In a challenging economy, streetwear brands are forging back-office partnerships with an eye toward growth.
After several years of explosive growth, the streetwear business is entering a phase of natural selection. No longer can a few graphic T-shirts earn a pair of entrepreneurial kids designer credibility nor will a 100-square-foot shop establish a streetwear collector as a retail expert.
Already the market has experienced casualties on both the brand and retail sides, and many speculate that the death toll will rise throughout the year. As the economy weakens and consumers buckle down on discretionary spending in every sector, the streetwear industry is gradually learning that simply being cool doesn’t pay the bills.
But the news is not all bad.
As weaker brands are weeded out, a maturation process is taking place among those who are serious about turning their screenprinting hobbies into full-time jobs. In the last several seasons, many tiny T-shirt lines have expanded into cut-and-sew collections and significantly multiplied their retail account bases. Labels that two years ago shielded their T-shirts from prying eyes at MAGIC will this season invite mainstream retailers into custom, 400-square-foot booths.
Of course, growth does not come without a price—or at least, a helping hand. In a field that has for years prided itself on its independence, business partnerships are being forged to handle such unsexy deeds as funding, sales, manufacturing and distribution—often at the cost of the brand’s ownership.
“It used to be easy to gain recognition in this industry as long as you had good design and good marketing,” explains Aaron Levant, cofounder of the streetwear-oriented Agenda trade show. “But that wave has passed. If you don’t have good infrastructure and production, and you’re not going to ship on time, retailers don’t care about good design or good marketing. You can only go so far with independent investment.”
For brands that have built their businesses on authenticity and exclusivity, bringing in a partner—particularly one with little understanding of the intricacies of the streetwear scene—can be a daunting decision. Understanding not only the established apparel industry but also the nascent streetwear market is a difficult prerequisite.
Enter Duke Wu, a 28-year-old streetwear fan with a background in business and a pedigree in sourcing. Wu most recently made headlines when he sold the streetwear brand Artful Dodger to Jay-Z and Iconix Brand Group’s newly established Scion LLC last November—a deal that earned him and cofounder Scott Langton $15 million in cash.
“In the course of negotiating that deal, I saw a void for a company that provides back-office and logistical support,” explains Wu.
He established The Meat and Potatoes Co. to bring burgeoning brands (defined by yearly sales of $500,000 to $5 million) a portfolio of services large and small. For the right price—which, for most, means an undisclosed cut of equity—Wu’s company can assist with such tasks as clearing customs, warehousing, allocation and factoring. Thanks to his family’s occupational strengths—which include sourcing for companies as varied as Abercrombie & Fitch and Sean John—he also offers an extensive production connection. And although Wu is not there yet, he’d eventually like to take equity in showrooms and design firms, he says, to create a “completely vertical, one-stop shop. A guy could come to us with an idea and we could move it from an amorphous stage to a sales-generating business.” Clearly, the streetwear industry has found Wu’s proposals attractive. In just three months’ time, The Meat and Potatoes Co.’s roster of clients already includes the long-entrenched streetwear brand Alife; ballooning-based, fashion-friendly Hot Air; and Hawaiian-bred, surf/skate–inspired In4mation.
Todd Shimabuku, who launched In4mation six years ago as a retail shop in Honolulu, explains that he and cofounders Ryan Arakaki, Rhandy Tambio and Jun Jo always planned for a comprehensive corresponding brand. But, he says, handling back-end logistics was draining time from more valuable pursuits, like design and marketing. Shimabuku realized, “As the company grows, you have to learn how to let go of things and let other people take charge.”
When the opportunity arose to partner up with The Meat and Potatoes Co., In4mation’s founders jumped onboard. “We have an understanding between all of the partners of what is going on with streetwear and the apparel market in general,” says Shimabuku. “We feel comfortable with Duke. He understands our brand. He can feel what we’re living.”
As a result of their partnership with Wu, the In4mation crew has expanded a 20-SKU, primarily T-shirt–driven line into a 40-SKU, cut-and-sew collection. They’ve also launched a women’s line and have plans to broaden In4mation’s accessories collection. With the help of the Vanguard Group showroom, the brand has doubled its retail account base in 12 months, bringing on new partners like Active Ride Shop and Up Against The Wall—both 25-door chains—while maintaining core streetwear stores like 5@adime and Brooklyn Projects.
Meanwhile, Wu’s template has helped to eliminate the many hiccups in the streetwear business that can scare established retailers away from young companies. “Nine out of 10 streetwear brands are behind schedule—not just by a couple of weeks but by months,” he says. Educating designers on something as simple as the inner workings of foreign-factory schedules can help encourage a timelier product, he believes, and show more trustworthiness to established retailers.
