In early November, the Council of Fashion Designers of America and the US edition of the most influential fashion publication in the world will announce the winner of the latest CFDA/Vogue Fashion Fund (CVFF), a competition for young designers aiming to boost their businesses. Winning the CVFF brings accolades, a financial award (now $400,000), guaranteed press in Vogue, industry mentorship and new business opportunities, from runway show sponsorships to retailer orders. This is only one of several Vogue-endorsed prizes around the world, modelled on CVFF, including offshoots in the UK and India, as well many other similar competitions underwritten by Swarovski, Woolmark and LVMH.
But do fashion industry competitions like this truly benefit designers — and the industry — over the long term? Of the more than 120 brands that have competed for the CVFF’s top prize since 2004 — some more than once — about 80 are still in operation. Not a bad ratio, considering the challenges that come with running a fashion brand. However, many of those still up-and-running continue to conduct business on a shoe string, with fewer than five generating more than $100 million in revenue a year.
The organisers of such prizes will argue that like restaurants, technology startups or other similarly risky ventures, most fashion businesses are destined to fail. The track record for keeping brands that participate in these competitions afloat — especially those who win — is impressive. But what it comes down to is that none of these brands, even the most successful, have broken out the way that was once expected. The uneven results of such contests are just one indicator that something is awry in the fashion system, as the who, what, where, why and how of consumer behaviour is radically transformed.
The Way It Was
In the 1990s, with the magazine industry’s pre-internet influence on the consumer still palpable and the rise of the luxury conglomerate model underway, the pathway to success for a high-end fashion brand went something like this: a talented young designer, who likely received notable accolades at his or her respective university, would launch a label to critical acclaim — or at least industry buzz. That designer would then be scouted by one of the old European houses, many of which were in the midst of resurrection backed by the likes of the GucciGroup (then run by Tom Ford and Domenico De Sole) or LVMH.
In the case of LVMH, the model was to fund the designer’s own brand — sometimes formally, sometimes not — in hopes that both businesses would develop. (Examples include: John Galliano at Christian Dior, Alexander McQueen at Givenchy, Marc Jacobs at Louis Vuittion, Narciso Rodriguez at Loewe, and Michael Kors at Céline.) At the Gucci Group, which eventually became a part of conglomerate PPR, now known as Kering, Tom Ford led Yves Saint Laurent and Gucci, while Tomas Maier was put in charge of Bottega Veneta alongside his own brand. Both Stella McCartney and Alexander McQueen’s namesake labels were also a part of the group.
In the following decade, nearly all of these brands surpassed the $100 million sales mark, and a few of them hit $1 billion. Power brands independent of the luxury groups, including Ralph Lauren and Tommy Hilfiger, did the same. The era culminated with the 2011 public floatation of Michael Kors, who left Céline and LVMH in 2004, only to be backed by billionaires Silas Chou and Lawrence Stroll. When his namesake company went public, Kors became an on-paper billionaire.
Where Things Went Wrong
While there are plenty of examples of flaws in the old model, it worked exceptionally well for some time. But the internet changed everything, fundamentally rewiring the way consumers discover fashion and giving birth to a new generation of digital-first brands. The trauma of the Great Recession, the decline of the department store, the rise of fast fashion and the growth of the experience economy all putting tremendous pressure on sales of traditional fashion goods. And despite the incredible boom in luxury spending coming from new wealth creation in China, today there are fewer name brands emerging from the traditional fashion system. Labels including Alexander Wang, Rag & Bone and Proenza Schouler have achieved more success than most — with the first two surpassing the $100 million mark in a relatively short time — but no one is immune to the disruption and it’s becoming increasingly difficult to grow.
That’s because the way in which fashion is sold has fragmented, making it more and more difficult for one brand to own a major slice of the market. Wholesale retail, while still viewed as an important marketing platform, continues to shrink, with no end of contraction in sight. Relying on payments from wholesale partners also restricts cash flow, as designers depend on retailers paying on time and paying in full. Onerous terms often result in designers having to pay back retailers when product is discounted.
However, for brands generating a certain amount of revenue and employing a certain number of people, selling 100 percent direct-to-consumer is a near-impossible feat. It costs money to acquire customers and manufacture clothing. Without the line of credit financial factors provide for wholesaling goods — or a significant cash infusion from an outside investor with patience — it’s hard to implement such a strategy.
