An A.T. Kearney study last year singled out the 10 most attractive emerging markets for investment. Brazil, China, and India topped the list, which also included the United Arab Emirates as the 10th most attractive market. The global downturn might well force changes to that list, as fortunes rise and fall. Witness Dubai and Russia, which both seemed unstoppable just a few months ago but have since faltered dramatically.

Russia's gross domestic product is expected contract by 4.5 percent this year, down from growth of 5.6 percent last year, according to the World Bank. The UAE has also been hit hard, with its GDP slated to grow by just 2 percent this year, down from about 7.8 percent in 2008, according to the Dubai Chamber of Commerce and Industry.

The future of fashion might still lie with global players, but international expansion could be just a dream for some.

The New Austerity

Doing more with less is becoming a way of life in the often high-flying fashion industry.

The austerity can be seen far beyond the end, at least temporarily, of Marc Jacobs' post-runway party, a twice-annual highlight on the social calendar of many fashionistas. Designers are looking at the economy and dramatically changing how they operate.

"The situation is very serious all over the world," said Domenico Dolce, CEO of Dolce & Gabbana. "You either waste time commenting on the negatives, or you do the positive thing and do something constructive." The company's sales were down in their stores and showrooms and clients delayed their pre-fall buying from November to January and asked to postdate payments.

"Instead of making a certain number of models, you make less," explained Stefano Gabbana, chairman of the design house. "But this has nothing to do with creativity….You have to do a bit of editing before instead of after. Instead of 1,000 items, you produce 500. Anyway, you send out 50 for the runway….The crisis is there, but we continue to make the collections as we did before—actually better [than before] to sustain all this."

Empty fashion hype is another casualty of the financial crisis, said Jean-Jacques Picart, a Paris-based industry consultant. "The big trend of 'fashion for fashion' is dead," he said. "Consumers are looking for honesty, respect, and value."

In the past, creativity was channeled in service of the image and desirability of fashion brands, whereas in the future, "creativity will serve the product," he explained. "Passion and reason will be the two important elements for fashion in the future."

The nips and tucks are happening everywhere.

"As a company, we'll be more attentive to our investments, which will need to have a faster turnaround," said Guido Damiani, chairman and CEO of Damiani SpA, the Italian jeweler. "If in the past we would invest in a new store knowing that we would lose money in the first three years and start making a profit after five, now the break-even target has to be shorter otherwise, we'll hold back."

Damiani said consumers would eventually get used to the situation and start buying again, but the rebound would be uneven.

"It will take the more mature markets a longer time—maybe even 10 years—to forget the slap of this crisis while the emerging ones will turn out new richness faster," he said.

The Nuts and Bolts

Making all this happen will require fashion companies to be as flexible and innovative as they've claimed to be all along, or more so.

For years, the industry's been filled with chatter about market research, making products with both creative and commercial appeal and tweaking supply chains so design decisions could be made later, but the tangible results were often never seen.

"It's the execution of these things, not just the wishful thinking of them," said John Karonis, newly minted president of Kurt Salmon Associates' retail and consumer-products group. "Our economic environment has really instilled a sense of urgency in many people."

A study by Kurt Salmon described this new, more efficient way of operating as "acting vertical," and said firms such as Target Corp., Coach Inc. and Aéropostale Inc. were already doing it.

Coach is one company that, while heralded as a success and an accessible fashion darling, is also adjusting its approach, offering more bags at lower price points.

"Growth, if it's not profitable, isn't growth at all—it's just expanding a problem," Karonis said. "Wall Street has valued growth and put that up as kind of the key measure of a viable, vibrant company in the past. I just don't think they're going to place nearly as much value on that in the future. You have to earn the right to grow."

That goes for brands across the price spectrum.

"While Bulgari's objective regarding retail used to be maximizing the prestige, the image, the visibility—and therefore we were opening a lot of new large stores—now it has changed and become efficiency in the distribution network," said Francesco Trapani, CEO of Italian jeweler Bulgari SpA. Bulgari will apply this new standard to new stores and existing doors, some of which will be closed.

All the action could change the geography of fashion. "Fashion markets in advanced countries will not see much business expansion because the society is aging, but developing countries will see an increase," said Kana Sasaki, an analyst at Tokyo-based Mitsubishi UFJ Securities. "To survive for another couple of decades, big luxury brands like Chanel should protect the equity of brands while expanding merchandise variation."

An emphasis on smaller chains and quick-turn fashions might also prompt some sourcing patterns to change, even bringing overseas production back to the U.S. market.

"As the dollar inevitably falls, the cost of manufacturing is going to become too great," said Peter Schiff, president of Euro Pacific Capital. "A lot of the U.S. fashion industry manufactures in China and Mexico. That whole process is becoming increasingly more expensive due to shipping costs and the anticipated dwindling foreign currency exchange rates. We can't just be a giant distribution center where we sell everyone else's goods by credit."

The Future

None of this means companies will outright abandon the strategies and methods that helped them get started in the first place. The future of fashion, however different, seems likely to be based mostly on its present.

Massimo Ferretti, executive chairman at Aeffe SpA, said his firm was sticking with its growth strategy focused on complementary brands and would try to make the most of the downturn. "Mindful that a crisis does not have to be seen as a negative, we are looking to be particularly flexible and to revise our guidelines based on the contingencies of the market," Ferretti said. "We are seeking to focus on the core business, streamline costs, and improve overall efficiency."

Aeffe's efforts include a rationalization of manufacturing processes and working closer with major retailers. The company is also holding on to its sense of what it means to create, sell, and own a luxury good. "We do not forget that, even in a period of economic crisis, luxury products cannot afford to leave out ingredients like dreams, desires, and aesthetic gratification, which end up representing one's very essence," Ferretti said. "Creativity remains the key to recovery."

Amid the crisis, there might be opportunity for the nascent fashion industry in China, the world's largest apparel producer.

Though the country is losing millions of manufacturing jobs with the downturn, Shen Liuxin, a Shanghai-based professor of international fashion and art, said declines elsewhere could help China's creative industry.

"We should seize this time when the European fashion industry is entering a recession to promote our own brands to an international level," said Shen. "We should develop our own brands, combining our traditional culture and style."

The pieces in the global fashion game are moving, and there's no telling at this point what the final picture will look like.

---