Capsule collections are a collection of 30 to 40 garments that include everyday clothing and shoes. They are a curated selection of commercial wardrobe pieces, promoted as a limited edition for a short amount of time.
A capsule collection provides a great insight into a designer’s stylistic vision and can serve a variety of purposes for brand development. As a result we could go as far as to suggest that a capsule collection can be considered the ultimate marketing tool for a fashion brand.
In this post, we’re going to touch upon 4 reasons why capsules are such versatile and effective collections to grow your brand. Please find below a breakdown of the article’s content so that you can explore those sections that you find more interesting.
- Market Testing
- Artificial Scarcity
- High Resale Value and Sustainable Use
- Partnership Opportunity
1. Market Testing
It’s not uncommon for designers to approach the business of fashion with a strict product orientation. As a result, designers can build collections that look great on style sheets but might not connect to the consumer market. Each time a ‘full’ collection is being launched designer bets against unfavorable odds.
The challenge designers face is connected to the high investment costs of collection development, against uncertain market reception. To better manage this risk, capsule collections can help designers test the waters before developing full-scale collection designs.
Market testing is especially relevant at a startup stage, as the customers your fashion brand will be addressing may have not developed any loyalty to the brand, and as a result, the chances of launching a collection to a ‘hungry’ market are low. But here lies another great benefit of the capsule collection, connected to the perception of scarcity they are able to ignite. We’ll discuss this point in further detail in our next section of the post
2. Artificial Scarcity
Scarcity is the essence of luxury. For certain heritage brands building a sense of scarcity is relatively easy, as this perception can be built through many components of the collection: its materials, its distribution, its price, and so on. But how can other brands approach this challenge? Well, lower-tier brands can use capsule collections to take advantage of scarcity by juggling availability and timing. Capsule collections are a great way to build a sense of urgency in acquiring the products on sale as they are often available for very little time, and are engineered to run out of stock.
It may seem that by doing so, brands are acting against their own interest, as they are purposefully capping their sales, but there is a subtle strategy that helps developing brand equity by taking advantage of customers who resell limited-edition collections at a higher makeup price on resale marketplaces. This again might sound like an unusual strategy but can help connect the brand with younger audiences, as we’ll discuss in the next section of our post.
3. High Resale Value
Undeniably, there is a strong social currency value attached to fashion. This is why marketplaces end up playing the role of an auction house in terms of creating competition for iconic pieces which create a buzz that is hard to resist.
Capsule collections in this context still make sense as many limited edition pieces can easily stir up competition and bidding that leads to price escalation. As a result, other pieces (from non-capsule collections) can benefit greatly from this element of social validation that resale marketplaces can provide and as a result, the overall equity of the brand can increase exponentially.
An additional benefit connected to resale marketplaces has to do with fashion sustainability and lifespan management. As customers now expect brands to better manage their products’ lifecycle it’s important to see how the opportunity to access second-hand markets is a very effective way to get your brand to think about extended garment lifespan.
Convinced yet? In many cases however capsule collections to be truly exclusive have to be daring, and in this context, finding unusual partners to develop the collection together can bring the biggest result, like in the case of the historical partnership between Karl Lagerfeld and H&M. More about this in the next section.
4. Partnership Opportunities
As we’ve mentioned in the previous paragraph in many cases the most successful capsule collections come from the most unusual partnerships. The goal of the partnership is to identify a trade-off of associations that is beneficial to both brands. In the case of H&M and Karl Lagerfeld, the designer was able to gain a huge cool factor connected to a young and hip brand, while H&M could instead connect its style to a legend of haute couture. It may seem like the partnership was a challenging match, but in reality, the two brands had strong overlaps in their business models. H&M customers could potentially buy a lot of Chanel accessories in various categories (eyewear, fragrances, hard luxury, and beauty) by entering the Chanel world through H&M distribution. At the same time, H&M was able to solve one of its weaknesses, which is the idea of a fast-fashion brand that could not compete in terms of quality with higher tier companies.
As we’ve discussed capsule collections are not only products, they are also - and especially - marketing tools that can help dramatically increase the value of your fashion brand. We’ve seen how useful they can be in terms of being a tool for market testing, and engaging with new audiences by creating a buzz around a limited-time opportunity to buy your brand’s products. It can also allow your brand to build brand equity by tapping into resale value and become a tool for partnership development. Is there anything they can’t do? Jokes aside capsule collections are indeed very versatile tools and we hope that this article was able to help you explore their potential. If you are interested in reading more about the fashion business, please take a look below and you’ll find a lot of additional material for you to access. Enjoy!