Business Growth, Productivity

Why fashion labels grow fast and die young

BY Carl Thompson 13 Apr, "12

Does that have to be the mode for every fashion label, asks Carl Thompson, Co-founder of TradeGecko. Meet the former fashion label owner-turned digital entrepreneur who’s set himself a 100 day target to save small fashion labels worldwide.

Five years ago I launched Crowded Elevator, a fashion label in New Zealand. We started with a few boutique t-shirts and within a year we were wholesaling to over 50 retailers across New Zealand and Australia. It looked like the world was waiting for us. Then we died.

Wholesaling is no easy business. It takes a lot of time managing each section of the sales cycle. The administration required to manage inventory, orders, accounts, stockists, manufacturing and errors is completely overwhelming. If you don’t have the systems in place to handle such a workload the administration will kill all passion and ultimately the business, as it did for me.

When things went wrong for Crowded Elevator, I made a promise to myself to understand why.

I’ve spent the last few months calling 200 small to medium sized fashion wholesalers and retailers worldwide and an interesting picture has emerged.

Travis Siflinger from LA based underwear label BR4SS says “The ability to sell, produce, handle logistical challenges & ultimately collect what is owed to you is where revenue is created. Not in simply creating something cool that people like.”

“Stores don’t think to pay, you have to be like a squeaky door, keep hounding them until you get noticed. Cash flow is key at the end of the day.” Says Sam Moore Men’s founder of Sydney based label Dead Castle Project.

He’s not alone. Countless creative people working in our sector confirmed that starting a fashion label is an appealing business. The freedom to create and develop a public following is enticing. But when success comes, it cuts both ways: time and again we heard that the administration required to actually run a fashion label kills all creative passion.

Rick Buissink owner of long running retail store Texas Radio in Auckland, New Zealand has seen his fair share of labels come and go. He agrees that the late payments are standard practice “The poor designer who has had to pay up front for material and labour is now hoping that the struggling retailer who has their stock will pay them, sooner than 90 days! A vicious cycle.”

Creating a few t-shirts for friends seems to be the starting point for would-be fashion heroes and with success selling a couple of hundred, plans to expand soon follow. Growing the business means opening new markets and sales channels. Our young hero must rapidly learn new skills as retail stores quickly jump on the wave. Suddenly the label is faced with huge growing pains.

What was a hobby rapidly needs to become a real business. There are key decisions to make – like whether to sell direct to a niche market, or to become a wholesaler. But wholesaling is about logistics and numbers, not creativity and these are not usually the reasons a fashion designer went into business.

All too quickly, the volume of work involved in managing inventory, orders, manufacturing, fulfillment, returns, not to mention debt collection, can become a nightmare for a small team. There is only so much a spreadsheet can do.

There are few standards and even fewer good applications to manage any part of the process.

Business writer Michael E. Gerber writes about the myths that hold back entrepreneurs in his book “The E-Myth revisited”:

“The fatal assumption is: if you understand the technical work of a business, you understand a business that does that technical work.” The interesting thing about the calls we have been making is how true that pattern seems but also why it need not happen. The issues that seem to strangle most fashion labels as they grow are common across all sorts of niche industries and so, it seems, are the solutions. From hi-tech products, through personal goods – even specialist food and beverage products like wines – creative people trying to turn their bright ideas into business face the same administrative challenges.

Hugh Mason is co-author of “Brainfruit – Turning Creativity Into Cash, from East to West”:

“Running a small business with minimal capital and minimal staff places huge responsibility on a first-time fashion designer. Each area of the business must be carefully planned and executed. It’s to find 90% of your time sucked up by administration and much of that is dealing with errors, returns, quality issues, manufacturing issues, staff issues, and the most draining of all; debt collection.

Cash is like blood for any fast-growing business. If the flow gets blocked, the result is the business equivalent of a heart attack. When most small fashion labels are only making 20% profit margin, a few errors, an unhappy customer that starts sending letters from their lawyer, or a couple of returned orders can kill that small profit.”

We heard the same story from well-known New Zealand fashion label WORLD:

“Fashion brands have always and will always find it difficult survive in any economic environment, WORLD has had its fair share of luck but stoic faith in the labels philosophy and hard work are what has kept WORLD going for 23 years”, Benny Castles, Menswear Design at WORLD Looking at it from the retailer’s angle, there are also frustrations. Lots of people like the idea of setting up their own boutique and they usually kick off sourcing their stock from a couple of wholesalers or they know well. Understanding the market and forecasting trends is difficult. You are guessing what is going to sell well. You want an ecosystem of brands that complement each other well and set your shop apart from the rest. Maintaining good relationships with your wholesalers is key and most issues arise around account confusion. Who owes who what?!

Calling all these people across the fashion world has been a kind of therapy. It’s been reassuring to find that the challenges I faced as a rookie entrepreneur trying to do what I loved were the same challenges faced by so many others. It’s also been inspiring. In fact it has given me a mission: to put right what I now recognize were common “supply chain issues” that hold back creative people across our industry.


That’s why I, and my business partner Cameron Priest, launched TradeGecko and joined the JFDI-Innov8 2012 bootcamp here in Singapore. It’s a 100 day digital business ‘accelerator’ that is taking us from an idea for a new kind of stock and inventory management system for SME fashion companies, through building a working prototype. On 4th May we pitch it to a roomful of investors.

We want to help labels get back their creative freedom by automating the sales cycle. No more creating order sheets, no more time sucking spreadsheets, no more chasing accounts, just one central control system to manage the core of any wholesale business and create transparency between wholesalers and retailers.

We want to equip fashion labels with the same kind of power that big brands have to manage their supply chain, increasing cashflow and taking away the growing pains that so often kill creative passion and businesses.

Doing all that in 100 days is exhausting but also very focused. We have had a great response from industry players who have spoken with us so far but we still need more fashion wholesalers and retailers to work with us to get this right. If you would be willing to share your experience and give us your advice, please get in touch.

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