Paris now leads Milan in EU fashion market

A deep-learning system applied to big data places Paris in the lead over Milan for the first time, party thanks to a booming fashion technology sector. The city recently launched Paris Good Fashion, an association that will support local and sustainable fashion brands as part of a move to relocate manufacturing and promote craftsmanship, according to a report released in December 2019.

When a team of analysts checked the data between the largest fashion capitals in Europe, Paris provided a surprise. IFDAQ, a fashion intelligence firm based in Vienna, uses artificial intelligence to quantify the global fashion market for its clientele. It helped E&T to test the two cities on their competitiveness.

The French capital has benefited from a major uplift since 2017. Since the beginning of 2019, the Paris index surpasses its rival Milan, making it the strongest fashion city in Europe.

The city index is composed of geographically assigned performance indicators, such as prestige and influence values for various entities including fashion and luxury brands, fashion media and agencies, as well as the production or work volume of the respective city, an IFDAQ analyst explained.

Paris benefited from a positive political and economic climate. One of the main factors was the election of French president Emmanuel Macron, according to IFDAQ. Fashion magazine Vogue cited Macron as a strong supporter of a more sustainable fashion business. Customer demand seems to be shifting and France especially is keen to take aim at fashion's heavy environmental footprint via a global industry sustainability initiative.

The fashion industry seems to have good reason for revisiting its impact on the environment. According to one study by Quantis (a provider of environmental impact assessments) on the environmental impact of the apparel and footwear industries, looking at both industries' value chains, the apparel and footwear industries add more to the global climate impact than all international flights and maritime shipping journeys combined. The two subsectors account for more than 8 per cent of the total climate impact.

At this year's G7 summit, hosted by France, the French president debuted a new 'Fashion Pact': a set of shared objectives incentivising the fashion industry to work toward reducing its environmental impact. This and other factors - including a thriving fashion-tech sector and startups in the city of Paris - contributed to the city's success in flourishing next to its Italian neighbour, Milan.

At individual company level, upbeat news from brands such as Hermès, the French high-fashion luxury goods manufacturer, may also have helped to uplift the Paris city index. For Hermès, its success came overseas, as it opened new stores and achieved higher sales in China.

For Milan, the IFDAQ's 'Global Fashion and Luxury City Index' reveals how the city has suffered under Italy's on-going debt crisis. Major brands such as Gianfranco Ferré were negatively affected and it closed in 2014 after being sold in 2011 to the Paris Group from Dubai. Other brands including Roberto Cavalli (Florence), Stefanel, Cesare Paciotti or Versace were also hurt by toxic economic conditions.

Barbara Slavich, Professor of Management at Iéseg School of Management in Paris, says Milan is long-recognised as one of the world's most important fashion capitals. The city is growing fast, which should be good news for the fashion market, too, she says. The Expo 2015 in Milan was a remarkable development, especially in the luxury field.

However, Slavich concedes that some Italian brands have suffered and certain brands took this as an impetus to change their course. "Some [companies] took this as an opportunity for renewal and are living a new transition by becoming part of groups that will probably support a new era for the brands. One example is Versace to Michael Kors".

IFDAQ data also suggest some brands recuperated. In 2019, the Italian luxury brand Gucci outperformed its 2014 peak by a healthy margin. So did high-fashion women's clothing and accessory brand Miu Miu, as well as fashion brand Valentino.

Slavich is surprised by the results on Paris: "My first reaction is that Milan is still leading, but there is a true movement for green economy and sustainability at the city level in Paris. However, that is not only [valid for] Paris. This is true for most of the brands, as customers are increasingly more sensitive to the topic. It is led by Anne Hidalgo and an improvement for the business environment at the entrepreneurial and tax level for business led by Macron".

Slavich said she is "a bit puzzled why Paris benefited from a positive political climate". The city's current situation is not healthy. She says conditions should make it more uncomfortable for people to travel for several reasons. Terrorism is one factor. Incidences such as the attack by an assailant who stabbed pedestrians along the Rue Monsigny in Paris at the end of 2018 should have weighed heavily on the Paris fashion market. Global fashion brands also suffer from the continuing strikes.

IFDAQ's results seem undeterred by the gilets jaunes (yellow vest) anti-government protesters. Brick-and-mortar fashion stores have been kept closed by owners on Saturdays for long periods over the past year. The recurring demonstrations have made shopping more difficult.

Despite some discrepancies, experts at IFDAQ's argue that without the data, decision makers are in the dark. Better some data to argue with than no data at all. The company's proprietary AI ecosystem quantifies performance information into key performance indicators, says Daryl de Jorí, an analyst at the firm.

De Jorí believes in the power of the city index because it is evaluating the right indicators. He says the quality of the individual value depends on the prestige, influence and market performance. "The production and work volume is primarily composed of advertising campaigns, catalogues, look-books, fashion shows, advertising and fashion media productions. IFDAQ's 'data lake' is composed of a vast range of industry databases including market and industry performance, industry-specific and global demand, digital and social media performance.

Paris and Milan were not the only cities affected by national politics and economic trends. The analysts also identified that the Brexit vote in the UK had an impact on London's index. According to the data, London's fashion market suffered a year-long period of flat development following the initial 2016 Brexit vote. Its growth recovered between 2018 and the end of 2019.

One major retailer gave an unconcerned impression about the impact of Brexit last year. A statement by John Bason, finance director at parent company Abf, said that UK fashion retailer Primark will not increase product prices after Brexit. London stores would be selling very well and Brexit isn't a big deal for Primark, Bason said.

Others are less confident. The real hit to the fashion sector may still be pending. Richard Lim, chief executive of analyst Retail Economics, an economics research consultancy focused on the UK consumer and retail industry, said that he is concerned. A 'hard' Brexit - where existing trade deals disappear and designers, retailers and manufacturers would have to pay to trade with the EU — could mean clothing and footwear tariffs of around 11 per cent, just over £1bn in additional costs, each year, he told journalists.

Other places around the world also suffered from geopolitical events. New York's fashion market remains number one in the world according to the big data by IFDAQ's. However, in the last two years, it has started showing signs of weakness and its edge over other cities has started to vanish following Donald Trump's move into the White House.

When the US-China trade war hit markets hard at the beginning of 2018, it left a deep mark on the city's fashion business. Calculations by the American Apparel and Footwear Association from September 2019 suggested that 92 per cent of apparel; 68 per cent of home textiles, and 53 per cent of footwear imports from China could be subjected to 15 per cent in tariffs - a major concern for the sector.

International manufacturers supplying the US were seen moving their operations outside of China. German brand Puma, which produces 50 per cent of its products for the US market, promptly relocated production to other countries, including Vietnam and Indonesia.

New York's city index was destabilised due to affected import and export streams, IFDAQ explains. Supply chains also grew more complex. The reverberating effects of the trade war are visible in a steady decline since the spring of 2018: "Since [the trade war started], New York has lost on global influence", de Jorí said.

Recently, the dust has started to settle. It helped that last autumn US brand Nike reported strong growth in revenues in China. New York remains strong as a global fashion capital. The time when European or Asian fashion markets outperform New York may still some way off, but no fashion capital is invincible to geopolitics, as the data shows.