Tailored Menswear Clothing

In 2012, menswear represented 40% of global sales of Luxury mens wear,

while mens spending on luxury grew 14% on 2011, almost twice as fast as

Market Analysis Report

Tailored Menswear Clothing

Group 5
Group Composition:
Gaia Migliavacca, Enrico Nicolamarino,
Billy Souksavanh, Anshumala Srivastava, Gustavo Vejar Llugany

2014

womens.1 The largest share of the luxury menswear market is still retailing,
but tailored clothing is gaining growing importance.2
The tailored clothing menswear market includes both bespoke and made-tomeasure clothing. With the first one, clothes are created from scratch, entirely
by hand, with a limitless selection of fabric and style options. Instead, with
made-to-measure, clients are fitted from a selection of sample clothing that are
tailored for their body type and then are given a selection of fabric and detail
options. Clothes are produced in a factory and then customized by a team of
tailors. Both bespoke and made-to-measure are more expensive compared to
the standard ready-to-wear clothing, as its a time consuming proposition
requiring the service of professional tailors.
The tailored clothing for men includes a wide range of products assortment,
which can vary from formal to casual wear. However we will focus only on
Formal clothing for our analysis, which will include Jackets, Trousers and Shirts.
Main players in tailored clothing market can be separated into three different
categories:

Luxury-fashion houses with menswear lines, which also specialize in

tailor-made products (Ermenegildo Zegna, Prada, Ralph Lauren, Brioni,
Gucci, etc.);
Traditional, often historical tailor houses (Saville Row, etc.) and,
Business-oriented industrial made-to-measure stores which tend to offer
more affordable products for bargain seekers (Indochino, Brooks
Brothers, etc.).

For our analysis we will stick to Luxury houses.

According to industry specialists3, the price of raw materials (that makes
almost 50% of final cost) ranges from 100 for the cheapest material to
over 20,000 for the most expensive cloths. Also, the labour cost for tailored
1 Bain, Worldwide luxury goods continues double-digit annual growth; global market now tops
200 billion, finds Bain & Company, published on 16th May 2014,
http://www.bain.com/publications/articles/luxury-goods-worldwide-market-study-spring2014.aspx

2 Luxury Society, It's All About Made to Measure for Luxury Menswear, published on 4th July
2013, http://luxurysociety.com/articles/2013/07/its-all-about-made-to-measure-for-luxurymenswear

3 Ms. Ruchi Singh, Deputy Manager - Buying, Made-to-Measure, Raymonds Apparel, India,
Mr. Gautam Golchha, Managing Director, Silvercrest Clothing pvt ltd & cofounder/Invester
Tailorman, India and,
Mr. Jacob John, Brand Directore, Louis Philippe, Madura fashion & lifestyle, India.

suit in a developed country is between 25 and 30 per hour worked. This

means that for a bespoke suit, which requires about 45-50 hours of work, the
price of labour could range between 1,250 and 1,500, and for a made-tomeasure, which requires around 8 hours of work, it would be close to 200.
Then, depending on the reputation of the brand, the final prices for the suit
would be 2 or 2.5 times the cost of goods sold for an anonymous tailor, and 4
or 5 times for a renowned one. Therefore, a suit with the same cloth could be
worth 3,500 when bought from local tailors or 7,000 from established
brands.
From cost structure point of view, most of the costs for goods sold are variable
in the short run, except the tailors salary. In the mid run, other costs such as
salaries (including administrative, selling and production salaries) are also
considered variable. Finally, in the long run, all costs are variable (Table 1).
Table 1 Fixed & Variable cost for different periods for Tailored Clothing in
Luxury Segment
Short Run
Fabric Cost
Variable Cost
Trim Cost
Variable Cost
Tags & Labels
Variable Cost
Making
Charges Fixed Cost
(Tailor)
Packaging Cost
Variable Cost
Logistics Cost
Variable Cost
Marketing Cost
Fixed Cost
Selling Exp.
Stores
Fixed Cost
Salaries
Fixed Cost
Commissions
Variable Cost
Corp/Admin Cost
Salaries
Fixed Cost
Legal
&
other Fixed Cost
Advisory
Other Corp & Admin
Fixed Cost
Dep. & Amortization
Dep. & Amortization. Fixed Cost
(COGS)
Dep. & Amortization. Fixed Cost
(SG&A)

Mid Run
Variable Cost
Variable Cost
Variable Cost
Variable Cost

Long Run
Variable Cost
Variable Cost
Variable Cost
Variable Cost

Variable Cost
Variable Cost
Fixed Cost

Variable Cost
Variable Cost
Variable Cost

Fixed Cost
Variable Cost
Variable Cost

Variable Cost
Variable Cost
Variable Cost

Variable Cost
Fixed Cost

Variable Cost
Variable Cost

Fixed Cost

Variable Cost

Fixed Cost

Variable Cost

Fixed Cost

Variable Cost

The marginal cost and average cost curves for the short and long run are
shown in Chart 1, using average fabric and tailoring costs.

