The Basics | Part 1 – Setting up your own fashion business: What do I need to know first?BY IMRAN AMED 21 FEBRUARY, 2007

Backstage at Christopher Kane’s S/S 2013 show | Photo: Morgan O’Donovan

The Business of Fashion is getting a lot of play of late. At the recent CFDA/Fashion Fund awards in November, Marc Jacobs spoke at length about the ups and downs (and downs) of starting a new fashion business. Many young designers rush into setting up a business, attracted by the perceived glamour and fun that is associated with the fashion industry. There are wonderful fairy tale stories of young talented designers graduating from St Martins or Parsons and then going off to achieve fame and fortune. The stories we hear less of are those that describe all of the failed companies and dashed hopes that are the cruel reality of this industry. I am glad that Marc shared his stories with some of the upcoming stars of American fashion who were in the audience, including Doo.Ri Chung, Proenza Schouler and Peter Som.

One of the most common questions I am asked by designers who have just come out of fashion school (at both the bachelor’s and master’s level) is: “Should I start my own business or should I go work for a big fashion house?”. The truth is, the right answer depends on you and your aims. In our first

article on the Business of Fashion Basics, we will pose the questions that you need to ask yourself – so you can make the right decision.

The first thing to think about is “Do I really want to run a business?”Beautiful people, fun parties, flights of creative fancy – what more is there to want from a career? Here’s a reality check: it’s not as glamorous as it sounds. Running a fashion business means that packing boxes at 2 am, steaming clothes over and over again, and pouring through receipts with an accountant will become part of your routine. You will likely spend less than 10% of your time designing, while the rest of the time you will be managing production, sending clothes to magazines, dealing with suppliers who want their money (now!), begging Anna Wintour’s assistants to grant you a meeting, managing your employees while hoping they don’t fall ill, and trying to eat and bathe in between. On top of all that, you have to worry about making enough money to declare some kind of dividend from the business for all your hard work. You will eat, live and breathe your business 24/7. If that doesn’t turn you off, then keep reading.

Starting any kind business requires tenacity, endurance and dedication. Setting up a fashion business is all the more challenging because this is a hyper competitive industry (who doesn’t want to be a fashion designer these days?) and a very complex one as well, even at the smallest of scales. What other kinds of start-up businesses so quickly find themselves with customers and suppliers scattered around the world, requiring so much coordination and organization? Managing to get all of your raw materials (fabrics, trims, haberdashery, etc) all to your manufacturer at the same time to start your production and then sending it all out to stores in different corners of the world (each with their own customs procedures) in only 2 months can be a nightmare, even for those with great forward planning and troubleshooting skills.

All of this is to say that one of the key drivers of success will be your entrepreneurial skills and your commitment to running a business. In order to be successful, you should think of yourself as a CEO first, fashion designer second. A CEO is a manager of people, finances and processes. Therefore, you will have a great deal of responsibility and important business decisions will face you each and every day. The buck stops at you and the business should always be at the forefront of your mind, not just an afterthought.

For some people this is an extremely exciting and energizing situation to be in. For others, it is their worst nightmare. What kind of person are you?

Next, you should ask: “Do I already have or can I find the necessary skills, contacts and funding to create a successful fashion company?”

Clearly, you won’t be able to do absolutely everything yourself. This is where you need to find other people who believe in you to join your team or provide support in some other way. Doing a self-assessment of your skills and abilities will tell you what gaps you will need to fill in order to make your business work.

You may assume that having completed a design degree, there are no skill gaps there. However, the design process in a business can often feel very different to that of the design process in school, where you don’t have to worry about things other than the product. Running fashion business means developing and following an organized creative process that works for you – and that other people can work to as well. One of the great things about designers who have previously worked in a large fashion house is that they have seen how other people organize themselves and can take lessons from there as they start. Having a clear design methodology is crucial to getting the best out of your abilities. If you don’t have this in place now, perhaps you may want to spend some time learning from someone else first.

Apart from mastering the design process, something that some of the smartest designers do next is to find a business partner they can trust, who brings different skills and connections to the table. Often it is a spouse (Patrizio Bertelli is married to Miuccia Prada), sibling (Christopher Kane’s sister Tammy runs the business) or a friend (Marc Jacobs has long time business partner Robert Duffy) who might take on this role. In this way, not only do you have someone to lean on in times of difficulty, you also have a division of roles, which allows you to focus on more on the creative aspects of the business.

You will also need to find people in the Industry who agree to support you and work with you. You’ll need a PR who will (at least initially) give you his services for almost nothing and a factory that will make your clothes in small quantities. You will also need accountants, lawyers, stylists, photographers, graphics designers, production managers and interns – hopefully all at discounted prices. You therefore need to ask yourself if you already have a set of contacts which you can leverage to make your business work. If not, you need to get out there and meet people so you can start your business on the right foot, with the right team behind you.

Finally, for most designers who haven’t come into an unexpected windfall inheritance in the millions, starting a business is also a question of finding money. There are many sources of funding, but each source will take time and effort before it bears its fruit. Family and friends who believe in you are obviously one place to start, but you will also need to deal with bank managers about loans, and think about taking on investors as well. Having a

network of people who may be able to introduce you to potential sources of funding is imperative to setting up your business. You can have a brilliant business concept, a fantastic team, and all the energy in the world, but without funding in place from the start, it will be difficult to get up and running. You should also do research on grants, sponsorship and awards that many organizations make available to nurture new design talent.

Lastly, you should ask yourself: “Do I have something unique to offer the market?”If there is one crucial thing I recommend that you do before rushing off to start a business, it is to carefully craft your business concept. What is it about your business that will be unique? Why will people choose to buy your product over someone else’s? Is it the design, the price, the value or the dream that they are buying into?

You will need to think carefully about who you are designing for. It is cliché by now, but I almost always ask designers when I first meet them: “Who are you designing for? And why?”. Most of the time, this simple question is met with groans or blank stares or platitudes like “I design for me and my friends” or “A very glamorous woman with lots of money”. This is not enough. You need to get into the mind of your customer and understand what motivates them. Where do they spend their time and for what occasions will you dress them? What makes them buy a garment? Understand their psychology, emotional needs and relationship with clothing. Visualize all the aspects of their lives and assess how your business can blend into making them even better.

It’s worth pointing out now that not all fashion businesses have to operate at the high end of luxury, although it seems that that is where every designer wants to be. Remember, your business concept needs to offer a clear proposition of value to your customer, and that value could be world-class design at more reasonable prices. Look at Zara or H&M or Coach orAmerican Apparel and how they have taken clear business ideas that allow them to deliver great fashion to the masses. While it may seem ideal to be a “luxury” brand, also remember that some of the most influential fashion businesses are on the high street and in your neighbourhood mall, because they dress thousands of people around the world.

Next time: Writing a Business PlanAssuming I haven’t completely scared you from starting your business, our next article will go through the process of writing a business plan and why it is so valuable. In short, it will help you to raise funding, to clarify your vision, and to set a roadmap for how to get there.

