The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
For a young fashion brand, finding a prestigious retailer to work with is a critical first hurdle. For the Selfridges and Saks, the Barneys and Bon Marchés of the world, stocking emerging brands can entice new customers away from the competition. But along with the benefits of the of the young designer/big retailer relationship, there are significant risks and challenges on both sides.
“Exposure,” is the most important benefit, says London-based designer Alexander Lewis, who adds that orders from established luxury stores (he has previously been stocked with Saks, Barneys and Net-a-Porter) help young designers to “ramp up your production.”
“Department stores help to build trust in the market,” agrees Christopher Raeburn, whose London-based label’s stockists include Matchesfashion.com, Harrods and Barneys. “A brand which is stocked in major department stores has a level of credibility, quality and reliability that induces confidence.”
For retailers, emerging brands bring "a distinctive handwriting to the shop floor," explains Andrew Keith, president of Hong Kong-based department store chain Lane Crawford and fashion boutique Joyce. "This is particularly appreciated by customers in this part of the world, as they have a huge appetite for newness to differentiate themselves."
For the Lane Crawford Joyce Group, working with emerging designers has paid off. The retailer picks up nascent brands in Joyce's Hong Kong stores, and if they demonstrate growth potential, moves them into Lane Crawford's nine department stores across Greater China. It has done this with 3.1 Phillip Lim and Sacai, the latter of which is now among the top five performing brands in the Lane Crawford portfolio.
Bergdorf Goodman, too, has seen the benefits of investing in young talent — for example, when Dawn Mello, then-president and fashion director of the store, bought a young designer named Michael Kors. "He learned everything about starting a fashion business through his close relationship with our buyers and Dawn," says Linda Fargo, senior vice president of fashion at Bergdorf Goodman. "The rest is history."
Even though a strong stockist can act as a calling card for a fledgling brand — a sign to other retailers that a young designer can manage the business — the logistics, production and business reporting involved in supplying to a big store can be a shock to the system for a young company — something stores don’t always take into account.
Payment terms can be a particular pain point. One designer BoF spoke to reported that large retailers generally “won't pay deposits” and sometimes ask for a trade discount, which can be very difficult for a brand producing in small quantities, with tight margins. Others noted that major stores pay "net 30 days," meaning the designer has to fund their production upfront.
“Some of the bigger retailers understand that if they want to work with start-up brands they need to be flexible with their terms,” says Raeburn. “But it's not always easy to negotiate with buyers when you are relatively inexperienced.”
The designers interviewed for this article all said they rarely or never sell on consignment (where the designer gets paid only after — and if — their collection sells), though one noted that a prestigious department store asked them to work on commission for the first season — the designer refused and the retailer agreed wholesale instead.
From a store’s point of view, there are risks too. Inexperienced designers sometimes struggle to deliver orders on time or to quality standards, and there’s a risk of “the designer not being able to keep up with the demand,” says Bernadette Kissane, apparel and footwear analyst at Euromonitor.
For this reason, stores tend to initially buy young designers in “low-risk quantities,” says Katie Smith, senior fashion and retail market analyst at retail technology company Edited, which works with retailers including Saks Fifth Avenue. “They will be watching very closely. Testing and then iterating where there is success.”
For stores, one way to begin a relationship with a young designer is to work with them exclusively. According to data provided by Edited, on average, an exclusive Net-a-Porter product will sell out in 128 days, compared to 141 days for a non-exclusive item — a fact that could be down to the promotion stores invest in exclusives.
Selling exclusively also avoids the risk of price-clashing with other stores: “In a store, customers can check on their mobiles what Net-a-Porter has got that product priced at,” says Katie Smith. “Having exclusive items from designers helps stores to set their own pricing and decide when they mark down, if they mark down.”
For young designers, that first experience on a prestigious shop floor is also a reality check — a chance to see how their collection stands up next to established brands, and to find out what sells. According to Christopher Raeburn, his product offering “takes into account the feedback from our key retailers both in terms of design and price architecture.”