1800
1600
1400
1200
1000
800
Price ()
600
MC Short Run
400
200
-

MC Long Run

AV Short Run

AV Long Run

Quantity (units per year)

Chart 1
Marginal and Average Cost Curve through Quantity for the Short and Long
Run

If a new player were to enter the business, the primary entry costs would
involve the workshop, tailor's salary, raw materials and low administrative
expenses. As for selling, nowadays there is no need to own a proprietary store;
instead a new business can manage its sales through alternative distribution
channels such as multi-brand outlets like Harrods 4, and even through an online
store. Secondary costs would include marketing to create awareness in your
target audience. These expenses would be high if the strategy is to focus on
rapid growth.
To summarize, the barriers of entry are considered low, since the entry costs
are low to medium depending on the strategy, and there are no significant
sunk costs. Furthermore, achieving economies of scale is limited (except in
4
GQ Get some top-notch tailoring at Harrods Made To Measure weekend By Nick Carvell,
published on 1st October 14, http://www.gq-magazine.co.uk/style/articles/2014-10/01/harrodsmade-to-measure-suits-tailoring-weekend-london

marketing) in this industry, since the product is hand-made, although

employing assembly line-like structures5 and using technology while taking
measurements6 can achieve some degree of economies of scale.
Tailored clothing has mainly two kinds of customers:7

Wealthy customers looking for high-quality products (top of the pyramid

in Maslows hierarchy of needs);
People who need tailored made clothing for physical reasons.

They are looking for perfect fit, and are willing to pay a premium for the quality
and uniqueness of product. Service in tailored clothing business is crucial. Not
only is the customer looking for a product that corresponds exactly to his
requirements, but also for a personalized experience. Moreover, tailored
products are an indicator of their owners status and wealth.
The starting price for tailored suit is around 2500 8 and the higher end is
limitlessness depending on the material used. For instance, Scabal offers its
customers a combination of wool and orchid for its special range. Suggesting
that luxury firms can go to extreme to imagine products. Similarly , for shirts
the price starts at 300.
Given the type of customer and the reasons that triggers their purchase
decisions, we believe that the demand of tailored clothing is relatively inelastic
to price changes. Demand is sensitive to changes in income: an increase will
shift the demand curve to the right, resulting in higher quantity demanded at a
given price. Therefore, the current recession in the western world represents a
threat to the market. However, demand of tailored clothing from BRIC and
Middle Eastern countries is increasing, thanks to a broader customer base
looking for social status recognition.9

5
Wikipedia, Assembly Line, as on 21st October 2014, http://en.wikipedia.org/wiki/Assembly_line

6
BBC, 'Virtual mannequins' promise better fit for online shoppers, by Rich Preston, published
on 21st January 2014, http://www.bbc.com/news/technology-25812130

7
Financial Post, Upscale brands tailor clothes for Indias growing economy and pot bellies, by
Adi Narayan, published on 20th June 2013,
http://business.financialpost.com/2013/06/29/upscale-brands-tailor-clothes-for-indias-growingeconomy-and-pot-bellies/

8
Prices taken from Zegna, as on 23rd October 2014 at 4:00pm, www.store.zegna.com

Changes in consumers preferences also affect demand. On one hand, the

growing awareness in men about taking care of themselves 10, the proliferation
of fashion blogs (such as the sartorialist & GQ 11) and the influence of movies
and television series like Madman, has a positive effect on the demand. On the
other hand, the new generation of successful IT companies CEOs are setting a
new laid-back trend, breaking the old perceived link between being successful
and wearing a business attire (Mark Zuckerberg) which might negatively affect
the demand.
In terms of substitutes for tailored clothing, the closest product is ready-towear. However, we believe a decrease in price of ready-to-wear would have a
relatively low impact on the demand of tailored clothing.
As highlighted by the Porters five forces diagram in Figure 1, despite the low
concentrated competition, the rivalry is not driven by price, but rather by
differentiation of the product, quality and service experience. Hence, the
industry focuses its efforts in marketing and advertising to enhance the brand
awareness and loyalty. Other key costs in the industry are fabric and labour
charges. Despite the mid-to-high power of suppliers, if a company manages to
build a long-time relationship (large number of orders), it can gain a
competitive advantage based on cost efficiency.
Figure 1 Porters five forces analysis for Tailored Menswear Clothing Market

9
Business of Fashion, No Signs of Slowing in the Global Menswear Market, by Lisa Wang,
published on 17th June 2014, http://www.businessoffashion.com/2014/06/signs-slowing-globalmenswear-market.html

