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Let’s compare what we are doing at Brook There and Seawall to the standard way of running a fashion business.
We call what we do small-batch manufacturing. We either make-to-order, or we make small quantities that are fabric driven. We don’t overproduce. And we have much, much more flexible lead-times.
We also run the the workshop. The very act of owning production is a major differentiator in this business. Why do we do it this way? It’s not just because we like the control.
Living outside of a major fashion center, it’s too expensive to try try to run a brand in the conventional way, which I’ll describe below. And we’ve very consciously chosen to live outside of a major fashion center. (I’m from Maine and don’t want to live elsewhere, Daniel chose to live in Maine a decade before we ever started living together, and learned, through experience, how to work in fashion from Portland.)
Most overseas garment factories have a minimum order of 400 units per colorway (i.e. you want three colors of the same shirt? 1200 units.) Some minimums are higher, some lower, but that’s a good reference point.
(fyi- we’re using “overseas” to refer to emerging markets, not Italy, France, or the equivalent.)
Want to produce in New York? Yes, there are factories there, and they have a higher price point, as well as a maximum (about 200 units per color max.)
Why do places like TJ Maxx exist? (I always feel depressed and nauseous if I go inside of one. Same as Barney’s Coop floor. It’s because, I’ll hazard, what looks like a sale to the customer, looks like massive overproduction and waste to the maker.)
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Let’s look at the standard way of running a mid-size, mid-price fashion brand:
– Design, development, manufacturing, marketing, and sales are functions that are fairly separate.
-Design and technical design are separate functions.
-Manufacturing is almost always outsourced, except among the largest brands.
-Marketing is usually done by a press agent – these cost $2k-$8k per month.
-Sales are often done by a showroom. Showrooms in NYC have rack fees that range from $2k-$5k per month, plus a percentage of sales (10-15%)
-There is about an 18 -20 month leadtime between starting the business and the first check. Most retail stores buy on terms of 30 – 90 days after delivery. To run a fashion business in the standard way described below could require an investment of $300k- $500k in the first 18 months, and no income until month 19 or 20. To make that $300k up and make it through till the next sales opportunity (month 24) will require about $400k-$600k in sales during the first market. This assumes you are running the business very lean, with basically no employees, and a minimal office space.
-Design is mostly done on a computer. It starts with inspiration boards and fabric selection, and moves on to tech packs done in Adobe Illustrator. Design starts about 18 months before a collection is in stores.
– Tech Packs (digital files) are sent overseas to a factory. Every little stitch needs to be spec’d in order to receive back a sample garment that meets the designer’s expectations.
– Design, technical design, and sampling take 6-10 months, resulting in a collection of samples (sales samples, press samples, etc.)
– Samples usually cost 3x-4x what the garment will wholesale for. If that shirt is going to wholesale for $50, the sample may cost $200.
– Sales samples are shown at various market weeks (tradeshows like Project, Capsule, Magic, etc.) To do a tradeshow usually starts at $5k, not including sales samples and getting the sales team there, fed and accommodated. Complicated booths easily reach $100-$200k budgets.
– At market, buyers (i.e. retail stores) view the line and place orders. The brand’s goal is to get enough orders to meet the production minimum (400 units per colorway) or a predetermined ‘breakeven’ figure.
– Brands follow-up market week by confirming orders from buyers and then placing their purchase orders with their factories. If a minimum has not been met via orders, the brand can decide to overproduce to meet the minimum and plan to sell the excess via their own website or discounters. It is this exact element that has led to the consumer expectation of being able to eventually buy things on sale.
