And the product offer has to do with a certain product category.
It may be leather goods, watches and jewels, fragrances, or apparel.
And of course each product category has a certain positioning in the high end
of the market.
So a luxury for instance, leather goods based on exclusivity.
Or in the premium market an apparel line that is
able to mix fashion ability with convenience.
So, the product offer again answers the question:
what are we delivering our target through our value preposition?
The third driver and the third part of a business model is the “how?”
So how are we designing the supply chain and the value chain?
Usually in this area companies are actually making decisions about
the degree of vertical integration.
Are we managing all the activities of the value chain,
design, manufacturing, retail, and/or distribution internally?
What are we outsourcing?
There is a trend in fashion and luxury towards,
for instance, an increasing degree of vertical integration.
And so, degree of vertical integration,
then also how you design your network of suppliers.
how much they will collaborate in your activities is
a strategic decision in the so-called “how.”
The fourth and last element of a business model is related to
the revenue model. Let's say
the way you make money.
Are we making money through licensing fees?
For instance, many companies are just a design workshop and
they give or license all their activities.
So, their revenue model is a licensee fee flow.
Or there are companies that are very much based on a revenue model
a volume based, based on volumes and little margins.
While in the luxury, you have lower volumes and higher margins.
So margins are very important in order to
contribute to the profitability of the company.
So the way you make money, how you design actually your economics,
is the fourth very important part of your business motive.
So we'll see how four business models in particular
luxury companies, premium companies and premium brands.
Designer brands and vertical retailers are therefore organizing these four pillars
in order to have a sustainable positioning and avenue and income flow.