Part Four: Realities of Building a Fashion Brand
This article is part four of a five part series entitled “Building A Successful and Authentic Brand.”
New Technologies, Easy Access
With the advent of online retailing, and the significant advancement of user-based tools now available, setting up an online store has never been so easy. Companies like Squarespace and Shopify have made it possible for a new brand to be up and running in one to two weeks, with sleek websites. Ten years ago, companies paid millions of dollars to develop the same platforms! What’s more, social media has made it possible to reach and communicate with customers globally, that was formerly impossible without the help of marketing and PR agencies. For a new brand, this access to market is exciting, and allows for new voices to be heard and recognized in a short amount of time.
So many options and constant change
And yet, this very access, and speed, has led to a glut of options in the marketplace. There are now more brands and products for customers to choose from than ever before. The effects have been spectacular, with storied department stores being unable to compete with new, more agile upstarts like Warby Parker and Nasty Gal, and therefore forced to close their doors, often in bankruptcy. Other technological advances have facilitated speed to market of goods, enabling brands like H&M and Zara to replenish their stores daily, in direct contrast to the traditional model of monthly or seasonal deliveries. It’s possible to visit Uniqlo at the beginning of the month and the end of the month and see completely different products! All of these advances have created a cutthroat atmosphere, as brands compete for attention.
The costs of building a brand
Most of the bad news has focused on big companies closing their doors, however this retail disruption has also affected smaller companies. New fashion brands often close their doors in one to three years, because they lack the capital necessary to grow their business and differentiate from their competition. With a major shift away from wholesale, wherein new brands would rely on the financial support and brand affinity from well-known department stores like Nordstrom or Macy’s, to a direct-to-consumer model, brands must now pay their own way to play. And the cost of creating a new brand and then getting customer awareness in a saturated market is high.
Tools such as social media have become increasingly more difficult as vehicles for gaining brand traction from a sales perspective. Too many brands have learned that “a million likes” doesn’t translate into even half of that in sales. And by engaging would-be customers on social media, brands are effectively keeping them from engaging fully on the online store site, where actual shopping happens (very different from the scroll-tap, scroll-tap motion of being on Instagram). Furthermore, developing an audience through Search Engine Optimization (SEO) and Search Engine Marketing (SEM) has become extraordinarily expensive, forcing companies to pay for their own brand names, and those of their competitors to gain market share and drive customers to their sites. In a sea of trillions of websites in the US alone, this is a daunting task.
Additionally, while setting up a online shop is fairly cheap today, selling online is very expensive. With so many options, brands are lucky to have customers who are “sticky” enough to actually shop on one website for a minute or longer, rather than going back to Google to hone their search.
A online store also requires a lot of created content to be successful. For example, it’s standard to have four to five images for every product sold online. Typical costs for images range from $25-$175 per image, and that doesn’t always include the costs of the models or studio rentals. Editorial images, and branded content is also necessary to communicate brand values on a company’s home and category pages. It’s required to have copy that describes each product in details, in line with SEO strategy. Online customer chat services are becoming the norm, and are expected to be open 24/7. What’s more, returns of goods sold online is very high, adding to overall operational costs, including restocking, reselling and tracking issues. All of these costs add up, and force new brands to work with small profit margins.
Finally, selling direct-to-consumer (business to consumer, B2C), requires different strategies around inventory, because all the risk is held by the brand. In a B2C operation, there is no other intermediary (ie, buyer at a department store) purchasing inventory in volume, and helping to mitigate operational risk, that is typical in a wholesale (B2B) operation. These brands also miss out on the expertise experienced buyers can provide that help eliminate bad purchasing decisions, including overbuys and underbuys. And when a company sells direct to consumer, they are reliant on day-to-day sales of their products to operate their business, rather than quarterly payments. B2C brands also do not have the same access to bank loans or factors, such as Hildun or Rosenthal & Rosenthal, who essentially provide loans on inventory that hasn’t yet sold in store, effectively giving brands the cash they need to manufacture upcoming seasons.
In many ways, this trend towards direct-to-consumer retailing has forced brands into rethinking how they develop and sell products altogether. Which begs the question, is creating a brand even worth it?!
—Joshua Williams, Chief Branding Officer, QueerCut
Part Five of this series explores how companies are finding success in a disruptive retail climate.