What’s more, the business of ready-to-wear, selling expensive clothes for profit, has become increasingly challenged, in no small part thanks to the rise of fast fashion, which offers fresh styles in reasonable, if not exceptional, quality. “Ready-to-wear is becoming an increasingly unprofitable niche in the broader luxury goods market, driven by a series of factors,” BNP Exane Paribas analyst Luca Solca wrote in June 2017. “For one, fashion has been radically democratised. Shoppers now have access to the latest styles at a wide range of price points… Luxury ready-to-wear rarely matches the brand recognition factor of accessories and so falls short as a marker of status, which is so important to consumers.”
“It’s hard in terms of infrastructure to be able to scale it,” DVF chief creative officer Jonathan Saunders, who suspended his namesake collection in December 2015 after 12 years in business, told BoF in a September 2017 interview. Saunders managed an amiable break away from his business partner, Eiesha Bharti Pasricha, and retains the ownership of his name. “There’s a timelessness to [accessories], an aspirational quality where a customer who doesn’t necessarily buy into the ready-to-wear would aspire to buy into that brand. You’ll see a handbag with embellishment on a girl in a white T-shirt and jeans, you know? That can offer a huge reach but scaling is hard.”
And sometimes, even all the money in the world cannot guarantee success. When Bright Fame Fashion, the Hong Kong-based investment vehicle led by Vivian Chou, daughter of billionaire mogul Silas Chou, announced the relaunch of American-label Thakoon (led by designer Thakoon Panichgul) as a direct-to-consumer brand in 2016, the younger Chou posited the company would be willing do whatever it takes to make Thakoon a success. “Just know that we are focusing our efforts in trying to build the next best American designer brand,” she told BoF in July 2016. “We have every intention of supporting the business as much as we need to make that happen.”
The elder Chou’s track record — which included transforming both Tommy Hilfiger and Michael Kors into multi-billion-dollar brands — indicated that would be the case. But while Hilfiger used music as a way into popular culture and Kors used television, Thakoon failed to make the most of digital culture’s vast resources, from email marketing to Instagram Stories, as a way to accelerate the label’s growth. Known as a designer brand, the product was heavily merchandised and targeted to an audience that was not familiar with it; the results were lacklustre.
In turn, the Thakoon business was put on hold in March 2017, less than a year into production. "In the last 10 years, Silas Chou has been building a big investment portfolio, including fashion and tech sectors," a spokesperson said in a statement at the time. "The Thakoon brand is one of the them. However, we have recognised that the business model is ahead of the current retail environment. Therefore, we are taking a pause and an eventual restructure."
With financial challenges often come mental, emotional and creative deterioration, frequently brought on by the system’s six-plus-collection-a-year cadence. “One of the most dangerous things I think is happening to fashion is the pre-collection,” designer Tom Ford told BoF in a September 2017 interview. “Pre-collections are important, they’re a huge part of your sales, but they used to be the time to make a pair of pants that don’t mean anything on the runway while holding the essence of your brand. Now, pre-collections are geared toward the press and they’ve become exaggerated, amped up clothes again. So you’re now going to almost have to do a pre-collection to the pre-collection.”
And the entire idea of a collection — a set of clothes that tells a one-off story — is increasingly irrelevant. Instead, what feels modern is product drops, popularised (and proven) by streetwear brands but relevant across categories.
This high-pressure, ego-fuelled culture of the fashion industry — which tends to idolise its tortured creatives — also feeds burnout and substance abuse. (There are dozens of examples of this, the most highly publicised being John Galliano’s rise, and subsequent fall, at Christian Dior.) “That’s something I think people don’t talk about; the alcohol and drugs in the fashion industry,” said Ford, who has been sober for eight years. “In the successful brands, it’s very prevalent and you can start to think it’s normal, that it’s a normal way to function.”
There is also the cultural pressure to tick off certain boxes: to stage fashion shows in some format or another, advertise in glossy magazines and sell to high-profile retailers that often do not pay their bills. Designers who abstain from these activities may be admired for their prudency, but they are certainly not viewed as being part of the establishment.
What Can Be Done?
Given the headwinds facing fashion designers, it’s perhaps no surprise, then, that the most notable successes of the era have followed a decidedly different path than the establishment has set. For instance, Mansur Gavriel, a line of minimalist, mid-priced handbags, became a cultish hit first by establishing a single hero product out of the gate — a drawstring bucket bag slicked with a brightly coloured interior — and then by building an Instagram following that not only renders thousands of likes on each post, but also engages consumers rabid for its products in the comments. While the New York-based label has used wholesale as a marketing tool and a driver of revenue, it has been careful about its distribution even as it has expanded into footwear and apparel.
