How To Start A Luxury Fashion Brand
Talent, yes. Connections, most definitely. But more than anything: a lot of money.
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Right before New York Fashion Week, I received a distraught email from a respected publicist. She contacted me to vent about the lack of transparency in the press about the way young designers launch their businesses. She cited several designers who are heirs/heiresses to billion-dollar fortunes, or whose parents own factories, or whose personal net worths are in the nine figures. “Maybe it’s considered gauche to actively point out if someone has a family trust funding their fashion company, but it’s #realtalk,” she wrote. “I meet with emerging designers all the time and they’re always sort of baffled as to why so-and-so is getting traction. None of these designers had to spend their first seasons worrying about order minimums, fabric costs and renting a venue for a show. You’re competing with people who have massive financial resources.”
And she’s right. I’d say that 98 percent of the new designers we cover on Fashionista have some sort of support from their families, even if that means a parent had to remortgage a home to provide it. Every time I interview a new — or newish — designer, I ask them the same question: how did you come up with the funds to make this happen? Occasionally they have worked for 10-15 years in the business and are using savings. But more often than not, they are tapping familial resources. Designers, unsurprisingly, rarely want to talk about this. Recently, I asked the untrained co-founders of a new brand how they figured out how to handle production -- who taught them? They told me they spent two years researching after work. The next time I met with them, one co-founder offhandedly mentioned that one of their fathers was an executive in the apparel industry and had provided guidance. Did she purposefully deceive me? Probably. Most ambitious people who also come from privilege don’t want to be judged by the advantages they’ve been afforded.
So what does it truly take to launch a collection? “Connections are important,” says Ari Bloom of A2B Ventures, a strategic advisory firm that often counsels young designers. “Then there’s luck. But ultimately, it’s a very expensive proposition. It really is a rich man’s game.”
But how rich? Bloom says that a designer needs $2 million to $3 million to get a ready-to-wear company off the ground. That money goes to hiring a support staff, renting an office, travel expenses, public relations, not to mention the actual production of the collection. (When stores place orders, they rarely place a deposit. That means designers must pay to get the clothes made before they're paid by the store. If an item gets discounted, stores often do a "charge back," which means designers have to refund the store for the money lost on the discount.) For a ready-to-wear brand that uses fine materials, samples alone can cost upward of $100,000 a season. The one thing that's cheaper these days is brand recognition, thanks to social media. But followers do not equal customers. "I've come across brands that might have 150,000 followers on Instagram, but they're still making less than $150,000 a year in sales," Bloom says. Awards help in almost-immeasurable ways, but it's important to remember that a good chunk of the actual money goes to taxes. Indeed, many companies are not profitable until they reach $5 million to $10 million in sales, which can take years.
Sure, there are labels that are founded on less. Many designers do it by taking six-figure consulting jobs on the side and funneling that money back into the business. Others work out of their apartments, trying to keep the label afloat collection by collection. "It's the bootstrapping way," says Shira Sue Carmi, founder of Launch Collective, a company that advises emerging designers on how to properly start a business. "You get enough money just to make the collection possible, and hope it sells. It's the least capital-intensive way to do it, but it's not a business strategy." And even that can require six figures of investment. Crowdfunding is a new option, but it works better with mass consumer products. It's less practical for designers who are making things at the contemporary and ready-to-wear levels. "You'll need some capital to start, even if you're doing it in a really minimal way," says Carmi.
It wasn’t always so extreme. Like most creative industries, plenty of designers from the baby boomer generation were children of working or middle class parents, many of whom were immigrants. (Tommy Hilfiger, Ralph Lauren, Calvin Klein, Alexander McQueen, John Galliano and Jean-Paul Gaultier come from these sorts of backgrounds.) But as high fashion transformed from a craft to a business in the 1990s, it became harder for those without resources to rise up. Consider this: 2014 out-of-state tuition at the Fashion Institute of Technology is $8,905 a semester for students working toward a bachelors degree. At Parsons The New School for Design, which is private, tuition for BFA students is $20,275 a semester. Working class families in the United States earn between $20,000 and $40,000 a year, according to the Department of Labor Statistics. Even if an exceptional student received a full scholarship to either of these universities, there is also room, board and additional fees.
For designers who do make it through school — or choose to buck convention and train through apprenticeships or rely on their inherent talents — nothing can prepare them for the first few years of running a business. “Some of the designers I meet with are experienced, well-connected and have deep pockets, and they still don’t really understand what they’re in for,” says Bloom. “Even if they’re in the top 2 percent of their peers, they’re probably going to fail, eventually.” Adds Carmi, "The barrier of success is much higher than it used to be."
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