Fashion Retail – A broken model: From growth to collapse
A global crisis exposes an industry unwilling to adapt. But can it survive its own excess?
From Italian boutique Luisa Via Roma seeking court protection to Canadian e-tailer Ssense filing for bankruptcy, a pattern is emerging: the traditional model of fashion retail is broken. Indeed, the same fundamental flaws connect retailers across the globe, both physical and digital. But is this just the effect of an economic crisis, or is it a business model that has now reached its end?
Fashion retail: What went wrong?
Consider Luisa Via Roma. Once a pioneer in multi-brand e-commerce, it recently expanded with a New York store and a Milan headquarters. Now, the Florence-based company is seeking protection from creditors under Italian insolvency law. What went wrong? Management cited the luxury slowdown, US tariffs, and rising transport costs, alongside strategic missteps—notably, the subsequent closure of that very Milan headquarters.
They are far from alone. In fact, they join a grim roster of recent casualties that illustrates a broken model:
- Matches Fashion: The luxury e-commerce platform ceased all operations on 30 June 2024. Its owner, Frasers Group, which had acquired it only in late 2023, placed it into administration by March due to unsustainable losses. Its collapse left designer brands and customers in limbo, starkly illustrating the perils of online luxury retail.
- Farfetch: The luxury marketplace was rescued from imminent bankruptcy by a last-minute acquisition from Seoul-based Coupang, which provided $500m in emergency funding. The company is cutting costs, closing unprofitable units, and selling assets to stabilise its finances and return to profitability after facing significant financial difficulties.
- Net-a-Porter: The industry giant was sold by parent company Richemont to rival Mytheresa. Current information focuses on Mytheresa’s strategic plans and goals rather than the post-acquisition performance of Net-a-Porter. So, there are no current performance reports, and the success of the integration remains to be seen.
- Ssense: The Canadian retailer announced plans to file for bankruptcy protection, citing pressures from new US tariffs and the elimination of the de minimis exemption. But its downfall was years in the making. The company was squeezed by tighter liquidity and poor returns on pandemic-era investments. Most critically, its data-obsessed, always-on-sale model lost its novelty and its edge with a fickle audience.
Fashion retail: How overproduction and discount culture led to crisis
Their commercial strategy has become a vicious cycle: an endless selection of garments—including, ironically, sustainable lines—coupled with frequent, heavy discounting. Trapped by declining sales, they double down on the very practices undermining them: ordering excessive stock and relying on constant promotions, which only accelerates their race to the bottom.
Is this strategy successful? No. Do we see anything different? Neither.
In short, fashion retailers are part of an industry unwilling to change. We explored the topic here.
Final thoughts
Undeniably, these are challenging years for fashion retail. The industry’s foundations are crumbling, revealing a deep systemic issue. Yet the response in-store and online remains the same: shops packed with huge selections and perpetual markdowns.
And so, this begs the question: can seeking mere financial lifelines—from investors or the courts—without enacting genuine structural change, ever lead to lasting success?
How long can the industry continue to promote mass-produced garments from brands that are increasingly devoid of meaning?
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