While Mansur Gavriel has been embraced by the fashion establishment, winning the CFDA Award for Accessories Designer of the Year in both 2015 and 2016, designers Rachel Mansur and Floriana Gavriel have been reticent to conform to the standards set by the industry. “From the beginning of the brand, we had a vision for many different products, but we wanted to take our time to develop and get it right so we could get the product and the ideas where they needed to be,” Mansur told BoF in a September 2017 interview. “We have been developing ready-to-wear for a long time, and we decided to launch it now because we feel we are ready.”
To be sure, most recent “fashion” success stories are not fashion in the traditional sense. Consider something like Untuckit, a venture-backed line of shirts that are simply shorter in torso length than the traditional button up. Lacking in creativity or even aesthetic appeal, the brand, which has raised $30 million since its founding in 2010 with backing from prominent venture-capital firms including Kleiner Perkins Caufield & Byers, is now valued at $200 million. While the company does not disclose annual revenue, it is profitable with sales doubling year-over-year and 17 physical stores open across the US.
“[The establishment] doesn’t have to get it,” argues Lawrence Lenihan, an investor and co-chief executive of the new-wave fashion company Resonance. “Successful brands are really specific and really meaningful.”
But for designers and brands built first and foremost on creativity, the new model still applies. Untuckit didn’t need GQ or Esquire’s seal of approval to guarantee its success, in part because it is not aiming to appeal to the customer who reads those publications. However, Mansur Gavriel, a favourite among aesthetes, also chose not to chase down a feature in American Vogue, once a major milestone for a young brand looking to make its mark.
Instead, Mansur Gavriel, Untuckit and brands like basics label Everlane and atheticwear line Outdoor Voices chose another path. One key element is community building, which often comes before product. Consider Glossier, which analysed reader feedback from chief executive Emily Weiss’ beauty blog, Into the Gloss, while developing its first range. Contemporary label Anine Bing sprung out of the eponymous founder’s popularity on Instagram. Her personal style, admired by nearly half-a-million followers, served as the starting point for her clothing collection, which now generates annual revenue in the low double-digit millions.
Each of them also launched with one can’t-beat hero product (for Everlane, a T-shirt; for Outdoor Voices, a legging), and communicated directly with the consumer through email, social media and some sort of physical experience, whether that be a pop-up shop, studio hours or one-off events. Once a one-to-one relationship with a customer was established, they then expanded the product offering and, if the capital was there, ventured into permanent physical retail.
And yet, the fashion industry — from educators to retailers — continues to encourage designers to develop broad seasonal concepts six-to-nine months before they hit stores and remain at an arm’s length from the consumer through wholesale partnerships and traditional press. "These designers have been setup to fail," Lenihan says. "It's everything from education to mentorship. The rules of the game just don’t work."
These designers have been set up to fail. It's everything from education to mentorship. The rules of the game just don’t work.
Two independent fashion labels that have managed to do things differently are Off-White and Vetements, the latter of which generates revenues well into the eight figures. Neither brand has a big direct business, but they sell product-by-product rather than concept-by-concept. Even as the establishment has embraced them, they remain more driven by what the consumer wants than what the industry says it wants.
To be sure, the industry recognises that the world has changed; now it must decide whether it wants to change with it. For emerging labels with little-to-no-backing, it’s sometimes impossible to go against the grain. However, support is emerging. Consider Lenihan’s Resonance, which currently manages five brands with plans to sign on 30 by 2019 and 300 over the next decade. Resonance offers designers on-demand manufacturing capabilities (it owns its own factory), studio space, marketing, product and design budgets in exchange for 50 percent ownership of the company. If the partnership is not fruitful, Resonance will cut ties and let the designer leave with his or her intellectual property rights in place.
While the company has been up and running for just over a year, Lenihan says that some of his brands have already seen good success, most notably designer Gaby Basora’s Tucker, a line that first emerged in the mid-aughts, known then for its distinctive floral blouses. In 2011, a fire at the Tucker studio and offices put her out of business. (Like many designers, Basora’s cash flow was not optimised and the damages rendered her bankrupt.) She was only able to relaunch with the support of Resonance. Lenihan says Tucker will log more than seven figures in 2017 and is set to double in size next year. “Some of our brands will be $10 million brands, others, we hope, will be $100 million,” he says. “Our view is that brands should be as big as they should be.”
Time will prove or disprove Lenihan’s approach. More broadly, though, it’s certain that designers, and the industry that buoys them, must have different expectations of what equals a successful brand. While support systems for designers from CVFF or the LVMH Prize are well intentioned, they are supporting an outdated system. In order to sustain and develop businesses — to once again birth top brands that captivate the consumer — it’s time to audit the approach.
Disclosure: Silas Chou's Novel TMT is part of a group of investors that holds a minority stake in The Business of Fashion. All investors have signed documentation guaranteeing BoF’s complete editorial independence.