Young fashion brand Lipsy is gunning for growth after being name-checked by a raft of celebrity fans. Lorna Hall learns about the brand’s ambitious plans
Celebrity party girls Katie Price, Danielle Lloyd and Michelle Scott-Lee were pictured leaving a bar in London’s West End last week dressed head-to-toe in Lipsy. According to the brand’s husband and wife management team Jeremy and Marcelle Stakol, pictures like this are in the press most weeks. What was different about this celebrity-fest was that it was Lipsy’s own bash, held at the Jewel Bar in Piccadilly to celebrate the relaunch of the young fashion brand.
“The party was a big deal for us because it marked a real step change in the business,” says managing director Jeremy. “We used it as an opportunity to let people know about the label on a bigger scale and to mark the launch of our new transactional website.”
Lipsy is no overnight success. The business has had a large concession area in Topshop’s Oxford Circus branch in London since it opened more than 15 years ago. “We’re the only original brand left in the building,” says design director Marcelle. “We were in there when the store was called Peter Robinson and we were trading as Lipstick. When Burton Group decided to rebrand it Topshop, it wanted to replace us with a brand that had a younger image. Topshop gave me four weeks to come up with a new proposition and keep the space. I ran around Leicester and Brick Lane buying a new range. We renamed ourselves Lipsy and kept the spot.”
A lot has changed since those early days. Almost 80% of Lipsy’s sales now come from the brand, and just 20% are from producing own label for high street multiples.
In May last year the brand underwent its biggest change yet, when Marcelle’s parents effectively exited after a buyout deal involving boutique investment house New World Finance. The Stakols will not say how much the brand sold for, but New World Finance handles deals of between £5 million and £50m. The buyout left Jeremy and Marcelle with a 25% stake.
The deal, as well as the appointment of Mosaic Fashions chairman Stewart Binnie as non-executive chairman last week, is the culmination of a new spirit within the business. It started about five years ago when Jeremy started to take an interest in the brand.
Until then his world had been a long way from fashion, working as an executive for Sky TV. Marcelle says: “We needed some help on an issue within the business and Jeremy said he would take a look at it in his spare time. Then he came on a buying trip with me to LA and we bought into some ponchos that were selling madly in the US, but hadn’t made an impact in the UK. We came back and cleaned up, supplying half the high street. Then when Jeremy managed to source a trimming I wanted for a fraction of the asking price by going through a Chinese supplier, he was totally hooked and joined the business full-time.
“That was the beginning of a big change for us. We were always great on product, but never managed to capitalise on it to its full extent because we didn’t really get to grips with managing the costs and exploiting the brand’s potential. That’s where Jeremy came in. He is all about the finances and managing the brand.”
Jeremy adds: “When I joined we didn’t have a China office. We opened it with six people and have 40 working there today. Now, 95% of our production is done there. The rest comes from the UK, India and Europe.
“The China office is solely for Lipsy, and we have eight factories that only manufacture for us. If our China office tells the factory we need a garment made in two weeks, we can do it.
“We have made big strides in production in the past five years. We can book 100,000 metres of fabric and have it ready on the floor. In five days it can be dyed, it will spend another five days on a production line, and we can have a garment in store in five weeks. You need to have that flexibility now as a brand if you are going to compete with the high street.”
Lipsy is not a big business, but it is growing fast - turnover was £11m last year, and this year it is heading for £15m. It has 400 UK wholesale accounts and since May 2006 it has added five concessions in Topshop’s regional flagships. Another four will open next month.
In the past year the brand has invested £500,000 in computer systems to manage this new level of growth. It has taken on a new finance and merchandising system called Momentum, as well as outsourcing its e-commerce and e-logistics for its new transactional website, launching later this year. The Stakols hope that the new website, created by Imano, and fulfilment, which is being done by third-party logistics provider Amethyst, will take the brand’s online arm into a new stratosphere. It consistently deliverers sales of £30,000 a week and has a customer database of 35,000.
“The web business now has a team of five people focused on delivering it. If our online trials are anything to go by, the opportunities with the new website ought to be fantastic - particularly for stimulating business outside the UK,” says Jeremy.
