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Sustainable Business Models for Design Companies

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  • zamb
    Senior Member
    • Nov 2006
    • 5834

    Sustainable Business Models for Design Companies

    Ok, i've been doing alot of thought/ research lately, in part because I will be restarting my company soon .................I am somewhat concerned with so many companies/ Designers that have been going, and continue to go bust. kind of gives me the thought that if so many good designers go out of business, what is it that would give me an advantage that would lead to success.
    While I do know that there are a Myriad of reasons for the failure of companies, alot of times not related at all to the talent of the designer, I am specifically concerned with developing a business model that allows for the running of a small profitable business. I've never been concerned about becoming wealthy from fashion, but what I do want is to be profitable enough to grow,and continue to work.
    I have been doing alot of research in Lean Manufacturing and the Toyota production System, some aspects of which can be very useful to a fashion company. I've also been examining closely the business practices of companies like CCP, Rick, Ann D, Margiela (at least before he sold the company) among others.

    the basic caculations to profitability/ sustainability is quite simple (at least in the theoretical sense)

    Design / Maufacture Cost + Markup - Materials/ Operating Cost = Profit/ Loss

    if operating costs are kept less than the Markup, the business should be profitable.

    Loss of profits often stems from cost of Fashion Shows, PR, Advertisment, and other ridiculously priced expenses that have become associated with running a Fashion company.
    I just read an Article where Rick Owens used the expenses that His company would have incurred from hiring a press office, to open a store (a very wise investment when done right).

    In Todays economy, and with the traditional fashion company business model seeming implausible, what company, or companies do you think have a way of working that sems effecient and practical.

    would also love to hear why you think's its practical so please don't just name the company without giving reasons................

    thanks
    “You know,” he says, with a resilient smile, “it is a hard world for poets.”
    .................................................. .......................


    Zam Barrett Spring 2017 Now in stock
  • the breaks
    Senior Member
    • Sep 2007
    • 1543

    #2
    Step one: get everyone on SZ to wear your clothing.
    Step two: appear in Scoute.
    Step three: ???
    Step four: profit.
    Suede is too Gucci.

    Comment

    • zamb
      Senior Member
      • Nov 2006
      • 5834

      #3
      Originally posted by the breaks View Post
      Step one: get everyone on SZ to wear your clothing.
      Step two: appear in Scoute.
      Step three: ???
      Step four: profit.
      well yea, if it was that simple,
      I really do have a clear vision of what I intend to do, i just want to hear other intelligent and insightful perspectives on the issue......none of us have all the answers.
      “You know,” he says, with a resilient smile, “it is a hard world for poets.”
      .................................................. .......................


      Zam Barrett Spring 2017 Now in stock

      Comment

      • Faust
        kitsch killer
        • Sep 2006
        • 37852

        #4
        I don't know much about this, only anecdotal evidence. All I can say is

        1. Develop a strong aesthetic, one that people can relate to.
        2. Develop your story. People often relate to the designer behind the work.
        3. Forget the masses, go for the niche
        4. Do things slowly. It's not the number of store you are in, it's the kinds of stores you are in.

        Well, I suppose you already know all of this, so I don't know why I wrote that, lol.
        Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

        StyleZeitgeist Magazine

        Comment

        • Jon
          Senior Member
          • Apr 2008
          • 677

          #5
          god dammit... i just typed out a huge post and lost it...

          check: http://www.totemfashion.com to witness the power of PR... note the line-up and how it correlates to the popularity of brands with this community - no coincidence. as a retailer, when totem comes knocking, you listen...



          you don't know the POWER of the dark side
          ...
          Originally posted by merz
          perhaps one day pipcleo will post a wywt so non-euclydian & eldrich in its shapes as to turn all onlookers into throngs of dishevelled, muttering idiots

          Comment

          • Faust
            kitsch killer
            • Sep 2006
            • 37852

            #6
            Funny you should say this, Jon. I noticed this a long time ago. However, it might be a mere coincidence. I think that Totem got big by PRing for some Belgians, and that's who a lot of young Japanese labels look up to. Naturally, I would imagine they'd come knocking on Totem's door.
            Fashion is a form of ugliness so intolerable that we have to alter it every six months - Oscar Wilde

            StyleZeitgeist Magazine

            Comment

            • Jon
              Senior Member
              • Apr 2008
              • 677

              #7
              Not a coincidence, trust me ;)

              Damir Doma's been with them from the start, Boris Bidjan Saberi joined after his first season... Totem really has incredible amounts of clout, not only with retailers but also publications of all kinds.