10
China's metrosexual men revive luxury shopping, By Farah Master, published on 21st January
2014, http://www.reuters.com/article/2013/01/21/us-china-luxury-menidUSBRE90J0JK20130121

11
The Sartorialist, http://www.thesartorialist.com/

The analysis suggests that the industry is an attractive one to invest in and
keeping the cost-price structure in mind, we believe that the market is
profitable in the long run.
With the growing number of high net worth individuals, the demand for luxury
items will keep rising. The number is fast increasing in markets like China
where its growing by 20-25% per year and menswear segment accounts for
60% of that growth12.
The key aspects to be successful in this market are differentiation and brand
loyalty, as the demand is driven by product and service excellence rather than
price. At the same time, technology will play a major role in the future. Also,
some players have started to invest in technologies such as a water-repellent
fabrics and measurement machines. For instance, a French company Les
Nouveaux Ateliers has based its business on machines that scan human body,
taking 200 measurements per second. The information collected is sent to a
tailor in Shanghai who makes the garment. The key developments in textile
12
Chinese consumer report luxury, published by Roland Berger, referred on 25th October
2014
http://www.rolandberger.com/media/pdf/Roland_Berger_taC_Chinese_Consumer_Report_Luxury_
20121017.pdf

technology will be to work around the human body shape, for example bodyshaping fabrics. Companies that will manage to mix the right amount of
tradition and technology will be able to succeed.

Appendix
Online Reports & Articles

Bain, Worldwide luxury goods continues double-digit annual growth;

global market now tops 200 billion, finds Bain & Company, published
on 16th May 2014, http://www.bain.com/publications/articles/luxurygoods-worldwide-market-study-spring-2014.aspx
Luxury Society, It's All About Made to Measure for Luxury Menswear,
published on 4th July 2013,
http://luxurysociety.com/articles/2013/07/its-all-about-made-to-measurefor-luxury-menswear
GQ Get some top-notch tailoring at Harrods Made To Measure weekend
By Nick Carvell, published on 1st October 14,
http://www.gq-magazine.co.uk/style/articles/2014-10/01/harrods-madeto-measure-suits-tailoring-weekend-london
Wikipedia, Assembly Line, as on 21st October 2014,
http://en.wikipedia.org/wiki/Assembly_line
BBC, 'Virtual mannequins' promise better fit for online shoppers, by
Rich
Preston,
published
on
21st
January
2014,
http://www.bbc.com/news/technology-25812130
Financial Post, Upscale brands tailor clothes for Indias growing
economy and pot bellies, by Adi Narayan, published on 20th June 2013,
http://business.financialpost.com/2013/06/29/upscale-brands-tailorclothes-for-indias-growing-economy-and-pot-bellies/
Prices taken from Zegna, as on 23rd October 2014 at 4:00pm,
www.store.zegna.com
Business of Fashion, No Signs of Slowing in the Global Menswear
Market,
by
Lisa
Wang,
published
on
17 th
June
2014,
http://www.businessoffashion.com/2014/06/signs-slowing-globalmenswear-market.html
China's metrosexual men revive luxury shopping, By Farah Master,
published on 21st January 2014,
http://www.reuters.com/article/2013/01/21/us-china-luxury-menidUSBRE90J0JK20130121
The Sartorialist, http://www.thesartorialist.com/
Chinese consumer report luxury, published by Roland Berger,
referred on 25th October 2014
http://www.rolandberger.com/media/pdf/Roland_Berger_taC_Chinese_Co
nsumer_Report_Luxury_20121017.pdf
Forbes, What Is The Difference Between Made To Measure
And Bespoke?, published on 16th January 2013
http://www.forbes.com/sites/quora/2013/01/16/what-is-the-differencebetween-made-to-measure-and-bespoke/

Conversations with Industry Experts

Ms. Ruchi Singh, Deputy Manager - Buying, Made-to-Measure, Raymonds

Apparel, India

Mr. Gautam Golchha, Managing Director, Silvercrest clothing Pvt ltd &
co-founder/invester at Tailorman, India
Mr. Jacob John, Brand Director, Louis Philippe, Madura fashion & lifestyle,
India.

Independent collaboration within the group

Defining the market, based on individual information, online reports &

information provided by experts consulted.
The break down of costs in the short, mid & long run, based on
information provided by the industry experts consulted.
Determining the barriers to entry & economies of scales, based on
information provided by the industry experts consulted.
Porters five forces analysis based on online reports & conversations with
industry experts.
Deductions about the demand curve based on online reports &
conversations with industry experts consulted.
Main drivers of the market, based on information available in the reports
& as provided by the industry experts consulted.