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The Cost Of Starting Out

New designers find themselves inundated with a slew of complicated issues, from the logistics of staging a show to meeting the demands of finicky retailers to sourcing appropriate fabrics. It all makes staying in business that much harder — and...

New designers find themselves inundated with a slew of complicated issues, from the logistics of staging a show to meeting the demands of finicky retailers to sourcing appropriate fabrics. It all makes staying in business that much harder — and ever more expensive.

Any designer starting out today quickly learns that fashion is a business of numbers, not only of the 24/7 variety, but also the kind with six and even seven figures.

As stores look to differentiate themselves with hot designers and publications compete to be the first to discover them, the climate has suddenly warmed up to new brands, making overnight stars out of designers who have relatively little experience, and inspiring dozens more to attempt to replicate that instant success.

But it’s not as easy as it looks, and it’s a lot more expensive. An informal survey of several of the brightest designers to establish businesses in the past few years indicates they spent a staggering amount of money in start-up costs alone — averaging an annual cost of $250,000 to create, show, promote and sell their collection, not to mention actually making and distributing the clothes. That means designers with sales of $1 million a year or more are barely scraping by. While the market might be hot for new designers, that hasn’t exactly made recouping that investment any easier, considering much of their expenses comes from unexpected places.

The logistics of staging a fashion show and coordinating interview requests typically requires the services of an outside public relations firm; making delivery deadlines can dramatically increase shipping costs and the actual production of orders, once they start coming in, can hold untold costs if the slightest seam goes wrong. Despite the demand, independent designers said they are fighting an uphill battle to make ends meet, often turning to sponsorship, their friends and families and their own creative resources just to get their final products in a store.

“If you want to do it right and be recognized at a certain level, it can cost hundreds of thousands of dollars,” said Alice Roi, who started her signature label in 1999. A New York City native who grew up in the Gramercy Park neighborhood, Roi, age 27, started out as a fashion intern at Elle and then gradually started her own collection, eventually building it into a business with an annual volume of around $1 million and three full-time employees.

This story first appeared in the February 7, 2003 issue of WWD.  Subscribe Today.

Many others have started out like Roi, designing a hit runway collection that draws a lot of attention, then finding themselves forced to adapt that line to meet the demands of retailers by using less-expensive production and fabrics. Roi’s collection ended up hanging with contemporary labels like Theory, and the sell-throughs weren’t what she expected, but were still strong enough to help build her reputation to a point that she is now able to redirect the collection for fall with much higher standards for fabric and production, better quality and, of course, higher costs. Her wholesale prices now range from $200 to $800 for an evening look.

Having traveled to Première Vision in Paris, Roi’s use of more high-end fabrics has forced her to approach design in a different and more disciplined way. “How can you cut into duchesse satin that costs $90 a yard?” she said. This is the first season Roi has worked with muslins, estimating that fabrics alone account for 30 percent of her costs for the season.

Even more expensive for small designers is sourcing quality production, particularly in New York, where few contractors will accept orders for small quantities of a style. “You have to convince them that this could turn into a big run,” Roi said. “The whole thing is much more business-oriented than I ever expected.”

Roi has managed to build her business largely on her own, but has had to hit up her family for some financing, which she intends to eventually repay, once the collection begins to show a sizeable profit.

“Part of that will come from being more commercial,” she said. “I don’t mean the clothes being more commercial, but by making the business more commercial and reaching a wider audience. Young New York designers can really get pigeon-holed into this little boutique story, and that’s not the way to make a great business.”

Michael Soheil opened his own label in 2001 with backing from his family after working as an assistant designer to Jill Stuart and sketching accessories for Givenchy. He put together a small business plan, first working out of his apartment to save money, but quickly found the reality of the business was much different than he could have expected. After sourcing the production of his first few collections to contractors, Soheil decided it would be more cost effective to rent a $4,000-a-month studio on West 38th Street and hire freelance workers to ensure better quality control of his final garments.

“I consider myself to be both a designer and a businessman,” Soheil said. “There is no way you can succeed if you just take a designer’s point of view. You have to be a shipper, a salesman and a publicist. My first season, I was all of those things.”

Soheil’s first collection was shown as part of Vogue’s American View, a group of 10 designers who showed together in the wake of the 9/11 terrorist attacks. The event drew enough exposure that despite the economic difficulties of the season, Soheil estimates his business is close to breaking $1 million in annual sales.

“I’m break-even at the moment,” Soheil said. “But this is not the point that you start worrying about making a big profit. At this point, it’s about making sure that the quality is extremely high and that the production is beautiful.”

Peter Som, who also started his signature label in 1999, is more optimistic about the chances of young designers since, in the last few years, fashion has moved toward a more individualistic approach and away from logo-driven marketing. “A lot of the megabrands have mellowed out a bit,” he said. “There is more interest in finding something that is not everywhere.”

