The New Luxury Supply Chain

We all buy products but do we know who makes them?

Every retailer needs a game plan for transparency - which means, inevitably, engaging closely with the supply chain.

To fully understand transparency, you first need to grasp the different stages in a typical fashion supply chain (apparel, footwear, accessories) and how it differs by the size & complexity of the brand.

They’re the building blocks for any transparency agenda.

In this article, we unpack the parties in the typical New Luxury supply chain and model brands into three cohorts based on their size, volume of sales and channel mix. We’ll use both resources throughout our Transparency series in THOUGHTS, as we share actionable tech insights for brand leaders who want to be more transparent to their customers.

All of these are major factors in how brands tackle transparency because every link in the supply chain matters.

ICYMI

Transparency is a huge topic within fashion in 2024.

As covered recently, New Luxury companies must prepare for the upcoming DPP directive that demands they make supply chains more transparent to consumers or face fines, PR damage, and loss of consumer confidence.

Add to this the incentive of consumer demand shifting toward more sustainable brands and products, it means brands are increasingly setting out transparency agendas and plans of action.

So where do you start?

Parties in the Supply Chain

Most New Luxury brands produce clothing in standard sizes and sold in finished condition. The kind of production process that sits behind this is called ready-to-wear and it’s what we’ll focus on in this guide.

Whilst the supply chain of luxury brands is often complex and intricate, involving several stages, each contributes to the creation and delivery of high-end products. These different stages relate to eight different parties who form the links in the common supply chain:

Luxury brands place a strong emphasis on quality, exclusivity, and brand image. This significantly impacts how their supply chains are managed, and (in turn) impacts how they deliver transparency to consumers.

Let’s take a closer look.

1 - Raw materials producer

Every garment requires basic materials. So the first player in the supply chain is the producer of these raw materials, typically split into two groups

There are natural and synthetic (or artificial) materials.

Natural. Natural raw materials come from plants and animals - e.g. cotton from the cotton plant. Other examples of crops are linen and hemp, and from animals - e.g. wool (from sheep), and cashmere (from goats).

Synthetic (or Artificial). These are man-made basic materials and are made in chemical plants. Polyester is the most common synthetic fibre in clothing and is made from petroleum. Other examples of man-made fibres include acetate, polyamide, spandex (elastane) and cupro.

2 - Raw material wholesaler

Raw material wholesale is the Collecting Trade.

Which brings together the basic natural materials of clothing - e.g. the cotton grown by farmers in different countries - and the inbounding of artificial fabrics, which are usually delivered directly from the factory to textile companies.

3 - Textile industry

Textile companies create yarns from raw materials. The yarns are then made into fabrics, of which there are effectively two kinds:

Knitted. Knitted fabric consists of one yarn and keep their shape when pressed.

Woven. Woven fabric consists of multiple yarns in crisscross patterns and show the folds on the surface when pressed.

4 - Fabrics wholesaler

The fabric wholesaler buys fabrics from the textile industry (or its factories), and sells these fabrics to the manufacturing companies of the apparel industry.

5 - Manufacturers

Manufacturers turn these fabrics into clothing commissioned by New Luxury brands and production then takes place.

In ready-to-wear factories, garment making is divided into a large number of separate operations - e.g. cutting and sewing.

For cutting, the sizes are more or less fixed, it’s done through patterns in different sizes. By using standard sizes, mass production is easier and cheaper. However, assembling a garment and post-processing often still require human handling.

Usually different garment workers each take care of a small piece of the garment. There are those who insert zippers all day, while others make buttonholes or stitch back panels.

This is considered the most efficient way of working and has a practical reason behind it: there is usually a machine for one type of finishing or operation.

6 - Brand

The company behind the product and brand.

In 2024, the vast majority of New Luxury brands sell direct to consumer through webstores on platforms like Shopify, Centra, and many others.

Increasingly, they have their own physical retail presence through permanent stores and pop-ups. And they often sell directly to retailers without an agent or distributor.

In these conditions, the brand to consumer link represents the end of the supply chain. However, for many there are two further links…

7 - Clothing wholesaler

Agents, importers and fashion brands sell and distribute the garments to establish retailers - i.e. the shops.

Most emerging New Luxury brands are diversifying their channel mix by leveraging wholesale to retailers. This is especially popular when brands are exploring new markets in different geographic territories (e.g. South Korea, Japan)

Most fashion brands will work with an agent or multiple agents, so that they don’t have to set up a network from scratch. An agent is brought in to handle local sales and marketing,

Agents will accelerate the sales process, thanks to deep networks within relevant stores in a region of the world (e.g. South Korea, Japan, mainland Europe). They have a customer base of retailers, are fluent in the native language and know the local market well.

Fashion brands also often work with distributors, which has an important difference to an agent: a distributor acts on its own account and risk.

So with a distributor, a fashion brand shifts the financial risk. A distributor, or reseller, is an independent company. This means that a distributor has more freedom and can, for example, decide at what price to sell the clothing and through which channels to sell the products. In this structure, the brand that develops and produces the products has less control over distribution, but also less financial risk.

8 - Retailer

Retailers order clothing either direct from the brand or through wholesalers. Retailers sell the clothing to consumers. Thus closing the supply chain.

The term can be applied to independent retailers or entrepreneurs with one or two fashion stores of their own.

Brand cohorts

Based on analysis of large numbers of brands, the types of parties involved in the supply chain don’t vary massively. Some brands are more vertically integrated than others, meaning there are fewer links in the supply chain, but even so they still require mirror processes.

However, we have identified three primary factors that distinguish New Luxury brand supply chains, and each is influential in how they deliver transparency to consumers.

These are:

1. Volumes. The quantity of goods manufactured from high to low dictates a brands bargaining power and influence. This influence has a big role to play when it comes to how willing and able suppliers are to make their practices transparent.

2. Channel mix. The different channels brand’s choose to sell through dictates the level of control on what is communicated to customers. This is significant in relation to transparency because brands who sell through retail partners around the world have less direct control over how information is made available to consumers.

What’s next

This cohort model and supply chain breakdown provides a base on which we can build out our understanding of transparency and how to execute a strategy within New Luxury.

We’ll reference and build on both these resources throughout our transparency series. Next up:

• The different stages in brand-side product development and how this is managed in the majority of emerging New Luxury brands

• The key challenges when rolling out a transparency strategy and solutions / methodologies that can simplify the process

• A model of what good looks like inside of an emerging New Luxury brand - including critical path, product data hierarchy, people plan, and leadership.