( an aside: a huge part of our consumer culture is devoted to discounts and sales. It’s deep in our psyche, and it doesn’t have to do with price. It has to do with perceived value, and if you are inside the fashion business, you know that this perceived value is completely fake. Outlet stores? For the most part, they are not actually selling overruns, overstock, or seconds. JCrew, Gap, Banana Republic, Ralph Lauren: they all produce direct for the outlet store. It means sourcing a cheaper version of the same style from a cheaper manufacturer or in sub-par fabrics, throwing a label and a discount sticker on it, all the while making better margin. JC Penney, much in the news of late for its failing rebranding, hired a fashion insider, Nick Wooster, to improve their brand positioning. One of the tactics they’ve tried recently is this: instead of listing a product at ‘full-price’ and then immediately marking it down, they are listing a product at, say, $10 and saying “available elsewhere for $20.” This approach is actually more honest, but it isn’t working. The customer isn’t buying because it’s not “on sale”- despite the fact that all the sale prices were fake anyway- the product was produced to be profitable at the sale price, and never expected to sell at full price. I should write another post just about this topic.)
-Overseas over-production happens, but it’s not a problem to the brand, because all products are priced for eventual discounting. And if you want to sell wholesale, as well as retail through your own channel- you must price this way! (You can’t undercut your retail buyers.) Yes, it’s true, if a tshirt costs you $10 landed in nyc from your factory in turkey, it must wholesale for $25 and retail for $65. Overproduction and the consumer expectation of buying things on sale is the reason behind this.
-Let’s look at the mark-up between cost of wholesale tshirt and wholesale price of tshirt. The cost, $10, gets it to me from the factory. The markup to $25 ($15 margin) covers my development costs, my rent in new york, my press agent, etc.
-The retail store markup is, at least in part, fiction. The retail store probably expects to actually only average $15 or $20 in margin, not $40. Retail store markups USED to be keystone (i.e. 2x ) but now they are between 2.3x and 2.75x. Why the change? Because, somehow, the discount desire overtook our culture. People only want to buy on sale.
SO: What part of the market does this NOT happen in? The high end. Chanel never goes on sale, Hermes never goes on sale. Certain small brands control their inventory and distribution closely so that they never go on the internet, and they never go on sale. (the internet, in part, has led to the development of the on-sale-mentality.)
And back to small-batch: here’s what we are doing.
-about 11 months out from the season, I start design for brook there. (seawall runs similarly, with some small differences.)
– I order sample fabrics, between 5 and 12 yards per fabric.
– Sketches are drawn on paper and pinned next to the fabric swatches they will be developed in.
– patterns are made on paper in the sample size (first we do a medium, so I can fit it, and then we do a small for the model.)
– samples are made in sizes medium and small.
– photos are taken for the linesheet (flat garments, white background)
– a smaller selection of photos are taken with a model.
-3 months have passed between ordering sample fabrics and taking photos on a model. The linesheet is prepared (Daniel) and, if we are in the mood and feel flush enough, we do a tradeshow.
– Now we are six months from the season. Fulfillment of orders is scheduled and fabrics/ notions ordered. We also produce to meet the demand of our own web and retail store, but this can happen very near the start of the season.
-3 months from the season, cycle starts all over again with the next one.
-Design, development, press, marketing, web, sales, and fulfillment all happen in one space.
So what are the limitations to owning production? Why don’t people do this more often?
I’ll list them and then I’ll write about them in another post:
1. the skill set is hard to hire. You have to teach yourself, as I did, and then you need to teach others. I feel “secure” now because I’ve successfully transferred most of my knowledge about sewing and construction to 4 other people. We’re now starting on patternmaking and grading. Transferring it to person one was the hardest.
2. sourcing is difficult. It’s easier with small-batch, because we don’t need to worry about fabric availability in two years from now. Most of your fabrics and virtually all your trims are still ONLY produced overseas.
3. it was cheaper to produce overseas for a while, but that is becoming less true. (Tech companies are insourcing, other industries will follow.)
4. specialization of skill sets is what made the industrial and technological age possible.
5. Variety. We can’t make sweaters in our factory. We can only do cut & sew of light-to-mid-weight garments. It would require another room to add sweaters.
6. this is fashion, and production is not sexy.
7. fashion is a creative industry, and many creative people are poor managers. so they outsource the management of the product. (can you imagine if restaurants did that? well, fast food does.)
I’m sure there are more I’ll think of in the next post.
– from Brook & Daniel. Thanks for reading.
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