              Also, it's very important that you get proper representation in the showrooms. It's very varied, in terms of service, from brand to brand but the showroom is vital as it's where, as a designer, you build your relationships with retailers. You need to have the right people working for you. Some places you get a pretty face that barely knows anything about what he's selling and you never see the designer, and others you may be working with someone who has a personal connection to product - on occasion with the designer himself!
              Last edited by Jon; 04-15-2009, 11:53 AM. Reason: needs moar clarity
              Originally posted by merz
              perhaps one day pipcleo will post a wywt so non-euclydian & eldrich in its shapes as to turn all onlookers into throngs of dishevelled, muttering idiots

              Comment

              • Casius
                Senior Member
                • Dec 2006
                • 4772

                #8
                I've been thinking about this a lot lately as well Zamb. While I partially agree with what you're saying Jon, I still think it depends on brand to brand. Obviously brands such as Julius, Damir, and Raf have goals of becoming a very profitable, or in Raf's case, a very global brand (like LV maybe....He's getting there). But I don't think having an outside PR company makes or breaks a new designer/company. All in all, it comes down to the work and if it's good, it will sell (or at least, one would think).
                But then you have brands like CCP and MA+ who do all the selling themselves (Amadei is usually present when buyers come in) and it's that kind of hands on approach that I've always liked. Maybe I'm skeptical somewhat of having others try and sell a product that I would be so passionate about.
                Like you said Zamb; Keeping margins in line and keeping advertising to a minimum (if at all) is your best bet, at least when starting out to ensure your company can keep going (but this is all based on if it sells, of course). I think the hardest part is working out your margins; Making it so you can make a healthy profit, have your retailer make a good margin, all the while keeping the customer happy and ensure they're getting the most for their money.
                (Sorry, I'm kind of all over the place this morning...lulz)
                "because the young are whores. dealers come to carol to get the rock"

                Comment

                • Jon
                  Senior Member
                  • Apr 2008
                  • 677

                  #9
                  yeah, i'm with you cas. I had a giant response that was more in depth but I lost it when my browser refreshed , so I just cut it down to the link.
                  Originally posted by merz
                  perhaps one day pipcleo will post a wywt so non-euclydian & eldrich in its shapes as to turn all onlookers into throngs of dishevelled, muttering idiots

                  Comment

                  • Casius
                    Senior Member
                    • Dec 2006
                    • 4772

                    #10
                    Yea I hate it when that happens!

                    The one thing someone like Totem is great for is bringing in customers. There's no doubt that even CCP, Amadei, and Altieri took a while to get certain retailers to notice them.
                    "because the young are whores. dealers come to carol to get the rock"

                    Comment

                    • zamb
                      Senior Member
                      • Nov 2006
                      • 5834

                      #11
                      Well, I do understand the importance of PR, but it can also be an albatross around your neck, most of these PR companies can be very demanding, the have HUGE fees and want to guarantee very little in return.
                      I know someone right now who is (will be) paying about 100K a year for PR and have sold very little so far, being with a reputable showroom in New York.............
                      Not many small startup companies have that kind of money to spend on PR
                      what it comes down to with PR as far as I'm concern is basically....... you are buying a business connection. The problem with this is unless you have the additional resources for the potential follow through (sales) it becomes a problematic and potentially money losing investment.
                      I am looking at all aspects of a business model, from product design, manufacturing, effecient, value added management, all the way through selling a great product to the customer.........
                      Image is really important, but that has to be balanced against a good product that customers will want to buy.
                      “You know,” he says, with a resilient smile, “it is a hard world for poets.”
                      .................................................. .......................


                      Zam Barrett Spring 2017 Now in stock

                      Comment

                      • asis
                        Member
                        • Dec 2008
                        • 47

                        #12
                        interesting topic, I don't think most people realize that in this business its 10% design at most and 90% Business. Im slightly apprehensive to gain to much experience in the industry incase it puts me off the idea of starting my own company down the track...