International sales are small, representing just 10% of the business, but they are growing. “There is a potential for us to grow our international sales to 20% next year,” says Jeremy. “We are looking to expand in Germany, and Spain is a big opportunity for us. We’ve always had interest from Greece and Cyprus and have signed a distributor for those markets.”
In autumn 06 the brand agreed a licensing deal in Germany with home shopping giant Otto Versand, which gave it two pages of Lipsy product in the firm’s catalogues, a spot which has grown to three double pages this autumn. Jeremy says it is a way for the brand to quickly raise its profile in Germany, as it also supplies Otto’s e-commerce arm. Lipsy is now on the hunt for a European sales team. Further afield, the brand is in New Look founder Tom Singh’s 20-store Australian business Forever New, as well as having its own agent in South Africa.
The focus on getting Lipsy’s positioning right has been a full-time job. The business has worked with brand consultant The Bureau since November to come up with a new logo and identify what customers felt about and were looking for in the brand. “When we did focus groups, a lot of customers loved the product but hadn’t heard of the brand. Some remembered that they had maybe owned it when they were younger. People between the ages of 25 and 28 loved the product but didn’t identify with the brand. They also wanted to know why we didn’t do accessories or denim,” Marcelle says.
As a result, a new logo and labelling have been introduced and the product range has been expanded from about 160 pieces last year to 200 this season, alongside the launch of denim sub-brand Lipsy Loves Denim.
Marcelle, who heads a team of 12 designers, says: “Not only has the range expanded but the fabrication is more sophisticated. The product now looks much more expensive. We use a lot of embellishment and silks, but it’s still great value when consumers can buy one of our silk dresses for £50. We had always been known for our dresses and going-out gear. Now, although we are still very much about the going-out outfit, we have more denim and outerwear in the collection.
“When we put a range together we think not only about the dress and the corset, but jeans to go with it or the coat to cover it all up. I suppose we have moved from being borderline tarty to sexy. We’ve focused on making sure every piece is sexy and body conscious. Because of the brand’s retail commitment, we produce 20 to 25 new pieces every week. The 12 women in the design team are living the Lipsy life - they go out at night and want something new to wear.”
Jeremy has put together a two-person in-house PR team to the brand name-checked in magazines such as OK, Hello and Now, and pictured on the backs of party girls in the papers. Apart from random paparazzi pictures, the brand also has a sponsorship deal with Now, which runs a ‘Dress a celebrity in association with Lipsy’ page once a month. Jeremy says: “The best press we’ve had so far has been the Kate Middleton coverage. She bought one of our dresses and the picture of her wearing it went everywhere. We had thousands of people logged on to our website from all over the world.”
The brand has been quick to trade on this publicity. Every stockist has been sent four branded PoS boards, which the press team updates with images every time there is relevant coverage. The Stakols believe this is key to the brand’s customer service. Both see Lipsy as a wholesale business, with its retail arm limited to concessions in the big regional Topshops.
Marcelle says: “It is so important to get the product and brand approach right for our customers. We speak to at least six of our independent customers each week, as well as talking to Topshop. On the back of that we look at our stock and what customers have ordered and adjust the commitment weekly based on our gut feeling about what will sell. Sometimes this will mean that something an independent has ordered will not get delivered.
“Recently we had produced quite a few long dresses and customers had all bought into them. We felt the demand wasn’t going to be there, so we switched our commitment to something else. We tell our customers we are doing it and they are generally appreciative. They’d rather have something that will sell, and they trust our instincts because we are retailers too.”
The business has started to work with bigger branded young fashion chains, such as Bank and USC, and is stocked by etailer Asos.com. Whether this will disillusion its smaller independent stockists remains to be seen.
Keith McNicholl, owner of Richmond Classics in Bournemouth, has carried the brand for three seasons, but is looking to move away from it because he feels it is overdistributed. “It’s now in House of Fraser, USC and Republic in Bournemouth, and in a couple of indies in towns only two miles away. The brand has to realise that it can’t be everything to everyone.”
But the Stakols are confident they can continue to deliver for both sets of customers. Jeremy says: “Lipsy product has always been outstanding and the brand was reasonably well known, but by putting in place a management team with a clear strategy we can create a lot of value for our new shareholders.”