why do so many fledgling fashion businesses fail?
This is an article I came across last year and regularly forward it on to my clients as it sums up everything I believe in with regards to budget planning at the start of your brand!
It has been written by Kim Winser for Forbes.com & the link to the original article can be found here
Kim was the youngest-appointed and first female director of the Womenswear Group at Marks and Spencer Plc, chief executive at Pringle of Scotland, CEO of Aquascutum and chairman of Agent Provocateur. She also served as retail guru to 3i, and most recently, launched luxury fashion brand Winser London
“The fashion world is, by its very nature, an extremely image-conscious environment. So, it stands to reason that fledgling designers believe they need to create the right impression when they venture into this rarified territory.
Fashion start-ups often begin life in less-than-glamorous surroundings: in a designer’s flat, or in a shared space. More often than not, everything is done on a shoestring, with friends, interns and students producing samples, and models working in exchange for those very samples, rather than hard cash. And, if all goes well, these talented creatives catch the eye of the press, generating positive critiques, and a celebrity or two might be persuaded to wear said label to boost their style credentials.
Hearing the tragic news of designer L’Wren Scott’s passing recently highlighted to me the veil placed over the harsh reality of the fashion business. Here was a woman who clearly had a good eye for well cut clothes and had won legions of A-list fans, including Nicole Kidman, Sarah Jessica Parker, Michelle Obama, Angelina Jolie and Madonna – all of whom frequently top the best dressed lists. Even the harshest of critics had praised her collections, and – to outsiders - her star appeared to be on the ascendant.
But in the wake of Miss Scott’s death, serious questions are being asked: was she another creative talent existing on the façade of fashion fancy, perpetuating the myth of success. Her London-based enterprise, LS Fashion Ltd, was reportedly running at a loss of £3.5 million, seriously negative figures that any young business would struggle to turn around.
It is a scenario that is all too familiar in our industry, where fashion start-ups jump from using their friends and begging favours, to believing they need to create the perception of being a bigger player, with the infrastructure, staff, shows and industry presence of a successful business, before they are ready to fund that. Over the years, many start-ups are the beneficiaries of financial awards, which is the perfect gift to get a business off the ground, but it’s only recently that it has gone hand-in-hand with solid advice on how best to utilize the cash. These businesses need to focus on their critical path, not on hype.
Over the years, I have advised many young designers and creative start-ups, and time and time again, at the earliest stage of their ventures, I’ve heard them talking of growth in terms of studio space, PR budgets, extravagant catwalk shows and all the elements that create hype around a brand. But image isn’t business. Business is about creating healthy cashflow by selling a product or service that people want, delivering growth and profitability. The dictionary definition of business is “the practice of making one’s living by engaging in commerce”, and the key to that is to focus on delivering product, with a viable profit margin, for your customer to buy.
When I’m working with new labels, I try to keep them in that early thought process of ploughing everything into the product and making it attractive to buyers. You need to be prudent with your capital, investing it in the production process, negotiating deals with suppliers and carefully targeting your shrewd customers with focused marketing and sales.
I’ve seen so many embryonic fashion businesses invest all their energies into expensive advertising, marketing and staging catwalk shows in a bid to attract wholesale buyers and press, but for the money they spend, I would prefer to see them invest in their production and wooing a focused list of boutique and store buyers who they can build relationships with, consequently nurturing a strong customer base, perhaps with small in-store trunk shows or events.
London-based Jenny Packham is now an internationally-renowned designer - with clients including the Duchess of Cambridge, Angelina Jolie, Jennifer Aniston, Miley Cyrus, Beyoncé, Cameron Diaz and Kate Winslet - who, since 2010, has shown her collection on the runway as part of New York Fashion Week. She launched her label in 1988, but didn’t stage her first big catwalk show, at London Fashion Week, until around ten years later, once she had a solid business model with healthy balance sheets and production channels. This was a smart, strategic decision on the part of Packham and her partner, Matthew Anderson, and has seen her operation flourish through the toughest economic climate.
