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The struggles of independent brands were front and centre this week.
On Tuesday, The Vampire’s Wife — purveyor of gothic-glam prairie dresses beloved by Kate Middleton and Florence Welch — said it was closing after a decade in business. By Friday, Dion Lee, the 15-year-old Australian label that has dressed Taylor Swift and Dua Lipa, had called in administrators.
The news came only days after New York-based designer Mara Hoffman said she was shuttering her label after 24 years in business and London designer Roksanda Ilinčić's namesake label narrowly escaped administration after finding “white knight” investor The Brand Group.
For independent labels, perennial cash flow issues and a heavy dependency on wholesale orders from third-party retailers means their business foundations are shaky even in the best of times.
Now, they’re being pushed to the brink and beyond.
Roksanda said it had filed a notice of intent to appoint an administrator, citing “recent volatile market conditions,” before TBG came to the rescue. The Vampire’s Wife said the “dramatic implications” of “upheaval in the wholesale market” was a key factor in its closure.
“At the best of times fashion is still a risky business; when times are bad it makes it even more difficult,” said Vikram Menon, an accountant who works with several London-based labels under a British Fashion Council mentorship scheme.
A slowing luxury market is putting significant pressure on fashion businesses big and small. Even the likes of LVMH are being hit hard. But independent labels, most of which depend on third-party retailers for distribution, are also facing turmoil in the wholesale market.
In particular, the recent implosion of key stockist Matchesfashion, which was put into administration by new owner Fraser’s Group in March, has left small brands reeling.
Many are out of pocket for orders already shipped before the e-tailer went into administration. According to filings, The Vampire’s Wife and Roksanda are owed $32,000 and $9,000, respectively.
But it’s the wider loss of a key sales channel — and with it future orders, including lucrative specials and exclusives which many labels rely on to keep cash flowing — that likely hurts more.
And it’s not just Matches. The decline of key distributors Net-a-Porter and Farfetch-owned Browns has also weighed heavily on small labels, as has weakness in the department store sector.
Even buoyant retailers, many stuck with excess inventory after the end of luxury’s post-pandemic boom, are pulling back and taking fewer risks, opting mostly to stock brands with pristine sales records.
“It feels different than it did 10 to 15 years ago when it was exciting and retailers were willing to experiment with young talent and designers … Everyone’s more conservative,” said Gary Wassner, CEO of Hilldun Corp, a New York group that helps finance independent designers.
Seeing trouble in the wholesale market and the power of social media, some independent labels are rethinking their strategies and building direct-to-consumer channels, but the cost and complexity of acquiring customers and managing inventory, shipping and returns have made this path a struggle — even more so as would-be investors retreat from fashion.
The investor pull back has left many labels, already heavily in debt after the shocks of Covid-19, highly vulnerable. “You can’t just keep incurring debt; you can’t just wish that something is going to change and you’re going to get an injection of cash or find an investor,” said Menon.
Some labels may be able to walk the tightrope. “It is a struggle, but if brands are intelligent, careful and diligent on pricing and expenses, the opportunity is there for them,” said Wassner.
But for many, the current threat may prove existential.
“This is the most challenging environment since the global financial crisis,” said Stefano Martinetto, chief executive of Tomorrow London, a brand accelerator and distributor for independent labels.
“It’s sad but not surprising that many, and many more in the near future, will find their businesses completely unsustainable and will probably need to close down.”
Source: BOF
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