The Celebrity Effect in Fast Fashion Industry

With the increasingly fierce market competition in fashion industry, celebrity effect as a marketing tool has become increasingly popular for the fashion brand. According to some analysis in United States in1995, almost 20% of the television advertisements use famous person as an endorser (Agrawal and Kamakura, 1995). By 2000, this number had been increased to 25% (Shimp, 2000). The use of the celebrity effect is becoming more widely in corporate on street advertisement and the fashion introduction in magazines. Without exception, celebrity endorsement may increase brand awareness and materially improve financial returns. (Farrel et al, 2000; Edogan et al, 2001)

In recent years, H&M and Zara have developed rapidly around the world. The fast fashion brands purchases by consumers widely. Fast fashion is well-known by its quick response to the fashion trend. This means customers can find the latest fashion from the fashion shows or the celebrity trends in the stores within short period. Moreover, the effective use of celebrity effect is also a key point for their success.

In this essay, it will try to figure out the influence of celebrity effect in fast fashion industry. It could affect both consumers and companies. The celebrity effect will influence consumers mainly via media and the consumers’ buying behavior directly. On the other hand, the effect on firms will be their strategic marketing decision, the direct profit and the potential returns. Furthermore, this essay will use the case study of H&M and Zara and offer a SWOT analysis in order to study this effect in more detail.

2. The use of celebrity endorser on consumers

The celebrity endorser is defined as “any individual who enjoys public recognition and who uses this recognition on behalf of a consumer good by appearing with it in an advertisement” (McCracken, 1989). The preconceived image consumers have for any celebrity endorser will transfer to the endorsed brand (Atkin and Block,1983). Firedman and Firedman (1979) found empirical evidence that, using a celebrity endorser would bring a great believability in promoting products in psychological and/or social risk.

Moreover, several studies have shown that celebrities can have a direct positive impact on advertising likeability and also an indirect effect on brand attitude and purchase intentions (Pelsmacker et al, 2007). For instances, the management of Pepsi attributes its 8% increase in sales in 1984 to the Michael Jackson endorsement. Additionally, the Spice Girls were responsible for 2% global market share increase in 1997 (Erdogan, 1999). There are two sides which the celebrity endorser affects on the consumers firstly via the media and secondly by consumers’ own buying behavior.

2.1 Through the media

Celebrities are used extensively in almost every industry especially in the fashion industry. They certainly attract a lot of attention, not only from the target group, but also from the media. The literature figuring out that celebrity endorsement had generally two foundational source models: the source-credibility model and the source-attractiveness model (Erdogan, 1999) .

The source-credulity model is defined by Ohanian (1990) as “a communicator’s positive characteristics that affect the receiver’s acceptance of a message”. According to the source-credibility model, the celebrities should be credible in other words that they are professional and trustworthy. The trustworthiness of an endorser is defined as the degree to which the endorser is perceived to be honest and believable (Till and Busler, 2000).

On the other hand, based on the source-attractiveness model, “attractiveness refers in this context to the degree that the celebrity is known, is physically perceived to be attractive and is liked by the target group (Pelsmacker et al, 2007)”.

Tungate (2008) showed that once the celebrities put on one brand of clothes, it will directly affect sale especially for the fast fashion brand. The sales of Jimmy-Choo Collection for H&M from November 2009 had a satisfactory start with an increase of approximately 11% compared to the same period as the previous year (H&M Financial Reports, 2009). They could manufacture the latest fashion in short period and sell them to the public. The more the celebrities wore the fashionable clothes in the media, the more inspiration feed into fast fashion.

2. 2 Affect through consumers’ buying behavior

To successfully lead the fashion trend of consumption, firms must satisfy the consumer’s psychology and fashion sense. Living in the era of entertainment, celebrities’ behaviors are always concerned and copied by the public. Thus, it can be easily found the most fashionable dresses from the magazine, TV or even the advertisements. Traditionally, consumer researchers have approaches decision-making from a rational perspective. In this point, consumers reorganize the information as much as possible calmly and carefully in order to recognize what they already know about a product, painstakingly considering everything, and arriving at a satisfactory decision (Solomon et al, 2006).