Christopher Kane, working with his sister Tammy as business manager, and Matthew Willliamson, who has the savvy Joseph Velosa as the strategic brain, are other examples of bright minds marrying to create exciting, sustainable fashion houses from small start-ups.
But, for every strong fashion business model, there have been many other names who have been vaunted as the future of the industry, only to disappear after a couple of seasons, with bankruptcy hanging over their much-hyped names.
We all know that traditionally, the fashion world begins product development a long way in advance of pieces finally selling to the customer, which can create an enormous cashflow headache for even the most established of businesses. For an operation still in its infancy, this prolonged process is extremely high risk and requires enormous upfront capital expenditure.
These days, with selling direct to customers being easier than ever, it makes sense to me to engage directly with your clients, working out your own sustainable supply chain to suit their needs. Who wants to be on the hamster wheel of designing multiple collections a year to meet the crazy needs of an ever-hungry media circus, when you can build a profitable business to your own – or your customers’ – agenda?
Many start-ups planning to sell direct to customers buy in mailing lists from existing businesses they believe sell to a similar demographic, but that requires a fairly substantial outlay – often tens of thousands of pounds – with what I consider to be a relatively small conversion to sales. When I started my own brand, Winser London, last year, I sent emails to a network of women I thought might be interested in what I was doing. They weren’t industry insiders, but women who I had met who I thought might be potential customers. I asked them to forward the email to their friends, and rapidly grew the profile of my nascent company this way. As my business model was to sell online directly to the public, all those women had to do was click through to the site, and effectively I had them ‘through the door’. From there, I could establish my own database, free of charge, of women who had personally and genuinely expressed an interest in my product. As with any business, I then needed to convert those interested parties to buying customers, so the product needed to speak for itself and woo them once they were in front of it.
And here’s the rub. You don’t need smart West End offices, and a large studio space with a retinue of staff on the payroll. Nearly all my staff work remotely, which they love, and some are subcontracted on a part-time or temporary basis. With digital communications, we all work efficiently wherever we are, keeping overheads to a minimum. Yet in my first year of business, we have a seven figure turnover with healthy growth predictions for our five year plan.
Look too at Julie Deane, who started the Cambridge Satchel Company from her kitchen table in 2008, with just £600 capital and her mother as her partner. Today, they sell to 120 countries, employ 100 people and boasted net profit of £3.6 million last year, but for the first two years they ran the business entirely from the Deane family home and were frugal in their approach to managing growth, utilizing their own growing knowledge of their target customer to market their product online by reaching out to fashion bloggers.
And of course, Natalie Massenet, the Queen of the Millenial fashion entrepreneurs, started Net-a-Porter in 2000 from a spare bedroom in her London flat. Today, the business employs 2600 staff, is owned by luxury goods stable Richemont, and turnover for the Net-a-Porter group – which now includes outlet boutique The Outnet and menswear e-tailer Mr Porter - grew 18% to £434 million last year. She knew who her customer was, because she believed she and her social circle would adopt her vision for online designer shopping. In the early days, she focused on building relationships with the brands she wanted to stock in her e-boutique, and on developing and delivering a high-end customer experience. This focus on the core elements of her trading operation reaped massive rewards for Massenet, who now heads up the British Fashion Council and is mentoring a generation of new designers with her sound business sense and inspired plans for fashion industry forums linking creative talent with savvy commercial minds.
I want to see more small enterprises benefit from the kind of expertise that nurtures start-ups so they grow into successful global businesses. It’s not just about cash injections, but about the management of those funds: we need to instill an understanding of balance sheets and budgets into fashion students right from the word go, or at least begin the process early of pairing them with partners who can develop a solid strategy for their enterprise. When you attend luxury fashion conferences, they are full of branding experts, marketing consultants and retailers. I want to see legal experts, world, business brains, suppliers and manufacturers working with these start-ups from the word go, so they can forge relationships, strengthen the supply chain and the contracts therein and lay the foundations of a really healthy enterprise. I want these vibrant talents to have a fighting chance of making their creative vision into a commercial reality.