Monthly Archives: June 2016

Jun 27

Fashion Industry Profit Margins for Newbies – Don’t Get This Wrong!

By Maria Pesin | Business , Fashion , Vibe Consulting

 

Fashion industry profit margins for newbies!     Since the question of how to figure out margins comes up a lot with my clients I thought I would try to explain it in a way that a beginner would get it.

First what is a profit margin?  A profit margin is the difference between sales and expenses and is shown as a percentage.  For example:  If you have a dress company and your sales for the year is $500,000 and your expenses (including cost of goods sold “COGS”) is $400,000 than your profit is $100,000.  Your profit margin is 20%.

ProfitMargin

In order to get to your profit margin you need to calculate your margins on the way.  Gross margin is the difference between sales and cost of goods sold, or COGS, also shown as a percentage.  If you have a t-shirt that cost $10 to make and you charge $20 then your gross margin is 50%.

gross m

Ideally when you plan your margins you want to make sure that there is enough gross margin to cover the cost of goods sold and the overhead of running your business.  I say “ideally” because that doesn’t always work out.  I have seen owners price their line without considering whether their customer will pay the price.  Recently I spoke with a potential new client who priced her line based on production costs.  Unfortunately the price was three times the price of her competitors.  Of course that was a problem.  Further more the garments did not warrant the price.

What should you do when that happens?  

  • Step one — revisit your production and make sure you are not overpaying.
  • Step two — reevaluate the item and see if you can make it cheaper by using different materials or taking something out of the garment.
  • Step three — rethink the style and whether you should drop it from the line.

Understanding and planning your numbers is key to success.  If you are still confused, email me at maria@vibeconsulting.co and I will help you figure it out.

Jun 08

How Much Inventory Should A New Fashion Brand Carry

By Maria Pesin | Business , Sales

 

How much inventory should a new fashion brand carry?  Well ideally nothing.  However that is not always practical.  When I had my first sales manager position and was responsible for placing production orders I always over ordered.  I remember my first season we had two sweater groups.  Once sold out right away and the other didn’t sell well and I had visions of inventory piling on shelves so high I had nightmares that we would go out of business.  Part of the problem was that styles that originally sold well suddenly dropped dead and no one wanted them anymore.  Yikes!

You would think I learned my lesson.  But in my next job I continued to want to over buy.  Thankfully my boss was more conservative and would challenge me to reduce the orders.  Over the years I learned to balance my desire to sell to  my potential and anticipate needs and be cautious enough to not go overboard.  Of course I was never perfect and that is what off price stores are for.  To sell excess stock.  As long as I didn’t have too much to get rid of at the end of the season my margins were not too impacted.

There isn’t an exact science to buying inventory.  There is no formula.  You have to deal with factory minimums which might cause you to place more than you want to.  If you have a website you will want to have inventory to sell from.  But, when you are  a new brand you have no history to get a sense of what you may need.  The following are what you should think about when opening your line.

  • Not every style sells, so as soon as you get an idea of what customers like guide them into those styles and discourage them from buying what isn’t selling.  This way you build a cutting ticket and don’t have a bunch of little orders.
  • Better to sell out than have to much inventory.  Having to say no to a reorder is a champagne problem.  This way they may buy more up front the next season
  • You may be better served to pay an up charge to buy less units than to have too much.
  • Try to manage your SKU count in the beginning.  Do you really need to offer 7 sizes in the beginning?

I think you pretty much get the message that in the beginning you should err on the side of too little than too much.

Jun 06

How A Soft Launch Was The Perfect Way To Introduce My Fashion Line

By Maria Pesin | Business , Fashion

 

I launched and ran the Jessica Simpson Outerwear line for 6 years.  The first year I was in business was the second year  Jessica Simpson was in business as a brand.  The brand was relatively new and as I’m sure you have seen, celebrity brands are not always a slam dunk so matter how successful the celebrity.  Thankfully Jessica Simpson had a great team overseeing the brand and it was managed well.  It has since become a big player in the market.

However when I first signed on I wasn’t as familiar with Jessica as I would later become.  It was May 2005 and we were supposed to open the following January.  I studied Jessica and found out how famous she was and saw that the label had major potential.  Wishing to strike while the iron was hot (especially since she was at the peak of her career) I convinced the owner of my company to do a soft launch for delivery that year. A soft launch is the release of a new product to a restricted audience or market in advance of a full launch.  We developed a small group of cashmere blend coats which I was able to get test orders for with Dillard’s, Macy’s, and Nordstrom.  The line retailed OK but was not amazing.  While the styling was spot on I learned that it was priced too high for the market.  We brought the prices down dramatically and when we did our full launch we were positioned correctly.  It became a major success.

The soft launch was the perfect way to introduce the Jessica Simpson brand.   We learned about what our customer was looking for without too much exposure and the stores who tested the line were inclined to place bigger orders going forward.  The stores that didn’t test the line yet were also more apt to place business as they saw that we had a product that had the benefit of history, and was fine-tuned to the market.

 

Jun 02

4 Direct To Consumer Business Models For Fashion Brands

By Maria Pesin | Fashion , Sales , Vibe Consulting

 

I love the direct to consumer model.  I suggest it to almost all my clients.  The control you have over your presentation is a great reason.  The margins are high.  You can connect with you customer in a more intimate way and create a strong brand experience.  Also you can really get a handle on what your buyer wants, needs, and what they say about your line.  The education is invaluable for making your product even more relevant for your shoppers.  What options can you consider?

  1. Mobile/On Line – Selling through your website is a great way to sell your product.  The cost to set up is relatively inexpensive.  You are open 24/7.  And you can make a website that looks very high end.
  2. Own retail stores – This is a more expensive method.  You have the overhead of the store plus the cost of building the store.  You also have to have enough product to fill the store.  A retail store will give you terrific exposure.  You can design the environment to enhance your product and contribute to the brand story.
  3. Trunk shows/In house parties – This is one of my favorite methods. It involves going to people homes or businesses to present your product.  You can do this one on one or with groups.  I believe that this model will continue to gain momentum. Consumers more and more are gravitating to brands where they have a personal connection.  What can create a more personal experience than having a one on one with your customers in their own settings?
  4. Events/Fairs – This could mean many things.  From street fairs to rock concerts.  Usually you buy a table or booth and sell your wares.  I know a young women who sells her t-shirts at comic-cons.  She rents a table for about $300 and sells on average $5,000 in product.  Of course there are no guarantees your product will generate that much volume but it is another option to consider.

These days it is very difficult to get a store to buy a new brand.  By going direct to consumer you can develop your customer base so that when you are ready to sell to stores you have a history of success you can show the buyers.