                        its an interesting time to be contemplating start ups as im not sure the norm fashion b. model is going to be relevant much longer and will have to change and adapt not to mention thin out some.

                        I also put a lot of thought into this as I think the business model needs to be creative and original like the product itself. Also to me its obvious, the more creative your product the better businessmen you need to be ( in-terms of not just being in it for the money- which isn't a big problem anyways).

                        I think for me I will definitely be doing a relevant small business and accounting course when the time is right.

                        one piece of good advice i received a long time ago was don't try and do everything yourself as it will only break your heart.

                        Comment

                        • move_ment
                          Senior Member
                          • Feb 2009
                          • 430

                          #13
                          Let's hope totem can manage brands better than their own! It's an appauling site/logo/layout...

                          I think one of the most important things to remember zamb doing what makes you truly happy. Stay commited and your passion and drive will show through your product and personality. Things will inevitably fall into place and people will start paying attention.

                          Comment

                          • Casius
                            Senior Member
                            • Dec 2006
                            • 4772

                            #14
                            Originally posted by move_ment View Post
                            Let's hope totem can manage brands better than their own! It's an appauling site/logo/layout...

                            I think one of the most important things to remember zamb doing what makes you truly happy. Stay commited and your passion and drive will show through your product and personality. Things will inevitably fall into place and people will start paying attention.
                            If only it were that easy.

                            Zamb, I think a lot of it is going to greatly depend on how you want to run your business. Do you want to manufacture in the United States? Do you want to go overseas for production? Both of those bring their pros and cons and can mean something totally different to a consumer (US vs. Italian made for example). Will you deal with samples/production yourself? If so, it may be a whole lot easier to do it on this side of the pond. Or, you can go the route of getting an agent to help you for overseas manufacturing but then, it's going to cost. Also, are you going to make all the samples yourself and do production elsewhere? It's good because it can save on time/money but also to a disadvantage because samples (the ones being viewed by retailers) may not turn out exactly like production. And no one likes getting product sent back.
                            A lot of this is not only going to be a decision based on finances/connections/time but also on the way you want your company perceived. Not to mention the shipping charges for fabric going in and out of countries, cost of sample shipping, hoping samples make it on time, etc. etc. It's all such a fine line. In my opinion, the more you can do 'close to home' the better off you are (this is, of course, if you're the one man show).

                            Also, I'll disagree a bit with Asis a bit. Without good design a company might not ever make it out of the gate. I will agree on the fact that good business sense is what keeps it going but I think Design/Business go hand in hand. You can't have one without the other.

                            I do think Jon was on to something with his first (albeit shorter post,haha)post. One of the hardest things I feel is getting retailers to carry your product.
                            Also, a lot of PR companies (at least that I know of) may charge an up front fee but don't charge anything annually, only a percentage when product is sold.
                            "because the young are whores. dealers come to carol to get the rock"

                            Comment

                            • zamb
                              Senior Member
                              • Nov 2006
                              • 5834

                              #15
                              Cas,
                              of fundamental importance to me, is the control of production......
                              I pretty much have all the equipment now to operate a small factory
                              there are a few things that i would like to produce, that are indeed better contracted out (knitwear, some leather, accessories? Footwear?) but the bulk of my collection i always want to make in house...........I am a big machine/ sewing, feeling fabric junkie and I just dont feel I could really make the kind of clothing I want to make without doing it in house.

                              My biggest problem has always been getting the merchandise to the stores, and ultimately if there are no sales there is no business. I certainly will do my own retail store when I start again, I just cant see myself being able to exist without it.

                              Basically I intend to run a Zero debt, "organic" business, the way margiela did in his earlier years, the business grew only as fast as reinvesting their profits allowed them to grow.

                              the person i was speaking of, with respect to the PR company, is not really paying annually.
                              the basic agreement of most PR comanies nowadays is a six month contract, however, they usually want at least a one year commitment as the argument is that it usually takes at least two seasons before you start seeing any results. In that sense, the cost turned out to be about 100K for the year.
                              “You know,” he says, with a resilient smile, “it is a hard world for poets.”
                              .................................................. .......................


                              Zam Barrett Spring 2017 Now in stock

                              Comment

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