Handicapping the New Generation of Designers

Brands aiming for the big leagues face financial hurdles, intense competition at retail.

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Men'sWeek issue 09/13/2012

For attendees of New York Fashion Week, there has been plenty of men’s wear on display — with at least 40 designers showing men’s.

This story first appeared in the September 13, 2012 issue of WWD.  Subscribe Today.

However, for all the running around and for all the talent on display — some better than others — it’s hard not to wonder if the end result will mean much in the real world. In today’s retail climate of megabrands, burgeoning fast-fashion chains and big-bucks marketing budgets, what opportunity is there for designers like Todd Snyder, Richard Chai, Robert Geller, Patrik Ervell, Antonio Azzuolo and Timo Weiland to break through and create a significant impact beyond a small coterie of industry insiders and a sprinkling of directional boutiques?

“The market is still open to new ideas, but there’s so much more competition today. There are so many players and it’s difficult,” said John Varvatos, one of the few men’s designers of the past decade who has built a true lifestyle brand of meaningful scale — just ask Chrysler, which just tapped him to design a production car.

Observers also pointed to Tom Ford, Thom Browne and Rag & Bone as firmly developed men’s brands.

Beyond that, there are a handful of second-tier designers — such as Michael Bastian, Steven Alan, Band of Outsiders, James Perse and Billy Reid — who have built credible brand equity and show lots of potential for growth.

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The question is whether anyone will one day command the resources, infrastructure and branding to reach the big men’s wear leagues of Ralph Lauren, Calvin Klein and Tommy Hilfiger.

“Who will be the next Ralph or Calvin? I’m not sure that anyone will ever get that big again,” said Brooks Thomas, founder of consulting firm Brooks Thomas Group and a former vice president and divisional merchandise manager of men’s at Bergdorf Goodman. “The environment has changed so much and there’s so much product out there, from J. Crew to Uniqlo to everything under the sun.”

Tom Kalenderian, executive vice president and general merchandise manager of men’s wear for Barneys New York, pointed out that when Ralph Lauren and Giorgio Armani started out, the designer business was in its infancy in the U.S. “The concept of designer didn’t exist,” he explained. “Ralph Lauren and Mr. Armani were unique. It doesn’t happen on that level anymore. And people don’t think on that scale today.”

The growth of chain retailers has funneled consumer attention and dollars away from independent designers. Shoppers can get an inexpensive fashion fix at Zara, Topman, H&M, Uniqlo, J. Crew and Joe Fresh, leaving less room for new brands to gain a toehold in the market. Ironically, young designers now regularly partner with the big retailers on limited-edition lines for the exposure and the quick cash. Later this month, for example, men’s capsule collections from Todd Snyder, Mark McNairy, Ian Velardi, Ovadia & Sons, BLK DNM and Saturdays NYC will debut at the Gap. While the revenue will help the emerging designers build their own labels, there’s also the risk that they dilute their nascent brand equity in the process — and become another flavor of the month that the big retailers cycle through each season to add a little zip to their fleet of stores.

The intrinsic nature of men’s wear —which is mostly built on fabric, fit and the quality of construction rather than some of the creative dazzle of women’s wear — can make it even harder for smaller brands to compete effectively. Having the best production at the most efficient pricing becomes paramount. This can give an almost insurmountable advantage to the well-funded, professionally run organizations like the J. Crews of the world.

The men’s wear market is littered with recently hot, but now defunct or impaired brands. Simon Spurr departed his namesake label in March and the company is not delivering new goods to retail; Adam Kimmel has gone on hiatus for the next year; Tim Hamilton has not shown a collection since fall 2011; the Adam brand is restructuring for a February relaunch, and the once-buzzed-about Trovata label lost steam after the four founding designers split up. Council of Fashion Designers of America award winners like Matt Nye, Sandy Dalal, Gene Meyer, Robert Freda and Richard Bengtsson and Edward Pavlick of Richard Edwards are long out of the game.

“I’ve learned a lot — a lot of good things and a lot of bad things,” said Spurr of the implosion of his once-promising brand, following disagreements with partner Judd Nydes and financial backer Hugo Stenbeck. “Your partners can make or break a brand, for sure. Whether it’s a company or a garment, you’re only as good as the components.”

Spurr said competing at the designer level with global brands is a near impossible task. “Without marketing and advertising, going up against the Jil Sanders and Burberrys at retail is like an iron curtain. It’s very hard to penetrate. I’m quite proud that I did penetrate it a bit — I got my foot in the door, but not quite the rest of my body. If my suit is next to a Dior suit and both are $2,500, nine out of 10 people will buy the Dior because the brand recognition justifies the price.”

Designer Andrew Buckler exited his namesake Buckler label last year after founding it in 2001. At the brand’s peak, the company was doing more than $9 million in sales and had stores in New York, Los Angeles, London and Toronto. But profitability was always a struggle and Buckler eventually did the mental calculus and took a job as vice president of global apparel at Converse. The Buckler brand is now owned by his Turkey-based financial backers, who shuttered all the stores.

“Our wholesale margins were at 45 or 50 percent, and we really needed to be at 70 percent,” recalled Buckler. “That’s the level that allows you to cover the cost of running the business and also finance the future.”