The Basics | Part 2 – What is a Business Plan For and How do I Go About Writing It?BY IMRAN AMED 26 MARCH, 2007

Source: Shutterstock

The term “business plan” is casually bandied about like a hot potato in the studios of emerging fashion designers. Everyone knows you need one, but still, so few emerging design businesses take the time upfront to properly plan for their success. I use these words intentionally. Success is very rarely accidental. Sure, we all benefit from some good luck from time to time, but real success can only come through hard work and good planning. For this, a business plan is critical.

So, what is a business plan for? Many people think that the primary purpose is to secure funding – i.e. loans from banks or cash from investors. And while this is certainly one important objective, it is not the most important one.

The truth is, the business plan is, above all else, for you: the person or people who will drive the business forward. It is the document that lays out your vision and objectives. It is your roadmap for how you think it should evolve and grow to achieve this vision. It contains the budget and projections for how your business will manage is finances and fund growth. It is the document that helps you decide what to do, and just as importantly, what not to do. It is a living, breathing document that you should use to measure your progress,

while still being willing to adapt it to reflect new insights, unexpected competitive threats, and changes in your business environment. In short it is like your company bible – except that this is a bible you can adapt as you go along.

You can also think about the business plan as a tool for communication. Anyone who has set up a new business knows that when you are looking for investors, employees, suppliers, office space, banking services, professional advisors and everything else that you need, you have to tell people about your business and its aims. When you have spent the necessary time in crafting a business plan, you will be able to more clearly articulate what your business is all about. This makes you seem more professional and organised and will enable you to attract the people, support and money that your business needs to succeed. Going through the business planning process will enable you to distill your business down into a short “elevator pitch” of concise points that together provide a good understanding of your business aims in a short period of time. When people understand your business, they will know better if it is something in which they would like to be involved.

Now, if that all makes sense, what then do you need to include in a business plan? Essentially, it should address all of the constituent parts of your business starting from the broadest vision of the business right down to the most minute operational issues of job descriptions and work plans. The first thing to do is create an outline for all of the topics that need to be covered, and then for each of those topics jot down all the ideas and thoughts you already have. If you don’t have a written plan already, then it’s likely that much of your business plan is in your head and so you need to start getting your current thoughts out on paper in a structured way so that you can then go and revisit each of the topics in more detail.

A sample outline for a business plan for a fashion business might look as follows:

1. Executive Summary – This is something you do at the end, once the rest of your plan is fleshed out, It will quickly become the so-called “elevator pitch” for your company, when you need to describe it in a short interaction. It only needs to be a few paragraphs long.2. Vision and objectives – This section describes the vision of your business — essentially, why you set it up. What specific market need are you trying to fill? Which customer are you targeting and why?The more specific you can be about these issues, the more compelling your business plan will be. If the reader (or listener) can really understand the market need you have identified, then they will be much more likely to buy into your overall business plan.

The importance of knowing your target market cannot be overstated. Therefore, one of the first questions I always ask when meeting emerging designers is about their target market. When they provide a fluffy answer like “I design for people like me and my friends” or “A young woman with lots of money,” it usually indicates that they haven’t spent much time thinking about this critical question. And if they haven’t done so, it makes me wonder exactly who are thinking of when they are designing. If they don’t have a specific person in mind, then how do they know exactly what that person needs,  and what occasions they are shopping for?

Understanding everything about your customer’s lifestyle and preferences will make your job as designer and manager all the easier. You will not only know who you are designing for, but also where they shop, what magazines they read and what influences their buying behaviour. All of this will feed into important decisions you make everyday about how you design your collections, manage your business, and promote your brand.

3. Market and competitive landscape – This section describes the market you plan to operate in. What is the size of the market and how quickly is it growing? Who are the other players in this space?To be clear, market size you need to describe is not the size of the global market for clothing, but your estimate of the size of the specific market you have identified, in the geographies you are focusing on. Yes, this information can be hard to find, but you can take larger market size figures and estimate what share of the overall market your business is going after.

As for your competitors, the better you can describe and understand their products, their style and aesthetic, and their positioning and strategies, the better you will be able to shape your business to stand out from the pack.

In general, quickly growing markets of a good size with few competitors (or few strong competitors) are usually quite attractive. However, if you have identified a clear niche market that is currently unfilled, then that can also be very compelling.

4. Implementation plan – This section clearly describes all of the resources you will need to make your business successful. How many staff will you need in which roles? What type and size of space will you need to design and sell your collection? What outside expertise may you require to operate successfully?An implementation plan therefore contains a detailed description of all of the operating requirements in your business including Design, Production, Sales, Marketing/PR, and Retail. You should have a detailed plan for each of these core steps including human resources, expertise, space and timing. Thinking

very clearly about the various roles and responsibilities that need to be filled will ensure that you find the right people to make things happen for you. In turn, attracting the right team will also make it easier to attract funding. Most investors invest in people and teams, not just ideas.

Without an implementation plan, your business plan can lack the concreteness and specificity required to convince people you can take your vision and make it a reality.

5. Financials – This section is absolutely critical to your plan as it will identify your projections for how the business will grow, in terms of both profits and revenues, and what financing you will need to make it happen.An income statement uses carefully thought-out projections of how your business will grow at the top-line (i.e. sales and other revenues) and will also project the costs of delivering that growth, including the team and other resources you have identified in the implementation plan. This statement will then project profit, by taking projected revenues and subtracting projected costs.

However, the income statement does not tell you how much money you will need to raise as it does not reflect the timing of cash inflows and outflows. This is where the cash flow statement comes in.

The cash flow statement is one of the most important parts of your plan as it shows the peaks and troughs of your cash situation on a monthly basis and identifies what funding you will need to make it through the troughs. You can think of the cash flow statement as a monthly account of cash coming in and cash going out. The difference between these two figures is your funding need for that month – and you are better off knowing your funding needs in advance as opposed to finding out later when your bank account is empty and suppliers are asking for payment before they release your goods. This is particularly important in the fashion business where you incur many costs up front (designing, sampling, sales efforts) before any of your revenues even come in.

If you can, you should have a trained financial or accounting professional (a friend, family member or other contact) to help you with this section. They will have the expertise to sense check your assumptions to ensure that they are sound and believable. It’s better to have their input before you take your plan out to investors who will inevitably ask you the same probing questions and who will be looking for concrete answers.

Next time: Finding the right investors and partners

Once you have a plan in place, you will then be ready to start soliciting financing. In the next installment we will give you concrete advice on where to find the best investors and partners for your business.

The Basics | Part 3 – How do I Find the Right Investors and Partners?BY IMRAN AMED 8 JUNE, 2007

Source: Shutterstock

Taking on financing is one of the most important decisions an emerging fashion company will make.  This step is absolutely essential because the early stages of growth often requires significant amounts of working capital that cannot be generated by the business alone. So, unless you are independently wealthy and sitting on a pile of cash, financing decisions will be part of your critical path, early on.

