In the years prior to the pandemic, designer James Flemons’ Los Angeles-based brand Phlemuns was expanding at a steady pace. Last year, however, the business went through a growth spurt, driven by increased traffic to the brand’s direct online shop through sell-out mask sales, along with the success of its signature backless T-shirt, which now accounts for 10 percent of total revenue.
Now, Phlemuns is seeing the kind of business growth and positioning many designers dream of when launching into new categories and markets. The company declined to give exact revenue figures, but said revenue increased by over 200 percent year over year compared to 2019, up significantly from 2018 growth. A path to profitability is clear now, and Flemons intends to keep it in sight this year.
“We were already on this kind of upward trajectory but it just went into hyper-speed in 2021,” said Flemons. “It’s been challenging to keep up with.”
Phlemuns is one of many young brands that saw major growth over the last year, thanks to the sale of viral products or necessities like masks, as consumers spent more time indoors, shopping online and discovering new brands. Smaller teams were able to pivot quickly, expanding to new product categories and capitalising on increased demand. Now, as the world enters the post-pandemic era, the challenge is to keep that momentum going as spending shifts to other categories like entertainment and travel and consumers look to return to in-store shopping experiences.
Brands will be competing for a shrinking share of consumers’ wallets, and keeping that loyalty may become increasingly difficult in the coming months as restrictions ease. To prepare for longer-term growth and profitability, young brands are making strategic decisions, revamping operational infrastructure, reevaluating wholesale and managing customer acquisition costs.
A New Approach to Wholesale
Many brands pushed wholesale aside as order cancellations and store closures were at a high during the pandemic. Now, some are reconsidering that decision as they look to increase expansion.
Edward Glassman, co-founder of jewellery brand Bryan Anthonys with Amber Glassman, said that in the past, wholesale was “an afterthought” for the brand, which grew revenue by 30 percent from 2019 to 2020 from $16 million to just under $22 million at the end of 2020. After hiring new employees to focus on wholesale, the goal is to continue that same pace of growth through a large increase in wholesale partnerships.
Similarly, after moving away from seasonal collections, Flemons has reintegrated wholesale into his offering through a series of drops — set on his schedule — via Ssense and a storefront offering with Fred Segal. Ssense has given the brand international exposure and created sell-out collections, while Segal has offered the brand a chance to meet consumers in physical spaces to see and try on products.
I don’t want us all to be fighting for the same customer with the same items.
Still, Flemons is cautious: the brand previously entered wholesale, with accounts including Opening Ceremony, but re-evaluated in 2016. “I realised I couldn’t keep up,” he said. Now, he is looking to expand stockists slowly, ensuring that he doesn’t repeat history by overextending the brand.
Other brands share Flemons’ concerns about the pace and expectations of wholesale, a challenge many brands and retailers may face as they look to enter partnerships and expand their footprint both online and in physical stores.
“A lot of retailers are being aggressive about inventory positions because they have high expectations on sales,” said retail consultant Gurki Basra. “The risk is still going to follow the brand if those sales don’t materialise.”
The immediate task is striking a balance between wholesale and online, particularly for young brands where inventory is an issue.
Designer Spencer Badu, for instance, spent part of last year building out the e-commerce site for his namesake label, but young brands like his often have limited stock and small collections. While partnerships with Ssense and other retailers have helped to expand over the past year, Badu is now looking to find the right mix of products and distribution.
“I don’t want us all to be fighting for the same customer with the same items,” he added.
As companies spent the better part of the past year trying to manage the necessary logistics to keep up with the increase in demand, there was little time to focus on the larger operational strategy it supported. Now, they must determine how to expand their own teams and production in order to better serve customers and streamline operations.
For Marcelo Gaia, founder of Mirror Palais, that meant hiring his first three employees this year to handle day-to-day operations and customer service inquiries. Launched in December of 2019, the brand did over $1 million in sales in its entire first year of business compared to nearly half that in the first two months of 2021 alone.
Bryan Anthonys hired a wide range of employees to meet increased demand, including warehouse fulfilment workers, customer service representatives and wholesale and merchandising directors, as well as an entire creative team to manage advertising. Staffing up has helped them to cut down on fulfilment delays and better manage customer service and inventory costs.
Flemons roughly doubled his team to support production, hiring in-house sewers and an assistant designer as well as an outside public relations agency to help the brand gain a larger presence in New York. Building up the brand’s customer service arm was one of its “bigger hurdles from 2020,” and has also been central to its current expansion.
Customer Loyalty and Acquisition Costs
While brands have gained consumers over the past year, managing to keep them may be increasingly difficult as spending shifts to other categories. Turning one-time shoppers into brand loyalists will require greater investment and creative approaches to advertising, but brands still must manage those costs.
“You’re not only going to have to cut other pieces of your budget to pay for it but you should also plan for it to get even higher,” said Basra. “It is going to be more expensive to get customers digitally than it has been in the past.”
Bryan Anthonys has invested further in advertising, particularly on social media, led by its new creative team of photographers and videographers at the company’s in-house studio.
We’re too overwhelmed to acquire new customers right now.
“We do a lot of social advertising and the most important thing right now on those platforms is the creative side,” said Edward Glassman. “If some of our ads aren’t working, we can pivot really quickly and just have the team shoot new stuff for us.”
Many brands may not have the same resources at their disposal, but budgeting correctly will help brands experiment with digital channels to find what’s most effective.
Basra also notes this is a time for brands to experiment on their own through pop-ups and other experiences in order to meet new consumers. Gaia is opening up a Chinatown space, and Badu has added the brand has several pop-ups planned for later this year.
Others, however, are still just trying to keep up with present demand.
“We’re too overwhelmed to acquire new customers right now,” said Gaia. “Our audience, at least on social media, isn’t going anywhere.”