Buckler also ran into a “Goldilocks” problem, facing many up-and-coming designers. “The dilemma is that when you’re small, you can find a stitch house to make a 100 pieces for you. But when you grow a little bit and want 700 pieces, you’re too big for the small places but not big enough for the big factories. It’s harder to find a good in-between factory,” he explained.

Financing is the number-one issue facing independent designers. The brands that have reached critical mass all have robust backing. Varvatos was financed by Nautica, then VF Corp. and now Lion Capital; Rag & Bone by investor Andrew Rosen; Thom Browne by Japan’s Cross Co., and Tom Ford via a personal fortune and key initial licenses and manufacturing agreements with the Estée Lauder Cos. Inc., Marcolin and Ermenegildo Zegna.

Michael Bastian said he’s been told multiple times by finance people that his business needs to hit the $10 million mark to garner interest from investors. Currently, his business is below $5 million, with a presence in 36 stores this fall, including Bergdorf Goodman, Barneys New York and Mrporter.com. “That number has come up repeatedly. We went to a CFDA seminar on finding backers and the money guys there told us they would take us seriously at $10 million. That always pisses me off because I think you have to treat designer businesses with a little more finesse. There are licensing and diffusion line possibilities.”

The next few years will be crucial to Bastian, who started his company in 2005 with backing from Brunello Cucinelli but in 2010 bought back that license. “We need to find a smart partner and put some gas in the tank. We need someone like a Rose Marie Bravo or Silas Chou or Robert Duffy,” said Bastian, referring to business executives who were instrumental to the growth of Burberry, Michael Kors and Marc Jacobs, respectively. “We get a lot of love from the press and now we have to translate that into a real business. We have no senior management and no stores of our own. We’re at that critical stage where we need a strategic partner and we’re beginning to have those conversations.”

Reid is well acquainted with the ups and downs of the men’s business. He launched as William Reid in 1997 but went out of business in 2002, after which he worked as freelance designer for brands like Fruit of the Loom and TaylorMade to make ends meet. In 2004, he relaunched as Billy Reid, based out of low-cost Florence, Ala., with a new group of investors and has built steadily from there.

“This is a cash-intensive business and being prepared for that and knowing how much money you need is the number-one hurdle,” said Reid, who won this year’s CFDA men’s wear prize. His brand will ring up sales of $20 million this year, up from $13 million in 2011. The company opened its eighth store, in Austin, Tex., last month and is aiming to open another three in the next year. “Having your own stores creates the opportunity to create cash flow on a daily basis. With wholesale, you’re always waiting to get paid after you’ve shipped,” he said.

Learning the ins and outs of financing is essential for small designers, said Number:Lab founders Luis Fernandez and Greg Lawrence. “When you’re small, cash is king, so using tools like letters of credit or purchase order funders to finance your production is important,” said Lawrence. “The idea is to free up cash flow.”

Number:Lab is part of this year’s CFDA Fashion Incubator program, along with men’s designers Burkman Bros., Timo Weiland and Isaora. Launched in 2010, the program is geared specifically toward assisting new designers with the nuts and bolts of business, including a subsidized work space and mentorship from industry veterans like Gary Wassner, cofounder of Hilldun Corp.

“It’s not a beauty contest about who has the prettiest clothes. We’re looking at the long-term potential of those brands and businesses. It’s direct advice and sometimes it’s advice they don’t want to hear,” said Steven Kolb, chief executive officer of the CFDA. “Luis and Greg at Number:Lab make great T-shirts, shorts and sweatpants. I think they could be the Lululemon of men’s if they don’t get distracted with tailored jackets and try to be all things to all people.”

Band of Outsiders founder Scott Sternberg said his strategy has always been to be considered a reliable resource for retailers rather than a hot new brand with a few shirts on the sales floor. The tactic has worked, as the brand has steadily grown 20 percent a year and is now in 116 U.S. doors in men’s and 174 doors internationally. “My goal has always been to build a long-term brand with a lasting legacy. That means a brand with real, meaningful associations and something that lives beyond me in the culture,” explained Sternberg.

The designer pointed out that starting a new fashion line is fairly easy in the beginning and there are few barriers to entry relative to other industries, which can lead to a glut of young hopefuls in the starting gates of fashion. “It’s easy to get going with a sample line. But the reality of production and delivering on time to stores is different,” said Sternberg. “Success depends on what you want out of this. If you want to get a little famous and get a nice little write-up in WWD, a lot of people can do that. If you want to be around in 10 years, let me tell you, that’s crazy-hard work,” he said.

John Bartlett, who first launched in 1993 and made a return to New York Fashion Week this season after a two-year absence, knows that well. Renowned for his splashy, provocative runway shows in the Nineties, his business now consists of an e-commerce site at johnbartlettny.com and a private label men’s business for The Bon-Ton Stores Inc. under the John Bartlett Consensus and John Bartlett Statements names. “My goals are very different now,” said Bartlett, who prefers not to talk about the ups and downs of the past and focus on the future. “People love to talk about why I didn’t succeed. But I think I’m successful. I own my own name and I still do what I love.”


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