Logistics of Luxury Product

Topics: Supply chain management, Management, Supply chain Pages: 36 (10253 words) Published: December 9, 2012

Int. J. Production Economics 114 (2008) 554–570 www.elsevier.com/locate/ijpe

Logistics and supply chain management in luxury fashion retail: Empirical investigation of Italian firms Alessandro Brun, Federico Caniato, Maria Caridi, Cecilia CastelliÃ, Giovanni Miragliotta, Stefano Ronchi, Andrea Sianesi, Gianluca Spina Politecnico di Milano, Department of Management, Economics and Industrial Engineering, via G. Colombo 40, Milano, Italy Received 31 August 2006; accepted 22 June 2007 Available online 9 February 2008

Abstract The Italian industry of fashion goods is a business worth 67.6h billion in 2006 (Il Sole 24ore, January 10, 2007), of which about 26h billion is due to the luxury segment. Marketing gurus state that ‘‘consumers everywhere at every income level want more luxury’’ [Danziger, P.N., 2005. Let them Eat the Cake: Marketing Luxury to the Masses as well as the Classes. Dearborn Trade Publishing, Chicago]: therefore, companies should move brands towards a higher positioning and add more valuable features to products and services, but this cannot be obtained only by means of marketing efforts. Which is the role of operations and supply chain management in luxury fashion companies’ success? This paper presents the results of the exploratory stage of a research project ongoing at Politecnico di Milano and dealing with supply chain management in the luxury fashion industry. In total, 12 Italian luxury fashion retailers have been studied in order to describe the main features of operations and supply chain strategies in the luxury fashion segment and to identify their role with respect to the relevant critical success factors. r 2008 Elsevier B.V. All rights reserved. Keywords: Fashion industry; Retail; Luxury; Supply chain management

1. Introduction The industry of luxury goods, according to forecasts, has become in 2006 a $170 billion business worldwide (Egon Zehnder International, 2006), registering a growth of 7.3% compared to 2005 (Pambianco, 2006); Italian luxury brands represented in 2005 27.5% of the total luxury goods sold worldwide (Jucker, 2006), corresponding to about 40h billion. In particular, as far as luxury fashion ÃCorresponding author. Tel.: +39 02 2399 2814; fax: +39 02 2399 2700. E-mail address: cecilia.castelli@polimi.it (C. Castelli).

goods are regarded, the Italian market of fashion goods in the luxury segment accounted for about 26h billion in 2006 (Il Sole 24ore, January 10, 2007) Despite the adverse economic cycle of the last few years, luxury goods experienced increasing demand: this is due in part to the increasing social relevance of owning luxury goods, in part to the strong commitment of the luxury companies in branding and communication management (Castaldo and Botti, 1999). As a consequence, entering the luxury segment is a very attractive way to expand a brand and build a sustainable business for the future (Danziger, 2005): markets are polarizing, with growth concentrated

0925-5273/$ - see front matter r 2008 Elsevier B.V. All rights reserved. doi:10.1016/j.ijpe.2008.02.003

A. Brun et al. / Int. J. Production Economics 114 (2008) 554–570 555

both at the lower price and at the high end, especially considering fashion-sensitive businesses. Given this background, which is the role of operations and supply chain management in luxury fashion companies success? Which is the relative importance of superior product design, positive branding and communication action, and operational excellence in building and sustaining the competitive advantage of a fashion luxury company? Of course, as in any other manufacturing business, production and sourcing management is a key factor (Thomassey et al., 2005), and we know that balancing production and demand is one of the major challenges faced by fashion retailers (Nair and Closs, 2006). But when it comes to manufacturing fashion luxury goods, to what extent operations and supply chain...
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