Controversial fashion designer John Galliano's high-profile dismissal last month from his post as creative director of LVMH-owned Christian Dior at the start of Paris Fashion Week shook the rag trade from its teetering heels to its wobbly knees.

But Galliano, whose anti-Semitic rant was breathlessly covered by the media, isn't the only high-end designer to run into trouble of late. Alexander McQueen committed suicide a little over a year ago at his home in London, though his label, which is half-owned by France's PPR SA, lives on. Jean Paul Gaultier was replaced last year as creative director at French luxury group Hermès International SCA by Christophe Lemaire, the former creative director at mass-market brand Lacoste. In 2009, the namesake companies of Christian Lacroix and Yohji Yamamoto both filed for bankruptcy.

That same year, Tom Ford, who won kudos for successfully resuscitating PPR's Gucci label in the 1990s, failed to attract the $50 million in private equity investment he sought to expand his young company, Tom Ford International LLC. And Valentino Fashion Group SpA, which is controlled by private equity firm Permira, is having difficulty finding a buyer for the 45% stake in celebrated label Proenza Schouler that it has been shopping for more than a year. Its asking price: $30 million.

Proenza Schouler, like Tom Ford and a number of other posh labels, relies on a business model based on creating demand by designing and producing a limited number of well-crafted, high-end luxury goods -- where a handbag can easily retail for thousands of dollars. But it's a model that is becoming increasingly outdated as the recovey remains weak and the Internet continues to change the way people learn about and shop for fashion. No longer is a designer's primary mandate to create fantastical clothes for the runway in order to gain the support of a handful of key tastemakers and generate positive media attention -- attention that would then, in turn, drive sales of the real moneymakers, such as fragrances, handbags, sunglasses and other mass-market products.

These days, designers need to be more business-savvy and innovative than ever, whether that means cooking up fabric blends or synthetics in their "kitchens" or "laboratories" that can hold bolder colors and reduce costs, or understanding technology and the role it plays in retail, marketing and branding.

They also must be famous enough to compete against fashion brands from well-known celebrities such as Jessica Simpson, whose line of fashion-related products generated $750 million in sales last year based on name recognition alone. And, as Galliano recently learned, they must carefully manage their fame in a world where the Internet, enabled by smartphones with videocams, can capture and broadcast their every move.

Helping to galvanize these long-brewing trends is the rise of "fast fashion" as practiced by the likes of Forever 21 Inc., Industria de Diseño Textil SA's Zara, H&M Hennes & Mauritz AB, Uniqlo Co. Ltd., Topshop and others. These retailers, which can be found everywhere from New York's Fifth Avenue to suburban shopping malls, are adept at taking a garment from concept to drawing board to factory to sales floor in a couple weeks or so, allowing them to knock off top designers' creations and offer them quickly at the cheapest price possible.

Indeed, designers at Proenza Schouler were dismayed to learn that mass-market retailer Target Corp. is selling a messenger bag for $34.95 that is strikingly similar to one their label is offering for $1,995. Proenza feels even more betrayed, according to The New York Times, because the label did a special collection for Target a couple of years ago and recently signed a deal to allow the retailer to reissue some of those looks.

There is no doubt that such fast fashion is on a tear. In fiscal year 2010, Zara parent Inditex rang up more than €12.5 billion ($17.8 billion) in revenue and more than €1.7 billion in net income, 32% higher than the year before. Of fashion's 10 wealthiest individuals as ranked by Forbes magazine, at least five made their fortunes in fast fashion, including Amancio Ortega, the founder of Inditex; Stefan Persson, son of Hennes & Mauritz founder Erling Persson; Tadashi Yanai, founder of Uniqlo parent Fast Retailing Co. Ltd.; Philip and Cristina Green, who acquired Topshop parent Arcadia Group Brands Ltd. in 2002; and Leslie Wexner, founder of Limited Brands Inc. Fashion's newest billionaires, according to Forbes, are Jin Sook and Do Won Chang, the husband and wife team who founded Forever 21.

Of course, fast fashion has been
around at least since the 1970s, when Zara first began knocking off designers' creations. But its power has grown in recent years thanks in part to TV shows like "Project Runway" and the growth of the Internet, which brings, free of charge, images of the latest fashions into any home with a computer or a smartphone. Not only does the Internet increase fast fashion's potential market exponentially, it makes the extremely limited market of high-end luxury apparel more glaringly apparent.

For big-name, but struggling, designers, fast fashion is a reminder that clothes can make money, in addition to items such as sunglasses, fragrances and accessories. The consumers who line up for capsule collections, such as that designed by Karl Lagerfeld for H&M, prove the commercial viability of branded fast fashion, as does the hiring by Uniqlo of the designer Jil Sander, the naming of Olivier Theyskens as artistic director of Theory, and Giorgio Armani's mass-market retail partnership, Armani Exchange.

But not all designers are willing to embrace fast fashion, as they insist on using only the most expensive materials available and on not developing a viable plan for the Web. Bernard Arnault, chief executive of LVMH, has yet to add any fast-fashion business lines to his company's portfolio. And in an interview, Emmanuel Chirico, chief executive of Calvin Klein parent Phillips-Van Heusen Corp., argues that the advantages of fast-fashion retailers, such as speed to market, will soon be undermined by the rise in labor costs in places such as China and commodity prices.

To be successful today, designers need to be instrumental members of their companies' executive management teams, capable of providing leadership to large creative departments and responsible for securing additional talent. In a company presentation at Fairchild Fashion Group's CEO Summit for the menswear industry, Chirico pointed to Francisco Costa, creative director of Calvin Klein, as a key member of executive management who made Calvin Klein a successful acquisition for Phillips-Van Heusen.

More and more, the fashion business also requires that companies have a highly developed Internet or direct-to-consumer sales technology. Bonobos Inc.'s Bonobos.com or Saturdays Surf LLC's Saturdaysnyc.com, two New York-based men's apparel companies, both formulated successful strategies for the Internet before ever producing a runway show. Bonobos raised $18.5 million in venture capital in December in a round led by Lightspeed Venture Partners and Accel Partners.