The Meat and Potatoes Co. has emerged in the market at a fortuitous time, as more streetwear brands—like In4mation—become open to the concept of growth. “A lot of brands fear losing control of their baby. But you have to decide if this is a business or a hobby,” he says. “If you want to make it a hobby, that’s great. But if you want to make it a business, you can’t rely on just you and your four friends.”
For the streetwear brand that can parlay its hobby into a functioning business, there are many retail opportunities to capitalize on, despite fears of a softening economy. Core streetwear stores that have weathered the explosion of one-hit wonders are now turning back to their faithful sellers as young shoppers curb their wallets. “It’s no longer an item-based market,” says Agenda’s Levant. “Now it’s a brand-based market.”
Jerry Meng, owner of the Pasadena streetwear shop Greyone, says he’s through dealing with dozens of brands, and is “trimming down” his selection to those that “are in it for the long haul.” He explains: “Guys have to step up their game and not get trapped in the whole delusion of being a ‘streetwear brand.’ [Buyers] are looking for more cut-and-sew instead of just a screened T-shirt. Most start-up brands that don’t have the money to back them up are going to lose in the long run.” At San Diego’s Street Machine, store manager Bryan Kelly says he currently has just one brand in the store that’s independently funded. Instead of picking up new resources with questionable backing, he says, “we’re trying to go a little deeper with the ones we feel more comfortable with. “
Meanwhile, larger specialty chains and upper-tier department stores are taking notice of an increasingly savvy streetwear scene, providing new growth opportunities for enterprising brands. Bloomingdale’s has taken a leadership role in the department store sector, last month opening its new 59th Street young men’s prototype, with a specific section devoted entirely to “streetwear”—albeit using its own interpretation of the word. With labels including Stussy, Kidrobot, Penfield and MHI now in its uptown mix, Bloomingdale’s is an attractive frontier for a streetwear brand looking for respectability in a more mainstream fashion market.
“We believe in streetwear,” says Kevin Harter, Bloomingdale’s vice-president of fashion direction. “We plan on growing it and dedicating even more space to it.”
But the industry’s inevitable plagues have already followed streetwear brands to Bloomingdale’s. Harter concedes that timely deliveries have been a challenge in the newborn streetwear section.
“There’s some patience involved in nurturing young brands, so we’re trying to be as supportive as we can. We want to be first with a lot of these brands, so we believe it’s worth it,” says Harter.
The Vanguard Group’s Daniel Yadgard praises Bloomingdale’s interest in the streetwear market, but cautions young brands that respectable retailers will soon lose interest in a label that doesn’t have a strong backbone. “Product is important, but it’s equally important to have people [involved] who understand what it takes to build a business,” he says. “It’s not all about getting your T-shirt into a magazine or an A-plus door. It’s about getting your T-shirt into a magazine, then delivering to an A-plus door when you say you will, and making sure your T-shirt sells.”
Not all growth is good growth in the streetwear industry, though, and the wrong distribution partner can cause irreparable damage to a brand’s image. “When a distribution company doesn’t know how to preserve the brand’s image in the market, that’s bad luck,” says Greyone’s Meng. “Branding is everything.”
Izzy Ezrailson, co-owner of Up Against The Wall, agrees that there are “new sales pressures involved” when there are backers in the picture at a small streetwear brand. That can translate into overexposure at retail—and even over-produced goods ending up at discount outlets.
Ezrailson points to aggressive Internet retailing as a common frustration with growing brands. Not only do Web sales create heightened retail competition leading to price wars, he says, but the Internet can also sacrifice a brand’s identity if it is sold on a streetwear-saturated site. Although Ezrailson admits that e-commerce is inevitable for all retailers, he warns, “The Internet can depreciate an individual brand’s image because of the collectiveness of all of those brands.”
As Ezrailson sees it, “When you get a backer, you’re supposed to become more efficient and the price should come down.” For those brands in his store that have recently joined forces with a backer, he says, “I haven’t seen either of those things happen yet.” Duke Wu maintains that, if done correctly, distribution can expand without destroying a brand’s image. Because of In4mation’s roots in the Hawaiian skate and surf market, for example, that brand has the opportunity to add the top-level, action-sports doors to its list of accounts, according to Wu. “There are maybe only 200 great streetwear stores versus maybe 1,200 great skate or surf stores,” he says.
Of course, each brand has its own agenda, and its own idea of acceptable growth. “It depends on the people involved and what they want,” Wu notes. In4mation has a five-year plan for steady growth, in contrast to Artful Dodger’s faster-turning sale to Scion, which happened just three years after the brand was launched. But each brand’s distribution strategy is charted before Wu gets into bed with them.
“Some brands are comfortable making $35 million a year and not itching to grow beyond that,” says Wu. Other brands may not care if they end up on the bargain rack of a mid-tier department store, as long as they earn the right paycheck in return. “It’s the circle of life for brands. Success comes at a price.”
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