Celebrities could be defined as consumer’s awareness, learning and reference groups. Bearden & Etzel (1982) highlight that reference group influence on product and brand purchase decisions. In people’s daily consumption activities, reference groups lead consumers’ buying behavior. Celebrities every move can affect their admirers. They imitate, learn to dress their style in order to be closer their idols. However, considering the cost, people could not afford the high street brand greatly.

Reference groups affect consumers through the goals, standards, norms and lifestyles. Celebrities can be trust as a reference group. They are also the consumption of goods consumed by the symbol. They generally impact consumers in three ways. Firstly, the celebrity formation of group norms through the pressure of the consumer behavior of people and tend to some kind of “harmonization”. This uses celebrity effects to consumers who have similar items with the pressure to meet consumer behavior or consumer choice consistency; Secondly, consumers trust to consumers subject to psychological, to increase product trustworthiness; Third, the consistency of celebrity affect on consumer buying behavior. When a consumer chooses to buy a product or just taking a particular action, the celebrities featured in the products will greatly influence their choice, consumers will buy before the factors to consider in this regard ( Bearden & Etzel ,1982) . This offers a chance for the fast fashion brand which has the most fashionable style but the lowest price.

3. The effect on fast fashion firms

The use of celebrity endorsement will also influence the company’s development. This is shown very clearly in the profits returns. The importance of celebrity endorsers does not only depend on the fact that those firms wish to increase revenue, but also show in adding value for the company, brand or product. The added value of celebrities through the process means a kind of transfer (McCracken 1986,1989) .

3.1 The effect of strategic marketing decision

Celebrities lead the trends. It is not only influence on the consumers’ behavior but also influence the strategic marketing decision for fast fashion industry.

A number of studies about the economic value of strategic marketing decisions are increasingly attention-grabbing in marketing literature. These studies have examined “the effect of strategic marketing decisions such as product innovation, research and development expenditures, advertisement expenditures, product quality, and consumer satisfaction on firm profitability (Capon, Farley, and Hoenig, 1990; Szymanski, Bharadwaj, and Varadarajan, 1993).” Therefore a growing number of firms are putting more emphasis on celebrity endorsement to enhance the value of advertising and build brand equity. The economic returns from the investment in this form of advertising will influence many things from the initial design, improvement to marketing tool selection ( Agrawa & Kamakura, 1995) .

Take Zara as an example, what the celebrities prefer or what shows in the fashion week are the major inspiration Zara has. The design organization is focused on careful interpretation of catwalk trends suitable for the mass market. The Zara designers attend the read-to-wear fashion shows in Paris, New York, London, Milan and etc. They get inspirations from those shows and the dresses of the celebrities who attend these shows and begin to develop the initial sketches for a collection close to nine months before the start of the season (Ghemawat & Nueno, 2003).

Furthermore, the profitability of the celebrity endorsement advertising strategy is also a key point that needs to be discussed. The impact of celebrity endorsements shown in the previous researches provided a lot of views of celebrities advertising and the consumer response to it. “It is important for a manager to know whether a celebrity endorsement strategy generates a favorable consumer response, as well as understand whether the economic returns justify the costs associated with such a strategy. ( Agrawa & Kamakura ,1995) “

3.2 The direct profit for using celebrity effect

Celebrity endorsements are expensive for the company, however it is very useful. Depending on the status of the celebrity, returns could be millions of dollars for several years. The specialty and cost of advertising campaigns often rely on celebrities ( Agrawa & Kamakura, 1995) . Managers will prefer the celebrity endorsement as an investment in intangible assets and hope to offset with greater future sales revenues and profits. Such as H&M, it cooperated with several celebrities in order to use their reputation to increase their sales or even their brand fame.