What is the difference between equity and debt?Financing can come in many forms, but it basically comes down to equity versus debt.Equity investors (in this case, venture capitalists or angels) provide cash to invest in your company and  therefore end up sharing ownership of the company with you. They invest in the hopes that your business will grow and that they will have some positive return through shared profits and upside.  They may offer you resources and expertise to help drive the business

further. In fact, this is much preferred to someone just giving you cash and leaving you to fend for yourself.  If, however, you disagree fundamentally with your investor on where you want to take the company and how you will do it, then you may find their “help” a nuisance. Thus, when evaluating equity investors, choose someone who is aligned with your strategy and who has the industry and/or functional experience that your business needs to grow.

Debt financing, on the other hand, usually comes in the form of loans, where you are required to pay back  the money you have borrowed, plus interest, using a fixed schedule of payments that can be spread out over many years. While debt providers won’t be actively involved in your day to day business, taking on debt will mean you will have an additional cash outflow that your business will have to be able to support each month to stay on good terms with your bank. If payments aren’t made regularly, you may quickly find yourself dealing with irate calls from your bank manager. In the worst case, taking on too much debt  could drive your business into bankruptcy. Debtors are always paid back before profits are shared amonst the shareholders of your company.

The good news is that with your business plan in hand, you are in a good position to share your vision with potential financiers to sift through the various options and make the best decision for your company.  Financiers may have advice to offer, and you should take this under consideration. But, keep in mind the need to stay true to what you originally set out to create. It is important that you believe in the strategy you pursue.

What legal  precautions do you need to take?Before sharing the nitty-gritty details of your company with anyone, you should request that they sign an NDA, or non-disclosure agreement, which legally restricts the other party from sharing your confidential company information with anyone else. Of course, you can’t control what they actually tell other people, but this is a good way of sending a message that you take your business seriously, and that there is value that needs to be protected. Often, NDA’s are reciprocal, so both parties are protected. Your lawyer will very likely have a template that you can use, with some small adjustments so that it is fit for purpose. It is customary to offer two copies for the other party to sign, so that they can also keep a copy for their files.  Eventually,  you may also need legal advice to ensure your interests are being protected in any subsequent financing arrangement that arises.What are the equity and debt options available to you?1) Venture capital – VC funds look for high-potential businesses with strong prospects for growth, often based on a core new technology or brand.Many VC companies don’t even consider fashion as a core industry for investment, as it is a notoriously fickle place with all sorts of “fashion” risk.

However, as the world has been awash investment capital lately and as the competition for traditional investment opportunities has increased, more people seem to seeing a gap in the market for investing in fashion. Initially, the money was targeted at larger investments that have seen the likes ofJil Sander, Helmut Lang, Jimmy Choo and most recently, Valentino, take on private equity. But now, new funds are being raised in London, New York and Paris to focus on earlier stage businesses:

The Atelier Fund - Richemont has backed the Atelier Fund   to invest in early-stage fashion businesses, spearheaded by Dawn Mello, former President of Bergdorf Goodman. The first investments made were in adampluseve, Mathew Mellon, and Mary Norton.

Towerbrook Partners – Robert Bensoussan, formerly CEO of Jimmy Choo is raising a fund with Towerbrook Partners to invest in fashion businesses with sales of $30m — not quite start-up revenues, but still earlier stage than previously seen in private equity.

Marvin Traub Associates - Marvin Traub Associates, the New-York based luxury business consultancy, has stated in Women’s Wear Dailythat it is toying with the idea of raising investment capital for emerging designer businesses to pair with its business expertise.

The Centre for Fashion Enterprise - With the support of Harold Tillman, Chairman of Jaeger, The Centre for Fashion Enterprise in London is trying to raise a fund of £5m to invest in early stage fashion businesses. The CFE is a government-funded body that, up until now, only provided small investments of £20-40k.

Trapezia Capital – In the UK, there is also a venture capital fund called Trapezia Capital that focuses on business started up by women entrepreneurs.With all of that said, venture capital firms, even the ones that are focusing on early-stage businesses, will often not consider any investment until the business has a proven concept – e.g. sales in excess of $5m, a compelling retail concept, and the potential for multiple product lines, etc.2) Angel investors - If you’re looking to raise capital for a pure start-up businesses, Angel investors could be your best bet. “Angels” are independently wealthy individuals, often with backgrounds in entrepreneurship and business themselves. While the name might make them seem truly heavenly, angel investors can sometimes be anything but divine and this route needs to pursued with caution. Just finding angel investors (let alone convincing them to invest) can be tough.The best thing to do is ask friends and family if they know people who might be looking to invest some cash. This will not only help you find angels, it also comes with a built-in personal reference from the person who puts you in touch. There are also networks of angel investors, like Pi Capital, The Go Big

Network and The Angel Investor Network, which help to bring angels and entrepreneurs together.

When dealing with angels, it is mportant to ensure that there are clear roles defined before any investment has taken place. It is not rare to see angel investors, with the best of intentions, wreak havoc because they think they are fashion experts and end up interfering in the business. Make sure you agree what they will and will not be involved with based on a clear assessment of their skill set. Make sure you are confident you can jointly make business decisions with them. Test their response to pushback. It is better to know exactly what you are getting in advance, than taking the money and having to struggle later on.

Guy Kawasaki has some great lessons on raising angel capital on his blog, How to Change the World.

3) Banks - Bank loans are possibly the most readily available source of funding for young start-ups.a bank loan usually comes down to:

the quality (and length) of the relationship you have with your bank and bank manager

the future prospects for your business the debt burden you are already carrying

Essentially, banks want to be confident you will be able to pay them back. While all banks have credit guidelines to assess this, the process is not as scientific as it might seem. A good relationship can go a long way.

Since you won’t have much in the form of collateral to offer the bank in return for your loan, the amount the bank can give you may be relatively small compared to your overall funding need. Therefore, a bank loan strategy may not be sustainable over the longer term as it requires constantly going back to your bank and offers no guarantees that future loans will come through.

Finally, keep in mind that loans also add another cash outflow to your business.  To reflect this in your plans, use your cash flow statement to establish your funding gap for the next 1-2 years, and add in the loan payments that you will have to make each month to  learn how taking on the loan will impact your monthly inflows and outflows of cash.

4) Factors – Factors provide capital to businesses based on the actual  orders they have received on a season by season basis. This is very useful in the fashion business as it can help to finance production for sales orders that have just been completed. Once you hand over your order book to the factors, they will take a cut of the total value themselves, and in return provide you with the cash up fron while they take on the risk of collecting

payments later when the goods are delivered. Factors may choose not to underwrite certain stockists which are too small or have bad credit records. One of the leading factors in the US is Hildun. Working with factors means giving away part of your revenues to the factor right from the start.Where else can you look for more informationFor more information on financing your fashion start-up, some general lessons can be learned from the US Small Business Adminstration websiteand from this case study.

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Next time: How do I decide where to allocate my capital?Once you have successfully raised your capital, you will need to think carefully about how to allocate this capital across various business needs that you have identified in your plan. You may not have raised all the money you need, so carefully prioritising key areas is important.

