The Fashion Industry: Small Business Challenges #1

palmer harding, small business, fashion start ups, wholesaling

While we are talking about new fashion businesses, I thought we'd take a look at Palmer Harding's beautiful fall winter 2012 collection.

As a former owner of a small fashion business (luxury lingerie, I’ll tell you more about it someday), I understand the challenges young brands face when trying to launch their businesses. It is very, very tough, and this article by Vanessa Freidman (one of my fave bloggers) inspired me to write a few posts about establishing a fashion business. This will only be an occasional column, but if there is anything specific you’d like me to address, then message me here.

So, you should start by reading this Material World article by Vanessa Friedman that has left me gobsmacked. The article talks about a young (unnamed) designer who delivers an order to a prestigious store, knowing full well they won’t pay for the stock. Their rationale for this is that their presence in the store is like advertising and will help with exposure.

palmer harding, small business, fashion start ups, wholesaling

The insane thing is that very, very few young designers can afford to give away stock to stores, and the worst thing is that the types of retailers who could command this type of agreement are most certainly the ones who can afford to pay for stock. When I had my company, the biggest challenge was communication with retailers. First of all, 99% of the emails you send out, with your collection information, never get answered. It is commonplace that emails are simply never responded to.

palmer harding, small business, fashion start ups, wholesaling

When you finally get to meet a retailer, and they buy your collection, it is a waiting game to get paid. We waited six months once to get paid from a major French department store, then, they sent us an email telling them we owed them money. Some department stores expect you to pay supply your own sales staff (which is impossible for a small brand) and if you don’t, you need to subsidize their sales staff’s incomes.

Some stores demand a discount, simply because they are “a famous store” and therefore you are privileged to have your collection within their fancy walls. This recent news that some stores are simply not paying is shocking. These days, it is close to impossible for a small business to become seriously established without the help of a major conglomerate or other funding (how many of the “young” brands in New York or London were NOT sponsored by the CFDA or New Generation award, in some capacity? Hardly any.) So I really don’t understand how the hell they can afford to give away stock.

palmer harding, small business, fashion start ups, wholesaling

I contacted my friends at Palmer Harding to see if they’d heard of anything similar, and whether they had ever been expected to give away stock to a store. (Palmer Harding are in their second official season.) Levi Palmer got back to me on his thoughts.

“It is pretty insane [that a store wouldn’t pay for the stock], thankfully we have not come across any of these stores, though we have heard rumours concerning which ones do work this way. We request 30% deposit and receive this from most of our stockists. The stores that don’t work to this payment term we ask for 7-10 days net delivery, and thankfully have not had any issue with this so far.

With the surplus of talent that enters the fashion industry, it is no wonder that certain stores feel they can be more and more demanding. Trends change daily and designers pop up around every corner. There is always someone waiting/wanting to get that gold star stockist at any cost. I think for some brands whose product may be less based in consumer reality and more so in hype/ego, giving stock to a directional stockist may prove to be useful, but this is purely because the final sell through is probably less than impressive. The stores involved may want the hype surrounding a brand to keep their cool points and help shift lower priced and more commercially viable goods, but at the prices some young labels demand for their designs it is insane for any buyer to risk that loss. This does not mean that I agree with it. However I think if anyone is to blame it must be the designer for lacking the confidence in his/her product and agreeing to those terms. There are plenty of other well-known stores who will work within the terms of normal commerce.”

palmer harding, small business, fashion start ups, wholesaling

It was a relief to hear that this has not become commonplace behaviour for stores, however, Palmer brings up some interesting points. First of all, the sell through of the young labels may be low, which means the store is making little or no money on those pieces (if they have to sell them at a discount.) Secondly, the fact that many young brands have high price points (that’s is normal when you don’t have large production quantities) which may mean their pieces are difficult to sell. These are also challenges that small or new fashion businesses face, and probably a topic for another day.

Anyway, this is sad and scary, even if it is only happening in a few places.

  • Erin Harder

    Interesting! It never ceases to amaze me how the fashion industry refuses to comply with normal business practices – it is indeed in another dimension from the rest of us. 

  • Anonymous

    This article is very interesting. I find your blog very informative, particularly as a business person that is not in the fashion business. You can find analogous situations in nearly every industry and it’s a real frustration for people who are in business for themselves because they want to follow their passions. The notion of normal business practices is just a notion, or perhaps ideal. Its so important that a small business owner have a basic set of skills and good advice whether their product is clothing, food or machine parts.