Som works on his own and had shown his collection to stores out of his West Village apartment until this season, when he moved into the Greg Mills Showroom. Som sells between 12 and 15 stores per season, with a volume of more than $500,000 a year, and expects to make a profit this year.

“I’ve done this with my own money,” he said. “It’s really a struggle because there are lots of unexpected costs. You end up needing at least twice as much money as you plan, because you need to be able to write a check at any moment, for fabric, trim, or anything.”

Working with the best fabric mills, a designer can spend as much as $20,000 on sample yardage, and then thousands more on importing the fabrics, paying freight charges and, frequently, overnight rush charges. “UPS owns my ass,” Som said bluntly.

“You need to start small and have a tight collection if you want to survive,” he added. “You need to stay focused and remember not to get too big too quick. You feel growing pains every step of the way.”

Even designers who start in the business with a financial advantage find the expense of actually producing a collection to be daunting. Marie Claudinette Jean, the wife of musician and producer Wyclef Jean, is staging her first runway show under the label Fusha with Mercedes-Benz Fashion Week with guests expected to include many of her private clients like Will Smith, Damon Dash, Mariah Carey and Jay Z.

“My business started four years ago, but this is the first time I’m showing a real line in New York,” Jean said. “It would have been tough to show so early on when the budget was not there. Money is always an issue and I’m looking to take this as high as I can take it, by doing it the right way.”

Alvin Valley similarly sold his collection to stores before he took his line to the runways. His collection, opened in New York in 2000, now generates more than $5 million in sales through more than 200 doors, compared with a cost to produce each season that tops $1 million. As a more established collection, Valley employs 14 people, including several dedicated sales positions.

“We had gone after sales and designing product before we were actually able to do a show,” Valley said. “What it takes to stay independent and survive in this jungle is being smarter and finding a way to build a certain niche, and it takes money to make it. All the press in the world won’t make you succeed if you don’t have product to sell.”

Where small designers often have an advantage is in cutting deals for services related to the promotion of their collections, since it offers makeup artists and hair stylists more freedom to do their own thing if they are not getting paid. Most models will accept free clothes from young designers instead of getting paid, and some will walk for free just to get into the show of the moment, since that helps establish their careers. Public relations companies also offer discounted services to most new designers, expecting a big payoff later on, and some will work pro bono for a designer if it helps maintain their own reputation in attracting the key establishment houses that pay monthly retainers to those agencies of up to $13,500.

But that advantage only lasts a little while. “By the third season, when they see your name everywhere, models expect to get paid,” Valley said.

That’s where sponsorship becomes a critical component of staging fashion shows, which even on a tight budget cost more than $20,000 when figuring the costs of front-of-house production, casting, video and photography, lighting and even car services for celebrity guests. Paul Mitchell, Clairol, Bourjois Makeup, Pantone, Ecru NY, Moët & Chandon and dozens of other beauty, makeup, cigarette, publications and alcohol producers give designers between $2,000 to $6,000 to be associated with their runway shows. Casio is promoting its new Exilim camera by sponsoring Valley’s fall show, without which Valley said he would not be able to show on a runway.

“More and more I realize that someone like me needs to be creative in ways that I never could imagine,” he said. “I need alliances that help me promote myself, while giving others the allure of youth, hipness and all that is associated with fashion.”

But not all designers are so lucky, as such sponsorships are hard to come by. Liz Goldwyn, the New York editor for French Vogue who also directed Shiseido’s sponsorship program until last April, said there remains a desperate need for mentoring and business advice for designers in the wake of the funds being used to put on a show.

“There has to be a way that we as a fashion community can support new designers,” said Goldwyn, who is hosting a show for Jess Holzworth this season and offering personal advice to other small designers.

“The fashion world and the media world pick someone each season they are going to hail, and then they are dropped,” she said. “There should be some mentoring program in the nonprofit sector that could help them one-on-one to develop a budget, make their samples and hire them press representation. In Europe there is so much more dialogue between new designers and ones who are established, like Karl Lagerfeld, who takes someone under his wing.”

But Goldwyn is impressed by a grassroots effort among many of the young designers with whom she has worked, like Bruce and Benjamin Cho, to help each other, with last-minute fittings, sounding board advice and moral support, an impression that has also impacted other designers new to the city.

“The business in general is getting better in New York,” said Gaba Esquivel, half of the Argentina-based Vasseur-Esquivel, now in its second season. “We have found incredible help in New York, even though people say it used to be very difficult to start selling there.”

COST ANALYSIS

Designers starting new businesses today face a world of unexpected expenses. Here’s a look at what a typical designer can expect to pay for a first-year startup.

Garment center studio: $48,000

Public relations annual retainer: $30,000

Sales through a group showroom: $60,000

Fabric yardage for two seasonal collections: $40,000

Two-weeks travel to fabric trade shows: $20,000

Annual messenger-shipping bills: $5,000

Freelance production: $25,000

Two fashion shows: $40,000

TOTAL: $268,000