The Basics | Part 4 – How do I Decide Where to Allocate My Capital?BY IMRAN AMED 2 DECEMBER, 2007

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The fourth article in our BoF Basics series for emerging designers has been a long time coming. We have been receiving emails every other day asking

when the next article would be published. So, here it is, and  thank you for your patience.–

So you’ve done it. You’ve cobbled together some financing from family and friends or squeezed a loan out of your bank manager. If you’re a little farther along, perhaps you have managed to raise an injection of capital that will help take your business to the next level. The question is, now what to do with your funding? And, how do you make it last?

It’s likely that you will have had to agree fund allocation to some extent with your investors prior to securing the funds, but it will be important to re-visit and re-confirm this now that you are past the negotiation stage. In reality, you will make spending decisions every single day, how ever small. The fourth part of the BoF Basics discusses the allocation of your capital, or more simply, how and where to spend your money.

The easiest way to think about allocating capital is by using a series of principles. Allocating money is about tradeoffs, and making those tradeoffs means choosing between spending on things that might seem equally important, on the surface. For example, every fashion business will have to choose how much money to spend on building and shaping a collection and how much to spend on actually selling the collection. How do you make these decisions? By using the principles below combined with the priorities for your own business. The ultimate decisions may differ from business to business.

So here they are, the 5 principles of allocating money in an early-stage fashion business:

Key Principle 1 – Carefully manage product development costsWhile fashion is a product business that often comes with exacting standards, it is still important to carefully manage your product development costs. Creating large, unfocused sample collections with very expensive fabrics can be a death knell for a young fashion company. Not only will you have spent a fortune on developing a set of samples, you may have also created a collection that could never sell at retail because it would be far too expensive. Always use a collection plan to specifically identify the size, structure and price points for your collection, and select your fabrics with this in mind. This way, you won’t need to buy a bit of everything and sort things out once you are back in your studio, wasting money and time all the while.

Key principle 2 – Advertising is a cash sinkAs a young designer, you probably don’t need to spend money on advertising, and the expensive photo shoots and super slick branding that come along

with it. You can still craft a very strong profile by building relationships with editors, journalists, photographers and fashion insiders who take an interest in you and your work, and may help you for free. Those relationships will not only generate valuable editorial, their impact will also be felt longer than even the best-placed one-page ad in Vogue. As a young designer, you have a new and interesting story to tell and people will want to tell it too — you don’t have to pay them for this privilege. Supplement this with a professional looking website that is in tune with your creative vision and a clear brand identity that speaks to who you are creatively.

Key principle 3 – Focus on growing salesAs a growing company, you will likely be best off allocating your capital to people and assets that help increase your revenues. While you must invest time and resources into your product, brand image and identity, it is crucial that you are able to then leverage this raw potential to sell. Even if you have a strong collection and a growing brand profile, this will mean nothing if you don’t have a professional sales organisation to support it. One of the first people you should consider hiring is someone who can help you with sales. Also, investing in an e-commerce portion of your website (or through a partnership) helps you to increase both sales and profits, as you begin to capture the full-retail margin.

Key Principle 4 – Don’t forget about working capitalNot all of your funding should be invested in fixed assets like sewing machines, office furniture and computers. You will also need funding to make sure you can counterbalance the difference between the cash coming into your business (e.g. from sales, sponsorship and consultancy) and the cash going out of your business (e.g. for fabrics, rent and salaries)  In a growing fashion business, the amount of working capital tends to grow quickly as payments for clothes delivered to stores are often not received until well after the designer has made significant investments in everything it takes to bring that collection into a store – a large part of this is a variable cost of fabrics and productions costs that will increase with time as your business grows.

Key principle 5 – Use a budgetIt is absolutely essential that once you have thought these issues through, you create a budget to track your spending against your plan. Without this roadmap of sorts, you could lose control of spending and suddenly find yourself without enough money to keep your business afloat.  You should track your budget, at the very least, on a monthly basis, which means investing in a good bookkeeper to help you regularly track your accounts.

Next time: Value Chain – Design and Development

The design and development process is often a very personal one that differs from designer to designer. It is important to keep this process free and unrestrained to unleash the best ideas, but there are also things designers can do to stay on track and manage their time (and their team’s time) efficiently. For fashion business people in particular, understanding your designer’s creative process is a crucial part of a successful creative-business partnership, and so designers must also be able to explain to others how you work, in order that they can work with you.

The Basics | Part 5 – Design and DevelopmentBY BOF TEAM 5 DECEMBER, 2012

Source: thevipconcierge.com

Today, BoF resumes its longstanding ‘Basics’ series on how to set up a fashion business from scratch, collaborating with Ari Bloom, a NYC based strategic advisor to growth brands.  In this instalment, we examine how an informed design and development process can further your chances of commercial success.LONDON, United Kingdom — It’s no secret that the fashion industry is driven by design. Creating beautiful, unique products is not just an important component of fashion, it’s the very lifeblood of the sector.But when we think of design, we often focus on the creative side alone. This is no doubt important. But it’s also critical to consider market feedback that may influence how you present your product. Everything you create produces a reaction, positive or negative. And the most successful business people

tirelessly look for these signals, embrace their genuine meaning, and then react. Structured cost analysis, collection planning and smart presentation are also essential.

Here are six things you can do to make your design process more effective — and profitable..

1. Pore over your sales results each seasonIf you are already selling product, you should have excellent access to very valuable sales data. Use it. Read the reports generated by your store or website and ask your stockists for sales summaries. The information is generally available, you just have to ask for it.

Important metrics to focus on are: unit sales, total volume, sell through percent, net gross margin, net average retail price and returns. A quick note on the all-important sell-through, however. Sell-through is only a function of the success a product achieves related to how you or your buyers purchased it. So, while this is an important measure, it can exclude some important contextual information that should always be considered, as well. A good buy from the same collection can significantly lift sell-throughs.

You should also spend time with your buyers and retail partners to add qualitative colour to the quantitative data you get from the reports. Ask them about specific styles. Why did they or didn’t they work? What might they do differently? What did you miss in your offering?

2. Talk to floor associates and check out the competitionFashion is not a desk job. Get out there and see the state of the world for yourself. While buyers and company executives will give you good intelligence, the sales associates who work on the front lines can also be valuable in painting a vivid picture of how your product performs on the shop floor.

Initiate these relationships as often as possible and encourage the associates to speak candidly about what is and isn’t working, and what’s missing. As an added bonus, you may be pleasantly surprised by the attention your product gets on the floor once an associate is better acquainted with you.

You should also spend some time observing your peers (also known as competitors). Most customers have a finite amount of money to spend on fashion and it’s important to understand what other brands competing for that same share of wallet are doing and, in particular, which types of products seem to be performing the best.

3. Gather first-hand customer feedbackThere is nothing quite as valuable as a direct interaction with your customer. Reports may tell you what consumers bought, but spending quality time with them or at least watching them shop will help you to understand how and why they make purchase decisions.

You’ll also get a better handle on what they chose not to buy. This is a particularly good way to identify styling issues, in addition to fit and quality problems. The most tragic failures occur when a designer creates a beautiful product that’s poorly executed in terms of fit or quality. Without these elements, your hard work will be for naught.

