As a relative newcomer to the fashion business – this week is the first anniversary of my joining Drapers – I’m constantly finding out new and fascinating things about the trade and its people.
This week I certainly added to my knowledge during a meeting with one of the industry’s biggest names in branded fashion, who explained to me the pitfalls of selling a fashion brand into some of the larger multiples using a fascinating analogy with the US market.
The US multiples are so dominant that they can make or break brands with one order. Starting off over there, he said, was OK as they usually began with ‘metropolitan’ stores in big cities, where awareness of UK brands was higher and sell-through good. Orders are placed almost on a sale or return basis, with the multiple asking for cash at the end of the season to cover the promotion of any unsold stock.
But if you did well in that scenario, they’d up their order volume substantially and roll out the brand to all the small-town stores where sell-through was likely to be much less because the customers had never heard of the brand. By this stage almost all the brand’s US volume could be based on that one huge order … but if sell-through dropped the brand could be crippled by the promotional payout. My contact described the US multiples as ruthless, and the lure of their huge orders as being “almost like a drug”.
The UK is slightly less cut-throat overall but some of the issues ring true here. Certainly the rash of promotions that is an almost permanent fixture on our high streets must have led multiple buyers to put pressure on brands to offer larger discounts on bulk orders.
Do brands exit and lose volume, cut corners on quality to make up the shortfall or make their brand more premium with higher retail prices? We can see examples of all three.