By  on December 31, 2008

LOS ANGELES — Launching a fashion line has never been harder. But that’s not stopping a number of California entrepreneurs from trying to make their mark in the contemporary, premium denim and young designer categories.

The obstacles are daunting. In the battered Golden State, retailers — ranging from discount department store Mervyns to high-end boutiques such as Presse and Tracey Ross — are shutting down, and other stores are canceling orders.

“Just to start out now, that’s not an enticing idea,” said John Ward, an apparel industry veteran who cofounded knits brand Three Dots before launching the contemporary label Maggie Ward this year. “Retailers are afraid. Wholesalers are afraid of retailers. Credit is impossible to get. There are huge structural challenges that didn’t exist before.”

In the past year, when opportunities for financing evaporated as the global fiscal crisis ballooned, entrepreneurs scrambled for cash. While some maxed out their credit cards, others relied on contributions from family and friends. Young designers who were able to procure funds from private investors had to prove they already paid their dues by toiling at big-name brands. Some new labels are offshoots of existing brands, which can share funding and resources such as fabrics with the ancillary businesses.

Costs for running an apparel business continue to rise: typically, $10,000 to exhibit in a trade show, $9,000 for a look book to send to retailers and journalists and thousands more to make clothing samples.

Even established companies that have secured a firm footing in the market must adapt to the increasingly difficult economy. Contemporary brands Modern Amusement and Mike & Chris recently inked deals with licensees to handle production, financing, shipping and other tasks necessary for running an apparel business while they focus on design.

Other brands are playing it safe. Hudson Jeans, which more than doubled its sales this year from $33 million in 2007, pulled the plug on its moderately priced jeans label City of Others after only one season. Despite demand for well-designed jeans retailing for less than $100, Hudson didn’t want to tie up its cash flow in building a new brand. Instead, the City of Commerce, Calif.-based company plans to beef up its children’s and men’s lines in order to grow sales by another 30 percent next year.

“For a new business, there’s a learning curve,” said Peter Kim, president and chief executive officer of Hudson Jeans. “It takes a while. [With City of Others] the price was right, the branding was right, the image was right. The timing wasn’t right.”

On the other hand, the fashion industry thrives on change, whether it be different palettes, shorter hemlines or the latest “It” bag. No matter how difficult business is, emerging lines hope to appeal to consumers yearning for newness.

“Even though the economy is bad, going out there and doing the research and everything, I saw that people are still buying clothes,” said Octavio Carlin, who is supplementing his bridal and eveningwear business with a lower-priced sportswear line called Carlin by Octavio Carlin. Retailing for between $60 and $300, the secondary line also marks Carlin’s return to men’s wear after he closed his streetwear line, Naqada, three years ago.

“Because of my experience with Naqada and what I have, it was not a big investment for me to do [Carlin by Octavio Carlin],” Carlin said. “I had materials left over from Octavio Carlin. So my buying was very minimal.”

Jasmin Shokrian is another designer appealing to budget-conscious customers. With Draft No. 17, the first in a series of capsule collections that will be modified every year, she offers approximately 50 variations of the slipdress, cut out of silk and cotton poplin and priced primarily between $150 and $230 at wholesale. In the following year, she will switch to a different concept, such as trousers, perhaps. What will remain constant is the price, which will cost less than what Shokrian charges in her namesake flagship line.

“I want to make something more accessible,” Shokrian said, as she played with the different ways a loose shift can be worn on a model at her airy studio in West Hollywood. “Women are so busy now. You don’t want something fussy.”

Foreign markets also offer opportunities for new lines. Cameron Hawaii, the young contemporary line launching for spring by Hawaiian Island Creations, targets Japan for 80 percent of sales in the first season. Among the Japanese retailers that ordered the bat-wing T-shirts, pleated boardshorts and other pieces wholesaling for between $14 and $26 are Free’s Shop, Mitsukoshi and Isetan. In the U.S., Cameron Hawaii will sell to Planet Blue.

“Japan is always the purveyor of what is cool and new,” said Mike Clegern, Cameron Hawaii’s creative director. “Here [in the U.S.] we are picking and choosing. We’re being careful whom we’re selling to.”

Amber Sakai follows a similar strategy for her eco-friendly line of bodysuits, tops and dresses accentuated with French lever lace. Making her debut in the U.S. at Fred Segal Flair and Post 26, Sakai sets her sights on the Middle East for future sales of her line, which retails from $120 to $450.

“Their economy is strong,” Sakai said of the Middle Eastern market. “They are interested in American designers. They are looking for a little more cutting edge.”

Certainly being a small company yields some advantages in a slowing economy.