So, if you are lucky enough to be selling product out of your own store, spend as much time as possible on the floor interacting with your customers. And if possible, when visiting your accounts, observe (or work!) the sales floor. Trunk shows are another great way to meet customers directly.

If you have a mailing list, you can consider reaching out directly to you customers for feedback. Posting a feedback link on your website or via social media is another quick and easy way to get more structured thoughts from your customers. You may be surprised how happy your fans will be to help you out. Sending a personal thank you note or offering a discount on the next purchase are both nice touches and good incentives for your customers to make future purchases.

4. Consider costs carefullyMake sure that you are designing and developing a product that can reasonably be produced. While that may sound like an obvious point, many talented designers create beautiful concepts that prove to be too expensive or complicated to produce at scale.

Be sure that every detail of the product is truly creating value for a customer. With a retail markup, on average, of 6 times production cost, every dollar you are adding to the cost of producing a garment will add around $6 to the final retail price.

Your products should have clear cost targets, derived from working backward from final retail pricing. Make sure to build in a realistic margin for yourself that considers not only the pure costs of production, but also other monies that you will have to spend in order to get the product into a selling environment. This includes things like duties, freight, fees, commissions, warehousing, sampling and development costs.

Keep in mind that samples are often one of the single biggest line items in the design process and can swing a seemingly profitable collection into the red.

5. Develop a collection planAs you think about the overall size and breadth of your collection, you should identify the number of items required to fulfil your vision, but cross reference that with a reasonable assessment of what can fit in a store, on a website or into a retail account’s buy.

There are three fundamental elements to planning a balanced collection and it’s essential to keep these in mind, over the long-term development of your product assortment, as well as in each and every collection you produce. We often think about these as a collection pyramid.

The Base: Every successful fashion company rests upon the success of one or two items which form the foundation of the overall product assortment and a more predictable stream of revenue around which a real business can be built. These products don’t change dramatically from season to season and they become the staples of your product offering. Tory Burchhas her Reva ballerina flats, Louis Vuitton has its leather goods and Acne has its denim. Without this kind of solid foundation, it’s difficult to build a successful business.The Middle: In the middle are the products that you adapt and refresh each season with new colours, fabrics or prints, but the basic silhouettes remain the same. Over time, you may choose to slowly adapt these products and perfect them, but in general you are using tried and tested shapes which have already been proven in the market.The Top: At the top of your collection are the purely seasonal elements which are more about driving interest and bringing new energy to your product mix. This may be the pieces you show on the runway and which are featured in editorial. From time to time, you may have a huge commercial hit at the top part of your collection, but as it’s generally hard to predict exactly what will strike a chord (or which product your favourite A-list celebrity decides to wear), it can sometimes be hard for a small fashion business to capitalise on the short-term buzz generated by these types of products.6. Use a stylist – smartly!Many designers choose to employ the services of a stylist. These can be hired professionals, in-house team members or even a friend or colleague with a good eye. The most important outcome here is that you receive a second opinion on how the collection sits together best and how to present it to buyers or customers. Don’t underestimate the importance of this step, as it can greatly impact your eventual sales.

Ari Bloom has worked with numerous fashion brands as a consultant and as a mentor to the CFDA fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.

The Basics | Part 6 – SalesBY BOF TEAM 7 FEBRUARY, 2013

Bread & Butter Tradeshow | Source: europaregina.eu

The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NYC-based strategic advisor to growth brands. Thus far, we have examined how to develop a successful brand and product offering. Today, we dig into the critical prospect of selling your proposition to the market.LONDON, United Kingdom — In recent years, the sales landscape has changed dramatically. No longer are brands limited to wholesale and bricks-and-mortar retail channels. Today, brands sell across multiple channels, including online retailers and their own e-commerce. Each channel has its pluses and minuses, of course. And each requires different toolsets to succeed. Here, we focus on how to navigate the wholesale and direct-to-consumer sales channels.NAVIGATING THE WHOLESALE CHANNELFor emerging fashion brands with limited resources, the wholesale channel is usually a logical starting point, as it requires less upfront investment in infrastructure and greatly reduces the financial risk associated with production and manufacturing costs. It’s also a good way to test response to a product or collection. And with purchase orders from retailers in hand, fashion businesses can more easily gain access to capital (whether debt or

equity) that can help to finance the production of goods which may not return cash to the business for months to come.

Given that most small brands have limited industry awareness and contacts, building a wholesale business often involves hiring an experienced in-house salesperson or working with an external showroom. This person, or agency, will generally leverage their networks and relationships to make sure you get appointments with the right buyers, present your product effectively and, ultimately, secure orders.

No matter what you decide, make sure you do your research and get lots of referrals. Don’t be afraid to talk to existing clients. Your wholesale representative, whether in-house or outsourced, will ultimately be speaking for your brand, so make sure the fit is right. And even if you are not driving sales yourself, stay close to the wholesale process as it’s key to understanding how your collections are received and what can be done to improve them.

Avoid consignment at all cost. While most sales are just that — meaning the account actually buys the product from you — some accounts will only consign the merchandise. This means you still own the goods until they are sold, at which point you will split the revenues with your host. If the product doesn’t sell, you carry the entire burden of the upfront costs. Beware, consignment deals can put an emerging brand at great financial risk.GENERATING DEMAND VIA FASHION SHOWS & TRADE EVENTSWith a sales team in place, you will be able to take part in the various markets and sales-related events that occur on a regular basis around the world. While they can make a big, short-term splash, fashion shows and presentations can be a big expense for emerging designers and are sometimes hard to justify, given the limited resulting sales uplift. Remember, aside from venue fees, there are additional costs to consider, such as stylists, models, hair and makeup artists and production. Taken together, these costs can often reach well into six figures, even for seemingly small productions.

Before you decide to invest in a show, consider the audience you are trying to reach and what you will reasonably gain in press, credibility, and, ultimately, sales. Don’t be afraid to seek out low cost or subsidised venues and other options. Endorsements and sponsorships can also be an effective way to offset these costs. And remember, not every designer needs to stage a fashion show. Wait until you have a clear message you want to send.

There is nothing wrong with selling your collection from a clothes rail. In fact, it can be the most personal way to introduce your brand to potential buyers. Trade shows can be a great way to get in front of multiple retail accounts and

really focus on selling. There are many options, so it’s important to study the attendees, as each show attracts a different crowd. Remember, all show booths are not created equal. Make sure you fight for a good location, as being stuck in an untrafficked corner can have a material impact on sales. If you are a show regular, keeping a consistent location can also be very helpful, as your accounts may more easily find you, especially at the larger shows. In any venue, lookbooks and line sheets are a nice selling and marketing tool. But these can be extremely expensive to produce. So, think creatively, consider putting the file on a branded flashdrive or referring buyers to your website.

