due to the possibility to foster positive relationships with partners that do not rely on corporate agendas. Concerning resources, a fashion start- up may need to find not only fabrics but also human resources that will bring the necessary levels of expertise in developing design blueprints and then making the garments.
It has been found that the fashion industry struggles significantly with hiring and retaining talent: fifty percent of sixty global fashion and luxury item companies believe that they do not have access to enough talent, while sixty-seven percent mention that it is difficult or nearly impossible to find effective creative directors (Pike 2015). An effective structuring of the needed resources to begin a fashion company can ease the pressure of finding the right personnel.
Competition and Threats in the Fashion Industry
For a fashion brand, conducting a Five Forces Analysis is crucial for understanding the level of competition to be expected. A start-up fashion company is threatened by the following:
- Buyer power: customers cause decreases in prices by refusing to buy or switching companies;
- Supplier power: suppliers are dispensable and can be changed;
- Competitive rivalry: saturation of the market with similar products and lack of innovation;
- New entries: emerging companies that offer a unique value proposition;
- Substitution: clothing cannot be replaced by other products; therefore, any threats of substitutions are equal to competitive rivalry.
The BMC approach to strategic planning for a fashion brand offers a flexible and easy-to-use tool that can define the necessary steps a start-up company should take to attract potential customers and generate revenue. The tool can be used in multiple ways, from defining the target clientele to identifying revenue streams that will benefit a business the most. Large fashion retailers, ranging from Zara to Revolve, have all used the BMC tool to gain a clear understanding of their strategy, and to be prepared for any changes in their operations in order to become more successful. For an emerging fashion company, a BMC is necessary for breaking down all aspects of the business while acknowledging those problem areas that require the most immediate attention.
Business model canvas n.d. Web.
Frison, E 2017, Building a fashion brand: know your target audience to maximize growth. Web.
Kozlowski, A, Searcy, C & Bardecki 2018, ‘The redesign canvas: fashion design as a tool for sustainability’, Journal of Cleaner Production, vol. 183, pp. 194-207.
Pike, H 2015, Fashion companies need to rethink their HR function. Web.
Revolve business model canvas. 2018. Web.