“There are opportunities because the big brands face contractions,” said Jeremy Lew, a partner at Indigo Group USA, the Gardena, Calif.-based denim manufacturer that helped launch jeans labels including True Religion, Paige Premium Denim and the latest “It” brand Current/Elliott. “It’s almost easier [in this economy] for a company that doesn’t have much business yet than a company that has business and is losing sales.”

Entrepreneurs also can take advantage of grants and tax breaks. For example, Casey Larkin, who designs the eco-friendly contemporary brand Mr. Larkin in San Francisco, signed up for grants aiding women-owned companies and received a tax break for running a “green” business. While she requested that her retailers pay a 30 percent deposit for all orders, she also tried to save money by reusing patterns for styles updated in different fabrics for subsequent seasons. Her debut collection for spring will sell in 15 stores, including H Lorenzo in Los Angeles.

“You really have to exhaust every option that you can in this economy,” she said.

The bad economy also turns the tables for start-ups that previously received no attention from factories.

“All these factories that wouldn’t work with us two years ago will make 40 or 175 pieces, down from minimums of 500,” said Mitch Moseley, ceo of Endovanera, a Los Angeles-based men’s line that is translating its Victorian-inflected aesthetics for the women’s market for spring.

Endovanera focuses on details such as hand-sewn buttons and delicate lace panels stitched in lieu of a back seam on a cotton tweed tuxedo jacket. Women’s wholesale prices run from $35 for knit Ts to $250 for jackets. Factories might have been unwilling to do the time-intensive work in the past, but not anymore.

“They absolutely need the work,” Moseley said. “You have manufacturers go out of business all the time right now.”

For examples on how to launch a successful business in a difficult climate, entrepreneurs can turn to contemporary brands Vince and Trovata, which both got their start soon after 9/11. Vince, now owned by Kellwood Co., has grown into an $80 million purveyor of luxury basics sold at better retailers such as Barneys Co-op, Selfridges, Bloomingdale’s and Nordstrom, as well as in its own growing roster of freestanding stores. Trovata not only landed its inaugural collection of preppy-surf clothes in Barneys New York, Ron Herman and American Rag Cie, but also scooped up the CFDA/Vogue Fashion Fund and the Swarovski’s Perry Ellis Award for Menswear.

“Launching a business when the economy is down is a great opportunity,” said Trovata creative director John Whitledge, who is the sole remaining member of the four co-founders of the Newport Beach, Calif.-based label. “It forces you to think things through, and your products have to stand out. You have to have a point of view. You have to be smart with money. A lack of resources spurs innovation. When things are great, people are lazy.”

And even in a recession, retailers remain constantly on the lookout for new brands.

Jeannie Lee, owner of Satine in Los Angeles, takes chances on new labels because her customers expect her to be at the forefront of fashion. In fact, companies that have been in business for less than three years make up 20 percent of her boutique’s selection, which also includes style stalwarts such as Azzedine Alaïa and Lanvin. Among her recent finds are Kimberly Ovitz’s louche jersey knits washed in an austere black-and-white palette. Having interned at Chanel and J. Crew and designed for Imitation of Christ, YaYa and 12th Street by Cynthia Vincent, Ovitz, 25, is the daughter of famed Hollywood mogul Michael Ovitz.

“I like young talent,” Lee said. “It’s really important for a multibrand store to incorporate that element.”

The one piece of advice Lee gives to all new designers is: “Make product with a perceived value that is higher than the actual cost,” she said.

Even trend-savvy Barneys Co-op emphasizes the concept of value with its vendors. “They need to think about a price point certainly in this economy,” said Terence Bogan, vice president of women’s for Barneys Co-op in New York.

But price is only part of the formula for success. “For us, in terms of buying a brand, it has to have an integrity,” Bogan said. “It has to have something behind the brand and not somebody throwing a lot of [stockkeeping units] together and calling it a collection. It has to have a thought process and have a meaning.”

John Ward learned that the hard way with his contemporary brand Maggie Ward. For the inaugural collection that launched last spring, Ward offered serious sportswear with retail prices starting around $160.

“It was very difficult to get anybody’s attention,” Ward recalled.

In an about-face for the second season, Ward cut the prices by half, to between $80 and $200, and reconfigured the line to revolve around variations of sweats — cut out of silk charmeuse, sanded silk and artisanal Japanese fabric — with elastic waistbands and drawstrings at the ankles. Investing the money he made from selling his share of Three Dots four years ago, he built his own factory in Los Angeles, where 60 workers, including patternmakers, technical designers and sewers, fulfill small orders on demand for retailers. With the new focus, Maggie Ward will begin shipping in January to retailers such as Intermix, Fred Segal Couture and H Lorenzo.

“By far the biggest challenge is to really find a niche that is valid and new and identifiable,” Ward said. “If you survive this horrible time, you’ll be well positioned to build a solid, great company.”

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