DIRECT-TO-CONSUMERAn alternative to wholesale is the direct-to-consumer channel, including physical retail, e-commerce, pop-up stores and trunk shows. From both a financial and branding perspective, there are many benefits to this channel. First, the economics can be great. As you are selling directly to end consumers, presumably at the same retail pricing as your wholesale accounts, your gross margin (or profit on each product) is generally much higher than what you would achieve through wholesale where you share the retail margin with your partner. For example, if you produce an item for $20, you might wholesale it for $40, for a profit of $20. However, that same item is probably going to be sold to a consumer at a price that starts somewhere around $100, capturing an additional $60 in profit. When you sell direct-to-consumer, you have the opportunity to own the entire profit potential, or $80 in this case. A clear benefit.

Operating a physical storefront or online store also allows you to control the entire shopping experience, interact directly with your customer and communicate the very purest form of your brand. Of course, retail businesses, whether online or brick-and-mortar, require significant upfront investments and human resources. What’s more, the entire inventory risk rests with you. If the product doesn’t sell, you’re the one holding it come the end of the season and will have to find a way of liquidating it, which is not good for either your business or your brand.

Nevertheless, at a certain point, most fashion labels will need to invest in retail or e-commerce in order to grow commercially and showcase their entire product offering, which wholesalers will never be able to do as well. A successful retail or e-commerce venture can sometimes return the capital invested in its setup in as little as one year and provide a robust profit centre for years to come.

What’s more, a great retail presence can also be the strongest selling tool for driving wholesale, or serve as a prototype model for shop-in-shops and

international licensing. (We will delve deeper into retail and e-commerce in a future installment of this series.)

THE IMPORTANCE OF SALES DATA AND ANALYTICSWhichever channel you choose to focus on first, make sure you have access to quality data so you can track your progress. Sales results are the most important form of feedback, so understanding what has (and hasn’t) worked will be critical to your ability to adapt your offering to meet market needs.

You should generate wholesale recaps on a seasonal basis. Together, you and your sales team must be clear on what your accounts are looking for, how much product you need to produce, target price points and what competitor brands you may sit next to.

As for direct-to-consumer, having visibility of daily sales results, and especially insight into the styles and products that are selling well, will enable you to replenish winning styles and adapt them for future seasons.

CONCLUSIONSales are the core of any fashion business. You can have great product and excellent visibility, but without underlying sales your business can never work. As painful and painstaking as it can be, a successful sales strategy requires your close attention, so don’t leave it entirely to someone else.

Ari Bloom has worked with numerous fashion brands as a consultant and as a mentor to the CFDA fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.

The Basics | Part 7 — ProductionBY BOF TEAM 2 APRIL, 2013The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NYC-based strategic advisor to growth brands. Today, we examine one of the most important parts of running a fashion business: production.

Source: Shutterstock

LONDON, United Kingdom — The least glamorous, but possibly the most important aspect of bringing a fashion product or collection to market is production and manufacturing.Production describes the process by which concepts are made into a saleable physical product. In most cases, this means going from a small set of samples or prototypes to commercial quantities of the item or style, often across multiple sizes, colours and patterns. As you can imagine, it’s impossible to separate production from the overall success of a brand, as great concepts can be designed, developed and sold, but a fashion business will ultimately live or die based on what is produced and delivered to the end consumer.

For most small fashion brands and start-ups, finding sources of production is the most challenging element to get right. Too often, early-stage businesses leave this until too late, and sometimes find themselves with orders to fulfil, but nobody to produce them. This is something to avoid at all cost. Once you have taken orders, you must be able to fulfil them, or you risk scaring away retailers for years to come. Remember, this is a small industry and everybody talks.

While there are endless options for production, both domestic and international, finding quality suppliers can be difficult, especially in the UK

and and USA, where many top young fashion designers are based. As a result, many in the industry tend to be secretive and protective of their production sources.

In recent years, producers in France and Italy have become more open to working with young designers. But your orders (in small, unpredictable quantities) may tend to get pushed to the back of the order queue, meaning that your deliveries may be later than bigger brands, which can negatively impact sell-through rates and vendor relationships.

With so much competition for vendors, it’s essential to make sure you can secure production before you invest time and money in the design process, sales process and marketing costs.IDENTIFYING PRODUCTION PARTNERSSo how can you track down production resources? As with most things in fashion, it comes down to leveraging your relationships and seeking out help wherever you can find it:

Former Partners: If you’ve worked for another company previously, especially a larger one, some of your former producers may be willing to work with you, or at least make a referral.Accounts: Often a retailer will have preferred production partners that their other accounts work with. They may even use them for their own private label product, and, if you ask nicely, they may be willing to make some introductions.Sample Makers: Many small manufacturing labs or factories who create samples often have associated production facilities, or know the best local manufacturers. Use them as a resource as they may be able to point you in the right direction.Fashion Schools: If you are a student or alumnus of a fashion school, check in with your professors and tutors to see what resources are available to you. They may also have relationships you can leverage.Friends and Colleagues: It never hurts to ask. But beware, you may not get a straight answer.Online Resources: There are some very helpful sites that, for a fee, will give ratings and testimonials on apparel and textile manufacturers.Panjiva.com is a great example, although you may be hard-pressed to find top-quality resources if you operate at the luxury end of the business.PRICING AND PLANNINGAnother good reason to identify your production partner early in the process is because their execution capabilities and associated costs need to be figured in to your early design decisions, and ultimately into your pricing. If you’ve followed our advice from earlier in this series, you should have already set wholesale and retail pricing targets for your product. Then, by simple

comparisons of these prices to your quoted costs, you should be able to tell whether they will allow you to make enough profit margin on each item, at the right level of quality.

Many designers ask what a reasonable margin target should be. The answer, of course, varies depending on the size of your business, its overhead, development, sampling costs and many other factors. Most companies try to achieve close to 50 percent margins at wholesale and over 70 percent in retail. But again, there are no hard and fast rules, as each circumstance requires different treatment.

Remember that not all factories will have all the raw materials, fabrics and trims required to construct your product. If procurement falls on your company, you will need to source these yourself, and in doing so, incur costs that will likely need to be paid on an accelerated timeline. Most suppliers will require some sort of deposit or prepayment to cover raw materials and/or the labour needed for production. Whatever balance remains will usually be required once the goods are ready to ship. Some suppliers will be flexible on terms, allowing you to delay these payments for weeks to months, which will help your cash flow, as you are not likely to get paid by your accounts or customers for some time. Always ask for terms so you can give yourself some cushion on payments. And remember, whatever arrangements you agree on with your suppliers should always be captured in an official Purchase Order that should detail all transaction and delivery terms.

THE IMPORTANCE OF SAMPLING AND QUALITY CONTROLIn order to get started with production, you will need to create or designate an approved sample to work by. This “sew by” sample, or design prototype, is the model by which the factory will use to create “bulk” production. If you are an apparel company, you will use these samples to define construction guidelines, as well as fit specifications and the grading of sizes up and down.

When production is in process, it’s important to monitor quality, as compared to your samples, which are what buyers will use to write their orders. The single best way to do this is to visit the facility regularly. This is obviously made easier when producing locally, but do not underestimate the value of an investment in travel to see production before shipping. Depending on the situation, you may be able to conduct fittings on test or bulk units to make sure that they are executing correctly. If this is possible, it is highly advisable. If you are unable to visit your facilities, there are third party auditors that can oversee quality control for a fee.

