Financial crisis belts fashion industry WHITNEY FITZSIMMONS, PRESENTER: Fashion may be glamorous to the outsider, but those in the business say it's tough and unrelenting game, even in the best of times. And in the worst of times many, including some of the biggest names in fashion, simply fail. Very few companies have well resisted. FRANCES BELL: In fact, some have not even survived. European luxury labels Escada, Christian Lacroix and Gianfranco Ferre all filed for bankruptcy last year. It's no surprise to Christian Blanckaert, who spent more than a decade as an executive at French label Hermes. He says despite the high price tags, the spiralling cost of production is making it more and more difficult for luxury retailers to turn a profit. CHRISTIAN BLANCKAERT: Talent is not enough. Look at what happens to Christian Lacroix. Christian Lacroix is a very fantastic creator and a very fascinating man, but he never succeeded to make a company, to make any money. FRANCES BELL: Design and marketing consultant Paul Bennett says the global recession has merely exacerbated what he believes is a wider problem in the luxury industry, that it's become out of touch with its customers. PAUL BENNETT, MARKETING CONSULTANT: The luxury industry needs to realise that what they think is luxury is not. I don't think the luxury business is about selling products, I think the luxury business is about delivering service. And it really needs to step up to the plate, because I think the mass market is delivering service in a much more compelling way than the luxury market is in most cases. FRANCES BELL: Paul Bennett says the days of spending the lion's share of advertising dollars on billboards and high-end fashion magazines are over, and that brands need to target customers more directly. He says developing mediums such as social networking sites will be integral to future marketing strategies. PAUL BENNETT: Two words: appropriate and sparingly. You know, I read a great quote in a marketing magazine and it was about a detergent brand that had gone on Facebook, and it said "I don't need to be friends with my fabric softener". And I kind of feel the same way; I'm not remotely interested in being friends with my. watch. So I think appropriately, but I also think it's time, again, to use them as a forum for feedback. FRANCES BELL: The quality of some luxury fashion goods has come under fire in China this week, with reports that provincial officials have impounded imported clothes which fail to meet Chinese standards. Christian Blanckaert believes China is an important growth market for the industry, and brands can't afford to cut corners. CHRISTIAN BLANCKAERT: I think those who believe that to charge a product with a high price without the quality behind or the legitimacy behind will disappear. And this is very good. FRANCES BELL: Australian sales make up a tiny share of the profits of the top fashion houses and the Retailers Association says consumers have cut their spending on the most expensive brands. RUSSELL ZIMMERMAN, AUSTRALIAN RETAILERS ASSOCIATION: There has certainly been a shift between brands, so I suspect that that is part of the answer. The stimulus package probably has not given as much effect in those top end brands as perhaps it has in the general marketplace of retail. FRANCES BELL: Russell Zimmerman says even if local demand for luxury goods picks up, rental costs in the retail sector are a big barrier for new entrants. RUSSELL ZIMMERMAN: Landlords need to be very, very aware that retailers are struggling and realise that they just cannot come forward with these huge increases in rents that we've been told about. We've heard of rents going up 30 per cent - it is just not sustainable.