6 TIPS FOR BUILDING A PROFITABLE FASHION BUSINESS
The Commercializing Creativity Report was written by Alejandra Caro and Alessandra Basso, MBA students at the London Business School. They spoke to 19 designers, 14 retailers, 16 advisors, five PR and media representatives, and five investors to get an understanding of the biggest challenges and best strategies for fashion entrepreneurs.
The report sets out guidance to help young designers build companies that are respected for their creativity, have a high profile and generate profits. It was written with the UK in mind, but much of the advice applies to anyone starting a business, regardless of nationality. Here are some of the most useful tips.
1. Behave as a business
To build a successful label, you’ll have to think like an entrepreneur from the start. That means understanding how a business works and putting together a plan that lays out short-term, medium-term and long-term goals. Once your company is up and running, build solid relationships with manufacturers, buyers and investors by being consistently reliable and honest about what you’re doing.
2. Recognize the importance of product development
Start small with one product line – then develop the brand from there, in a way that feels consistent and carries forward the same design DNA.
Setting the right price for your product is crucial in finding success. Work it out by starting with the amount that a customer would be willing to pay, and working backwards to calculate how much you can spend on materials and manufacturing while still turning a profit.
The report recommends that young designers pay more attention to feedback from buyers than from the press; good reviews are nice to have, but the only thing that will sustain a business is sales.
3. Be clear about your unique brand proposition, and support it with a marketing and communications plan
It’s important to have a strong vision of your brand’s identity from the beginning. “Young designers need to understand what they are and why they are starting their own businesses,” says Vanessa Friedman, fashion director of The New York Times. “If they do it, it is because they really believe that they have something to say that cannot be said in the context of Paul Smith or Oscar de la Renta or Dior.”
Start with a marketing plan that sets out which customers you’re targeting, and how you’re going to approach them. You may want to look at hiring a PR company – but not until your business is stable. “PR and communications are useful tools to support a designer and bring their work to the attention of a wider audience only when their business can support this attention,” says Daniel Marks, director of The Communications Store.
4. Understand and address the challenges of production
New businesses can often struggle with production – you’ll be ordering small quantities at first, which leaves you in a poor bargaining position with manufacturers. They may ask you for a deposit long before you’re going to receive payment from a retailer. This can be difficult, but it’s essential to pay promptly so that production is not delayed – otherwise you could end up late to deliver to retailers, damaging your relationships.
5. Find the key to sales and distribution
To be successful, you’ll need to get the attention of buyers. They’ll want to know what’s unique about your product, how it fits with their other brands, whether it’s at the right price point, and whether your business is well-structured. “I think what could be improved is the designers’ sense of place,” says Anne Pitcher, managing director of British department store Selfridges. “They need to know how they compare to the competition. Who is going to buy the product? Where you would like to be sold, realistically? Will it be the right price? These questions have to be answered before picking up a pen to design.”
If you’re planning to sell online, be aware that colorful and printed products are usually most popular, and any garment with an unusual shape or fit is going to be a tough sell on a website. You’ll also need a complete range of sizes. Once you can afford it, setting up your own website will maximize your profit margins and give you direct access to customers.
6. Understand the importance of cashflow, funding and ﬁnancing
One of the biggest challenges you’ll face as a new business is that cash flows out – for product development and manufacturing – long before it comes back in from retailers or customers. From the very beginning, you’ll need to know where your funding is coming from and keep your finances under control. Taking investment can mean losing some of your control over the business, so think carefully and don’t give away too much too cheaply.
By Hattie Crisell || fashionista.com