SHIPPING AND DELIVERY

When goods are ready and approved to be released, you will likely have them shipped or delivered. Some companies will “drop ship” directly to their own retail stores or accounts. Most often, the goods are received in an office or distribution warehouse. Once you take possession of the final products, you should make sure to pull some (or all) of the units to check for quality on execution. This extra time and money is well spent considering that your customer or account is likely to return any faulty or ill-fitting product. Remember to have a clear understanding of any packing parameters required by specific accounts, as failure to adhere to these parameters can result in charge backs and even order cancellations.

All in all, production can be the most complicated and cumbersome part of running a fashion business. If you have the resources to hire an experienced production manager, they will often be able to bring both know-how and sourcing contacts to your company. In fact, a production specialist is often one of the first hires a growing brand will make. Those of you still considering a career direction in fashion, and who have a mind for managing complex processes and logistics, and an eye for product, should keep this in mind as it is consistently one of the most in-demand skills in the fashion industry.

Ari Bloom has worked with numerous fashion brands as a consultant and as a mentor to the CFDA fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.

The Basics | Part 8 – MarketingBY BOF TEAM 12 JULY, 2013The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NY-based entrepreneur and strategic advisor. Today, we examine a critical element that can ultimately separate a successful fashion business from the rest: marketing.

Source: Shutterstock

NEW YORK, United States — Fashion is a hyper-competitive industry. Talent is readily available, so having a well-designed and a high-quality product is simply the price of entry. What ultimately separates a successful fashion business from the rest is often how the brand’s story resonates with consumers.In the pre-digital age, brands were built with classic marketing strategies, using traditional media like print and TV to ‘push’ their latest campaigns at consumers. While these traditional tactics may never completely disappear, today’s Internet-era consumers have more power than ever before and interact with the brands they deem worthy of their time via a number of new channels. With the proliferation of digital and social media, the rise of ‘on-demand’ content and services, and the growth of micro-targeting techniques, people increasingly expect products and services to speak directly to their individual needs.

The most successful fashion brands will embrace a blend of both traditional and new media to communicate a consistent and authentic message across multiple channels in a manner that both piques customer interest and creates long-term brand value.

Defining Your Brand Story

Before marketing your brand, it is crucial to define what it is — and what it isn’t. In the most simple form, brands should think about key descriptions of any design or aesthetic features, define their pricing or market segments, and identify exactly who their customer is, factoring in elements like gender, age, geography, interests and anything else that helps describe their lifestyle and preferences. By the end of this exercise you should be able to clearly articulate a simple brand equity statement in one or two sentences, for example:

“Brand X is a contemporary American work wear collection featuring traditional fits and luxury fabrics for professional women ages 40-50. Brand X is unique because it offers exceptional quality at accessible prices.”

The Classic Marketing FrameworkIn the classroom, the 4P’s (Product, Place, Price, Promotion) has become a straightforward, foundational framework through which to think about marketing. There are many other frameworks available, but the 4Ps is a good place to start. It’s important not to be too rigid within any one framework, however.

ProductIn fashion, having a great product is the essential foundation of a great business. In the classical marketing framework, “product” is defined as an item or service that meets a consumer’s need or desire. But it’s worth noting that, in fashion, we are often designing products that people don’t yet know they want, then using our various marketing strategies to unleash their desire.

As we discussed in Part 5 of the Basics series, there are many business and trend considerations involved in the development of a collection. Likewise, when planning marketing initiatives, it’s important to consider whether they will be aiming to promote the brand or specific products. There is a place for both, but whenever possible, it is advisable to feature actual product, as this can directly help to drive sales and awareness of key items.

For example, is there an iconic piece from your collection that conveys your message best? Are there unique design or functional features to call out or focus on? Is there a particular lifestyle or activity that you want to associate with your product or brand? Is there a specific person or archetype you want to associate with your brand? What colours are important to the brand DNA, year round or seasonally?

Price

In fashion, price is not only a reference to the nominal amount of money being charged for a product. It can also refer to the “value equation” that the brand creates in a consumer’s mind. For a price being paid, what qualitative benefits and functional utility is the consumer getting in terms of design, quality, goodwill?

Keep in mind that the resulting value equation will have a sizeable impact on how your brand is perceived. This should be considered before any price tickets are printed.

PlaceAs discussed in Part 6 of the Basics, fashion brands have multiple sales channels through which to reach end consumers. In this framework, “place” refers to selling the right product at the right price (value) in the right place.

Where you sell influences which customers you reach and how your product is perceived. Therefore, picking the right accounts can have a major impact, not only on your financial results, but also on your brand image. Some brands may even justify selling or consigning to an account that is known to pay late (or not at all), simply for the marketing value. While we don’t recommend working with retailers on this basis, you should always consider the brand equity you can create or destroy by working with certain retail partners.

If you own direct-to-consumer sales channels (a physical store or a commerce-enabled website, for example), you have the benefit of controlling the environment and experience. This gives you an opportunity to tell the story exactly as you want it, which may well be the most powerful marketing vehicle of all.

Regardless of whether you sell online, it’s important for every brand to have a website. This may only require a small investment of time and money, but will be a crucial way to capture the traffic that you generate when you create interest in your brand. Think of your website as the first window into your brand and your world.PromotionThere are many promotional techniques available to brands, ranging from the traditional to the cutting-edge. All are effective in their own way.

1. Advertising

Perhaps the most traditional promotion technique is advertising: in print, TV, radio and, now, online. This is also known as paid media. This is often one of the more expensive methods of communication, especially in print, but can

reach a large audience and can bring prestige to your brand. Many new magazines will run ads for young designers and very low costs, or sometimes for free, as long as the creative elements are strong and in line with the quality of the rest of the magazine. Online advertising can be more affordable, though there is much debate about the effectiveness of traditional banner ads. But deployed intelligently, with specific goals, online advertising can help drive sales, especially to your own e-commerce site, and can be targeted and measured much more effectively than print ads.

2. CO-OP

Many retail accounts will offer (or require) brands to promote your designs in store or in distributed marketing collateral, such as catalogues and store advertisements. This usually comes with a fee attached and can be executed by the brand or the store. Signage can be very effective in drawing a customer’s attention to your product in store, especially when it is competing against other brands.

3. Public Relations

A strong PR strategy can lead to extremely helpful “organic” media exposure and influencer endorsements via celebrity placement, gifting, wardrobing and personal appearances by the designer or brand representative(s). One of the big questions most young brands wrestle with is whether to hire a PR firm or to keep PR in house. If you do decide to hire an outside firm, it is important that you spend time first setting a strategy with clear benchmarks for success and meet regularly to review progress.

4. Social Media

With so many new online platforms and technologies available to brands, it can be hard to know where to focus. In general, it starts with understanding your customer. If you are selling designer dresses, platforms like Facebook may or may not be the best place to promote your brand. As it stands today, it is usually in a fashion brand’s favour to focus on highly visual social media platforms, such as Instagram and Pinterest, where they can demonstrate the beauty and design of their products. Instagram, which has really caught on in the fashion industry, is an excellent platform for small brands, as it is highly visual and enables you to demonstrate the essence of your brand, even thought it’s a hard place to drive sales as Instagram does not currently allow live links in image captions.

