Case Study Part 1

A number of celebrities are aware of the connection between fame and fashion. They have developed their own lines of clothing, believing they will have a built-in customer base—their fans. With TV, film, and music success already on her resume, teen-star Hilary Duff did just that in 2003 by starting Stuff by Hilary Duff. Her fashions, including clothing and accessories, are designed for her fans—girls in their “tweens,” ages 6 to 12 years old. Causal t-shirts, skirts, and backpacks are offered in hopes of making Stuff a brand name in fashion. However, pop stardom does not always guarantee success in the fashion industry. Teen fashion is a specific segment of the fashion industry and is risky because styles go in and out of favor quickly. In addition, the teen fashion marketing is flooded with popular brands such as Abercrombie and Fitch. So how can Stuff by Hilary Duff compete in the world of teen fashion?

ANALYZE and WRITE1. Would you classify Stuff by Hilary Duff as a producer or retailer of

fashion?2. Is Stuff by Hilary Duff a corporation or a small business? Explain you

answer.

CHAPTER 3: THE FASHION BUSINESS

3.1 Types of Businesses

Fashion Industry Segments

There are three main segments in the fashion industry.1. Primary Market2. Secondary Market3. Tertiary Market

Primary Market

Primary Market – industry segment that includes businesses that grow and produce the raw materials the become fashion apparel or accessories. Example: Textile Industry

Secondary Market

Secondary Market - the industry segment that includes businesses that transforms raw materials into fashion in the merchandise production phase.

The main types of producers in the secondary market include: Manufacturers Wholesalers Contractors Product Development Teams

Tertiary Market

Tertiary Market – the industry segment that includes retail businesses such as stores. Retailing is the selling of products to

customers.

Types of Fashion Business Organization

The fashion industry and other industries are comprised of businesses that have one of the three most common types of business organization:

1. Sole Proprietorship 2. Partnership3. Corporation

Sole Proprietorship

A business owned and operated by one person.

Risks: Owner takes responsibility for all assets owned, whether used in the business or personally owned.

Taxes: the business profit is taxed as personal income tax at a rate less than the rate imposed on corporations.

Prons and Cons: The most compelling reasons for having this type of ownership is that the owner has the freedom to operate as he or she feels is necessary.

Partnership

A business created through a legal agreement between two or more people who are jointly responsible for the success or failure of the business.

Taxes Personal Liability

Corporation

A business that is chartered by a state or legally operates apart from the owner or owners.

Stocks and Shareholders Taxes

Fashion Risks

Risk is the possibility that a loss can occur as the result of a business decision or activity.

Risk Management is a strategy to offset business risks.

Types of Risks: Economic Risks Human Risks Natural Risks

Other Categories of Risks: Pure Risks Speculative Risks Controllable Risks Uncontrollable Risks Insurable Risks Uninsurable Risks

Quiz

a) Which of the following is NOT one of the three main market segments of the fashion industry?

a) Primary Marketb) Secondary Marketc) Tertiary Marketd) Quadruplet Market

b) Which of the following is NOT one of the three types of fashion business ownerships?

a) Sole Proprietorshipb) Partnershipc) Corporationd) Teams

c) Which of the following is NOT one of the risks of the fashion business?a) Economicb) Humanc) Natural d) Increased Sales