NEW YORK — They’ve got a name, they’re in the right stores and they’ve been in business for several years. Now what?
This story first appeared in the February 11, 2003 issue of WWD. Subscribe Today.
While those feats are commendable and filter out the strong fashion firms from the weak, there are handfuls of ready-to-wear firms with annual volumes between $1 million and $3 million wondering how to take their business to the next level. And perhaps more important, determining what their next level is.
For most firms though, the struggle lies somewhere between setting aside enough cash to add a division, building brand recognition to facilitate licenses and fragrance deals or increasing overall volume in hopes of attracting a backer.
Designers said they’re often in a bind, since they can only grow one small step at a time, which normally means hiring one of the following: a sales director to maximize volume, a public relations figure to build brand recognition or a production manager to streamline logistics. They can also use that little extra cash — if there is any, they said — and put it back into the business for better fabrics, a fashion show or a small ad campaign.
“If you’re going to expand to a big level then you have to do business with department stores,” said Carmen Marc Valvo’s president Christian Knaust. “For a small company to do that, it’s extremely difficult because of their demands.”
While today Carmen Marc Valvo is a 14-year-old company with an estimated volume of $40 million to $50 million, Knaust said the ground rules for building a design business haven’t changed that much. He said it takes having an excellent product that stands out in the market and the ability to ship it on time.
“It’s a good question and I ask myself that all the time,” said Marc Bouwer president Paul Margolin. “Marc and I constantly discuss what our next level is. Obviously, the next level has to be somewhat mass, but that’s not what we do.”
Increasing the number of doors at stores such as Saks Fifth Avenue and Neiman Marcus would be the most logical way to increase business — it currently represents about 35 percent of sales — but that quickly becomes a game of floor space, chargebacks and guaranteed margins, Margolin said. It’s enough to make any small designer crazy — or broke. Plus it means hiring several more people with cash the company doesn’t have, he added.
So the two came to the conclusion that their seven-year-old business is first and foremost a design house, with creativity the main focus. Working one-on-one with celebrities and private clients has proven to be a rewarding experience and allows Bouwer to stay what he considers a designer versus a dress manufacturer.
Also, growing the business at retail would mean outsourcing production, which is currently handled at the firm’s two workrooms on 20th street in Manhattan. Margolin acknowledged there is a ceiling on how much volume a small dress designer can do before finding investors.
“It’s hard to say, but a $10 million cap would be OK,” said Margolin.
Similarly, volume in the $5 million to $10 million range is what dress designer Kathlin Argiro said she’s looking to achieve in the next five years.
Hiring a sales director was the first step to achieve this goal for the designer — sales was previously handled by her sister Megan, who remains president of the company. Since bringing on sales director May Liu-Yee in April, spring sales doubled over last year.
Argiro said enlisting in a multiline showroom crossed her mind, but the one-of-many image wasn’t what she wanted. Her next hire would be a production manager, since it’s the most difficult and time consuming part of a designer business, she said.
“Between my sister and I, we produce thousands of dresses,” said Argiro. “It’s easy to make a pretty sample, but not everybody can deliver a pretty dress on time and I’m proud of my record for not being late.”
Since several of Argiro’s dresses are worn by bridesmaids each season, a bridal licensing deal would make the most sense in the future, she said.
Coordinating production is also designer David Rodriguez’s biggest challenge, so owning his own factory would be his ideal situation. Currently, the different parts of production are contracted out, such as grading and sewing.
“Cutting out the middle man would be fantastic,” said Rodriguez, who’s business is entering its sixth year. “But to do that in New York is probably suicide. It would be great if someone offered a more vertical package with the infrastructure to do production fittings, patterns, marking, grading, cutting and sewing under one roof to avoid the logistics problem.”
Rodriguez said he’s looked into production overseas, where this type of set-up is more common in countries like Italy, but the cost of producing abroad makes his price point too high, he said. International distribution though is a goal for the future, as is the launch of a small bridal collection expected for spring 2004.
The bridal area is a logical step for many ready-to-wear designers, since it’s such a natural extension of eveningwear. But the reverse phenomenon goes for bridal designers, such as Los Angeles-based Monique Lhuillier, who’s two-and-a-half-year-old eveningwear collection is having its first runway show Friday at Bryant Park.
While Lhuillier established her name six years ago in the bridal market, raising the profile of her rtw is a top priority. In the same vein, the 30-year-old designer will also show her eveningwear collection during Los Angeles Fashion Week, according to Michael Atchison, sales director.
Atchison also said the company has private backers, so the next step is really about building the brand name by doing more trunk shows and getting involved in charity events that potential customers are associated with.
“Last year we did about 40 trunk shows from September to December and that increased business by about 25 to 30 percent,” said Atchison. “I think we could easily get to $10 million in the next five years.”
Lhuillier’s eveningwear sells at about 14 doors at Neiman’s, Saks and other specialty retailers. The line runs around $400 to $2,000 retail.
“We perfected the fit, quality and production before we grew it,” said Atchison. “Now we’re ready to rock ’n’ roll. Some people come out with a big splash and they get a lot of publicity before they have a perfected product. Monique and her husband have done it the right way by working out all the kinks and building on a strong foundation.”