JIMMY CHOO for H&M -Shoes in luxury materials Legendary accessories brand Jimmy Choo created in autumn 2009 a sophisticated, fashionable guest collection of shoes and accessories along with a capsule clothing range for men and women. From 14 November, thousands of eager customers were given the chance to discover the collection, which was sold in around 200 selected city stores. (H&M 2009 Annual Report, 2010)

Furthermore, H&M launched a collection which was typical Matthew Williamson-wonderful colours and patterns exquisitely designed. A guest collection of underwear from French fashion house Sonia Rykiel was launched in time for the Christmas season. (H&M 2009 Annual Report, 2010)

Key ratios

2009

2008

Sales including VAT, SEK m

118,697

104,041

Sales excluding VAT, SEK m

101,393

88,532

Change, %

+15

+13

Operating margin, %

21.3

22.7

Profit after financial items, SEK m

22,103

21,190

Profit for the year, SEK m

16,384

15,294

Earnings per share, SEK (before and after dilution)

19.80

18.48

Change, %

+7

+13

Return on equity, %

42.2

44.3

Return on capital employed, %

56.7

61.1

Share of risk-bearing capital, %

78.5

75.7

Equity/assets ratio, %

74.7

72.1

Total number of stores

1,988

1,738

Average number of employees

53,476

53,430

Source: http://www.hm.com/gb/press/financialreports/annualreports__pressinvestorannualreports.nhtml

The sales and profit rise obviously through the cooperation with celebrities. Thus, using the celebrities endorsements helped H&M and brought it direct profits.

3.3 The potential returns

Open any fashion magazines, the brand advertising can be seen in using different methods of perform. Now, fashion advertising is becoming an increasingly important part in brand image establishment. Fashion advertisements are not only for simple clothes, accessories and cosmetics and other products information, but also for the brand image of the “overall appearance”. Practice has shown that people consumes certain kinds of fashion products, not only because their physical features and practical functions meet their needs but also because its advertising promotes the abstract. Different kinds of advertisements contain different values and spiritual orientation, represents a different attitude to life, lifestyle, life philosophy and ideology (Hu, 2001).

For the international brands, advertising has long been planning and running an integral part of brand development. A brand’s success needs advertising, but advertising cannot build a brand. A classic advertising should be able to rise to the desire to buy, because the original purpose of advertising to consumers is to purchase goods. For example, Chanel’s fame not only attracts consumers but is more attractive to celebrities, from actress Marilyn Monroe to Kate Moss, even if not as a brand of specially appointed advocate, they are more willing to purchase the items (Tungate, 2008).

4. Different way of managing the brands: H&M and Zara

Comparing the business strategy of H&M and Zara, it is quite obvious that these two companies use different marketing tools. H&M tend to devote quite large money in using celebrity effect in order to enhance its profit and its brand image. This offers consumers an image of ‘fashion and quality at the best price’. However, Zara, same as a fast fashion firm, uses a different approach and spend less on advertising (H&M Annual Report 2009& Inditex Group Annual Report 2009, 2010) .

Zara

“The firm spends only 0.3 percent of its annual turnover on advertising (Ghemawat & Nueno, 2003).” Normally it is at the beginning of the sales season or on the occasion of a new store opening. The store is considered its most effective communication tool.

“Zara relies on its shop windows to communicate its brand image. Displays are changed regularly, according to designs sent by headquarters, and are critical for Zara to remain visible and entice customers.” (Kumar & Linguri, 2006)

H&M

H&M’s business concept is to “offer fashion and quality at the best price.” (H&M Annual Report 2009,2010)

“Every year H&M launches a number of major campaigns, which are complemented by smaller campaigns. This increases the interest around the new collections of the season. H&M places high demands on all communication, which must always be of the highest quality. H&M uses all channels in its communication. (H&M Website, 2010) “

According to their different ways in marketing, SWOT analysis will be used to find the merits and demerits and their future development.

H&M

Inditex(Zara)

Facts

Started in 1947

Nearly 2,000 stores in 35 markets and around 76,000 employees.

sales including VAT SEK 118.7 billion(12,4 billion euros)

Lack of advertising, only 0.3% of turnover.

Established in 1985

4,607 stores in 74 countries and 92,301 employees

11,084 millions of euros in sales

4% of turnover spent on advertising.

Strengths

High brand awareness through the campaign with celebrities and Charity

Cooperate with celebrities to launch new product lines

H&M does not own any store premises, which gives the company flexibility

Own 8 brands, each of which has a different and specific appeal to offer to its customers

Rely on its shop windows to communicate its brand image

Preferred store locations

Rapid response to market needs

Have own factories; easy to control the logistic;

H&M

Inditex(Zara)

Weakness

Costs lot on marketing communications which influence a lot to the annual profit.