Indeed, a store knows its customers inside out, and can guide a designer on how to optimise their work for different climates and markets. Milan-based designer Damir Doma recalls taking the advice of a buyer when his label launched a shoe line: “He really helped me understand what is missing; what you have to add. We did that and, the following season, it worked out so well. I think you need to be open to make changes.”
“The range of advice can run from helping them build their internal team, to working closely on adjustments and adds to their collections to make them more saleable,” says Linda Fargo. Bergdorf Goodman offers designers daily and weekly feedback on how they're tracking, as well as guidance on pricing structure or issues with fit and delivery. “Often we can see holes or misses in their assortment that they can't see, or haven't had the resources to develop.”
Indeed, a retailer can help a designer capitalise on the best-performing products in a collection: “If you look at Net-a-Porter’s offering, you can see that the kind of exclusive product they have is clearly based on previous bestsellers of the mainline offering of designers,’” says Katie Smith.
The concern, however, is that the designer feels pressured to dilute their original collection, in order to fit the needs of a store: “For young designers, the risk is that they get kind of bullied into doing product or going in a direction that isn’t where their core brand is headed,” continues Smith.
That said, some of the designers BoF spoke to felt they could bargain with stores over such requests — for example, making a dress longer to cater to the Middle East — reaching an agreement that the store orders a minimum number of garments to cover the cost of producing the product especially. “If you can’t, then you bear the cost of the redevelopment, the new pattern cutting, which is expenses that you probably didn’t plan for when you were developing the collection,” says Alexander Lewis.
Not every designer has experienced this. "Design-wise and creatively I have always felt like I can stick to my vision," says London-based designer Huishan Zhang, whose stockists include Barneys, Bergdorf Goodman, Joyce, Browns and Opening Ceremony — but for those that do, the relationship can shift over time.
“[Larger brands] can bring their own understanding of their customer to that conversation,” says Katie Smith. “They can bring previous sales, they can bring previous conversations of what’s working at other retailers.”
However, the focus on the bottom line can be a shock to a young designer whose more outlandish designs received critical acclaim on the runway. “Department stores have to deliver numbers, which means that we have to deliver numbers also. This can be quite scary for the young designer,” says Damir Doma. “Compare that to a boutique that is handled by the owner, who can believe in the view of the designer, who can hold on to me even if the figures are not going so great."
“While sometimes I think it is really helpful to have that feedback, other times I’m not so sure how constructive it is,” adds Alexander Lewis. “I’ve spent a lot of time on the shop floors and there doesn’t seem to usually be a lot of communication between the sale assistants and the buyers. So the feedback I have from the buyers is usually based on numbers, whereas the feedback I get from the sales assistants is based on the clients.”
"You must understand that they will grow slowly in the beginning," says Elizabeth von der Goltz, senior vice president and general merchandise manager at Bergdorf Goodman, who says the store treats its partnerships with emerging designers like a "marriage," working through challenges together. "The biggest challenge with major retailers is many may be looking at the bottom line. The financial planners may not accept that a designer has low sell-throughs for several seasons in a row or that their sales volume remains flat. Major stores may ask them for end of season help when they are too small to provide it." By asking a designer to accept a merchandise return or charge back that applies to markdowns at the end of the season, the retailer in effect penalises the label for not meeting sell-through targets.
Some designers admit feeling under more pressure to be an instant commercial success. “There is a lot of pressure on the young brands to immediately function in terms of price, delivery, sell-through — I think there isn’t space for too much forgiveness,” says Damir Doma. “A little bit more belief, a little bit more time building the brand would be really great.”
“Stores used to buy into a young brand and they would support it for longer and they would help develop it,” adds Lewis, who says it has become more common for a store to buy only one or two pieces from a designer to fit that season’s “edit,” rather than the full collection. “It’s more about what’s hot right now, as opposed to helping the clients to understand the aesthetic and engage with a new brand.”
Some stores still invest in business mentorship of brands and help to introduce them to the local market. For Peter Pilotto, Lane Crawford organised trunks shows and dinners for them to get to know their customers.
Still, Lewis contends that few retailers are as generous in their support: “I think that there used to be a sense of building a business together, because stores were very supportive of young brands, and now I think they buy in a different way. I just think it’s a different market.”