Saturday, June 20, 2015

For Young Designers, Private Clients Can Be the Start of a Real Business

For Young Designers, Private Clients Can Be the Start of a Real Business:

Katie Ermilio at her fall 2015 presentation. Photo: Arun Nevader/Getty Images
Katie Ermilio at her fall 2015 presentation. Photo: Arun Nevader/Getty Images
Earlier this month, Honor designer Giovanna Randall announced that she would stop producing her ready-to-wear collection — for the time being, at least — to focus on “special orders and bridal.”

It’s not entirely surprising. Honor was well funded. (I’ve heard the company has blown through eight figures since its launch in 2010.) But because of that, Randall jumped into things that a brand so early in its life might not be ready for. In particular, she opened a physical store before Honor turned a year old. Retail is a massive challenge no matter what, but especially when there is little awareness around a name.

Yet even if you didn’t agree with Honor’s business plan, it was impossible not to respect Randall’s dedication to her vision. She brought in aesthetic soulmate, Violet editor-in-chief Leith Clark, as her stylist early on, and developed quite the following among the young-and-romantic starlet set, including Zosia Mamet and Zoe Kazan.

So it’s good to hear that Randall will continue to make clothes for her devoted client base, and that there is hope that this is only a hiatus for her ready-to-wear. Looking back, though, I wonder if Randall wishes she had done things in reverse. For young designers, especially those who manufacture locally, building up a following via trunk shows and personal orders is not a bad way to establish yourself.

That’s how designer Katie Ermilio got her namesake collection off the ground in 2009. “My clients are the reason that I started my business,” she says. “I’ve always enjoyed the process and personal nature of creating something one on one with the women who wear my clothes.” Six years later, many of those women are still Ermilio’s clients. “It is always good to have the customer physically wearing the collection rather than just admiring it,” says retail consultant Roopal Patel. “Personal orders can help create buzz.”

It can also provide a source of income for designers who are looking for ways to fund their next collection. While retailers offer exposure to a new audience, personal orders offer a much larger profit margin. Think about it this way. Say it costs a designer $800 to manufacture a dress, from fabric to finish. The designer must then create a wholesale price so that she can make some sort of profit. (Good profit margins are around 60%, although many designers have margins of only 40%.) Say she marks it up to $1,280. The retailer will then mark it up again, typically 2.2 to 2.5 times. What cost $800 to make is now going to cost $3,200 at retail. If a designer sells that dress to a store and it is bought by a customer at full price, she is going to make $480. If she sells it directly to a client -- and doesn’t offer a discount -- she will make $2,400. Not bad. “It’s important to have a steady cash flow to help support the everyday business,” Patel says. “Especially in the beginning.”

Designer Chris Gelinas, who started his line CG in the fall of 2013, says his personal order business is a priority. “It’s no secret that conventional wholesale isn't always the most supportive platform for an independently financed emerging brand,” he says. “[My private client business] has given me a stronger revenue stream but more importantly, it has started a direct conversation with the women who are making CG come to life [in the real world].”

To be sure, getting that customer feedback so early in one’s career can help a designer figure out who he really wants to be. “It has been really reassuring to see women come into the studio and not just purchase one or two pieces, but five and six,” Gelinas says. “It's a moment when I step back and say, ‘OK, I'm not crazy, these are beautiful clothes.’ When women finally have a chance to touch and feel them and experience all the subtleties in fit, they can’t get enough.”

There are some designers who build successful custom businesses without ever going the wholesale route. However, you have never heard of these designers, a fate most young brands would rather avoid. The good news? A strong private client business can lead to bigger and better wholesale accounts. “Private clients provide wholesale accounts confidence that there is a client at retail for the collection before it arrives to the store,” Patel says. Ermilio for one, is now stocked at Barneys New York and Moda Operandi, as well as many international retailers, while Gelinas was picked up by Fivestory and Shopbop, among others.

Of course, the private-client model doesn’t work for everyone. Gelinas and Ermilio both sell at the designer price point, which means the manufacturers with whom they currently work are more comfortable with producing one-off garments. For designers selling at a lower, contemporary price point, that’s not as easy. (The cheaper your clothes are, the more clothes the manufacturer requires you to make.) But if you can, it’s not a bad place to start. Beyond the financial benefits, the exposure, and the client feedback, it’s simply good training. Michael Kors still does trunk shows, visiting department stores and boutiques the world over to meet customers and sell them clothes. Not a bad skill to have. And the earlier you can master it, the better.

Posted by Nelio Inacio at 12:14 PM

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