Less brands to meet customers’ needs

Not establish a impressive brand image

Cost large amount of money in its logistic

Opportunity

Continuously cooperate with famous designer in order to launch a popular collection

New market, new customers, new brand image

Establish more new brands

Devote more in advertising in order to enhance brand awareness

Own factories, easy to control the quality

Quick response system get more consumer data

Threaten

More fast fashion brand turning into international market

The copyright for High street brand

Source:

Carmen Lopez and Ying Fan, “CASE STUDY Internationalization of the Spanish fashion brand Zara”, Journal of Fashion Marketing and Management Vol. 13 No. 2, 2009 pp. 279-296

H&M Annual Report 2009, Access from:

http://www.hm.com/gb/press/financialreports/annualreports__pressinvestorannualreports.nhtml

Inditex Annual Report 2009, Access from:

http://www.inditex.com/en

Jennifer E. Smith, “Flattery or Fraud: Should Fashion Designs Be Granted Copyright Protection?” Access from: http://jolt.unc.edu/sites/default/files/8_nc_jl_tech_online_ed_1.pdf

It is quite clear that H&M and Inditex Group both have advantages and disadvantages. H&M focuses more on the marketing communication, while Inditex Group puts more emphasis on operation.

Since 2004, H&M launched several product lines using famous designers and fashion icons. Designer collaborations boost business concept and makes the products more attractive and desirable to customers. Moreover, H&M published four magazines a year offering the customers know the fashion trend and know their new products. “H&M keeps in close contact with the media, both to showcase our fashion and to provide/information about H&M. We also communicate regularly with the business press and financial markets.” (H&M Website, 2010) On the other hand, Inditex Group uses different marketing strategy. It only devoted 0.3% in marketing which just in the beginning of a new store open which was one-tenth of ordinary fashion brand.

The suitable using of celebrities effect brings H&M a high rank of brand value which ranks 63 and has a brand value of 12,131 million US dollars in 2010. Zara was given with a rank of 80 which has a brand value of 8,966 million US dollars. (Millward Brown: Top 100 Most valuable global brands 2010, 2010) Comparing this with the brand value and the market value for both H&M and Inditex, it could know as follows.

H&M

Inditex(Zara)

Brand Value

$12,131 million

$8,966 million

Market Value

SEK 337,521 million (about $50,587 million)

31,442 million in euros ( about $40,119 million)

Percentage of brand value in total market value

24%

22%

Source:

H&M Annual Report 2009, Access from:

http://www.hm.com/gb/press/financialreports/annualreports__pressinvestorannualreports.nhtml

Inditex Annual Report 2009, Access from:

http://www.inditex.com/en

Thus, it means the celebrity effect has the close relationship with the brand image and also the returns, especially in the changeable fast fashion industry.

5. Conclusion

Celebrity effect influences both H&M and Zara and their consumer through their self infectious. They have always been the object of public concerns and the reference object. The aim is for consumers to buy more clothes which are similar with the celebrities and to reduce the distance between them. At the same time they could show their unique vision and decent taste of fashion. Celebrities give the celebrity effect for fashion brand marketing and bring new life to the industry by enhance brand image.

Celerity effect plays a crucial role in fast fashion brands. It could develop a high brand value. H&M is quite successful in establishing it brand image through the celebrity effect. That helps it rank the first in global appeal industry and ranks 63 in all industry. The rank is much higher than another fast fashion firm, Inditex. As we have seen previously, high brand value lead to high market value. Moreover, the celebrity effect has the direct effect to the percentage of brand value in total market value which shows that H&M is 24% and Inditex is 22%. As a result, H&M is more successful in branding than Inditex which means it is quite wise for fast fashion firms to use the celebrity effect to establish brand image and open the market. Furthermore, fast fashion firms also need to put more emphasis on this factor and use different channels of media to achieve maximum efficiency, and maximum effect in their overall marketing plan such as Fashion magazines, TV shows, TV programs, advertisements, web and etc.

Celebrities bring their own positive effect on the marketing of fast fashion brand. Their participations in fast fashion brand’s campaigns offer consumers a guide for fashion. However, for brands, they get an advertising opportunity for their new collection from the celebrities and the brand image enhanced. This is a mutual benefits situation for both consumers and fast fashion companies.