No matter which social media platform(s) you decide to use, choose carefully and make sure you have the resources to keep your accounts active and engage your followers. Somebody on your team must be dedicated to posting regularly, monitoring reactions and responding in a timely fashion. And remember, these platforms are conversational — not bullhorns — so make sure to also use your social media presence as a way to listen to your followers and gather important feedback.

The Basics | Part 9 — E-CommerceBY BOF TEAM 8 NOVEMBER, 2013The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NY-based entrepreneur and strategic advisor. Today, we provide a practical primer on how emerging brands can seize the direct-to-consumer e-commerce opportunity.

Source: Shutterstock

NEW YORK, United States — It’s no secret that the web has become one of the most effective tools for fashion brands to market and sell their wares. According to market research firm Emarketer, online sales of apparel and

accessories are now growing faster than any other e-commerce product segment (20 percent per year). By 2016, the category will account for $73 billion worth of online purchases in the US alone, just over 20 percent of all online retail sales. And while young fashion brands will always need to maintain offline touch points where customers can touch, feel and try on product, seizing the e-commerce opportunity is equally crucial to long-term success.Thanks to platforms like Net-a-Porter, e-commerce already accounts for a large percentage of sales for many young fashion brands. Yet to be competitive, every emerging brand must eventually consider launching their own e-commerce presence. Not only does this allow young labels to provide consumers with a more controlled and pure online brand experience, but the economics of selling directly to consumers, bypassing wholesalers, allows a brand to capture the entire margin between the cost and retail price of each product sold. This can often mean 20 to 30 percent more profit.Many young fashion brands worry that setting up their own e-commerce site will compete with existing online wholesale accounts, which can be an important source of revenue and exposure. But the simple fact is, the Internet is a big place with varied traffic patterns and diverse customer profiles. And having your own site, like a brick-and-mortar retail store, can actually help your sales on other sites by increasing exposure and offering consumers a more powerful brand experience. That said, it’s probably wise to offer some amount of exclusive product on your site, which can help to generate buzz through a unique experience that can’t be found elsewhere.

Selecting an e-commerce platformWhile it’s clear to most emerging fashion brands that there is a compelling opportunity in e-commerce, their quandary is usually how and when to launch. This is often exacerbated by the level of investment required to get started and a lack of technical expertise.

Luckily, there are some great new tools available that enable easy setup of an e-commerce site at highly affordable rates. Platforms like Shopify, SquareSpace and Tictail offer off-the-shelf, plug-and-play options for companies new to e-commerce. These services require few technical skills to set up and are extremely simple to use, though they are heavily templated, with little scope for customisation. As for cost, however, most offer simple revenue sharing schemes or low monthly fees. Open source e-commerce platform Magento is another, more flexible, option, though deployment requires greater technical expertise. Generally speaking, these kinds of platforms are ideal for brands with expected sales below $1 million annually.

If your business is expected to sell over $1 million online, annually, you may want to consider more advanced platforms, such as DemandWare, Venda or

Sellect. These services are more flexible and offer more robust, customisable feature sets, including easy-to-manage, drag-and-drop merchandising tools, but require significant investment to deploy.

Before choosing an e-commerce platform, you should be clear about your specific business goals and sales targets.

An equally important point to consider before you build a website is who is going to run it on a day-to-day basis. As with any storefront, e-commerce sites require constant management, as new product arrives and marketing messages evolve. If you or your team will be managing your e-commerce business day-to-day, the site must allow for easy, regular changes. Make sure you fully understand the content management system that accompanies the platform you choose, so you can operate the site and train others.

Every e-commerce platform should also come with a Customer Relationship Management (CRM) system, which will help you to collect and organise customer data. It’s very important to carefully vet these systems, as the direct relationship you develop with your customers through an e-commerce site can be one of the strongest tools in growing your business and result in significant sales lift.

Website designNo matter which platform you choose, you will need to design a compelling website. With simpler platforms, which allow for little customisation, you might consider doing this yourself. But more likely, site design will be undertaken by a professional web designer on your team, or by an outsourced individual or agency. While we could write an entire book on the finer points of building a great online store, we recommend that you work closely with vetted professionals to create a site that is not only a proper reflection of your brand, but also offers an engaging and enjoyable user experience. Working with a trained user experience professional, or UX, is as important as working with a visual designer. Be wary of agencies that tell you this function is not needed.

Your site should also work easily and gracefully across multiple types of devices, like smartphones and tablets. In 2013, around 15 percent of total e-commerce sales in the US will be made from “post-PC” devices, with 65 percent of those coming from tablets, according to Emarketer. By 2017, sales from mobile and tablet devices are expected to account for 25 percent of total purchases. With this in mind, it’s crucial that your e-commerce presence be optimised for these platforms. But rather than designing a separate mobile sites or apps, we suggest building your site using “responsive design,” an approach that enables you site to automatically detect your user’s device and

adjust the experience to different display sizes and forms of interaction (like touch screens).

Remember, your e-commerce site is nothing without content. Beautiful brand images and product photography are a must. We recommend that you work with a trained photographer to shoot these images and remember to capture multiple angles. Zoom and 360 degree views of the product are also nice to have.

Inventory managementInventory management is a critical part of operating an e-commerce site. For many brands, this site is their first foray into the direct-to-consumer sales channel. While this has several benefits, as outlined above, investing in inventory without the guarantee of confirmed orders can be a risky, cash-intensive undertaking.

Many young brands simply allocate a predetermined percentage of their offering to the online channel. While this approach may work for the inaugural season, we recommend a more precise planning process whereby you use past sales data for similar styles, look at traffic growth from season to season, and consider the overall “visibility” of each particular product. As can be expected, an item featured on the homepage, or one that might be planned for heavy press exposure, is likely to sell at a higher volume.

One of the benefits of an e-commerce site is the ability to manage your own liquidation channel. Whether it’s unsold units, excess inventory from returns, or even extra samples, you can utilise your new store to move goods. But it’s important that you do this in a way that does not damage full price sales, so be conscious of over-emphasising sales.

FulfilmentAn e-commerce site must also be coupled to a fulfilment platform that can process orders, ship to customers and accept any returns. When some small brands first launch their sites, they fulfil goods right from their offices, or apartments! Other brands partner with a third-party logistics centre that will hold the goods, manage shipping and process returns. Often times, these warehouses do not manage customer service, so it falls on the brand to answer phone calls and emails from their customers. While this might seem a headache, it can often help a brand uncover important feedback that should be incorporated into future product designs and company strategies.

MarketingFinally, an e-commerce site cannot survive without ongoing promotion and traffic generation. There are many methods to achieve this. Our previous

Basics article on marketing covers many of the most effective techniques that a brand can use to promote itself, but some specific methods to consider relating to e-commerce are search engine optimization (SEO), search engine marketing (SEM), affiliate marketing, email, and ongoing promotion via social media.

Ari Bloom is the founder of A2B Venture