The Great Fashion Reset: Can New Designers Still Build a Business?

0:07Hello and welcome to The Debrief from the Business of Fashion where each week we delve into our most popular BOF professional stories with the correspondents who created them. I'm senior correspondent Sheena Butler-Young. The great fashion reset isn't just happening at mega brands, it's reshaping the runway from the ground up. At the early stage level, the support systems that helps new talent take off from incubating retailers to hungry investors have all thinned out. Viral moments still happen, but turning heat into healthy businesses is harder than it's ever been. And if fashion's future relies on a steady stream of new ideas, what happens when the pipeline slows?

0:46Joining us is BOF reporter Joan Kennedy, who recently wrote a story on fashion failing emerging designers. Joan, welcome back to The Debrief. Thanks, Sheena. Excited to get into it. Absolutely. So let's start with the ground truth before we get into some of the solutions to the problems. What did your story uncover as far as those big structural shifts that are taking aim at emerging designers right now? Ground truth, it's never been easy to be an emerging designer. It's always been tough. But right now, there are a few key structural shifts that are making it really hard for brands to emerge, to turn buzz into a genuine success story.

1:24First of all, we're in a really tough market. Costs are high, getting higher. We have the new problem of tariffs to contend with. Investors generally are more cautious, less willing to take big swings on creativity or just a good vision, and more focused on profitability and consistency. And then elsewhere, you have some cultural factors, like the complexity that fast fashion has introduced. Shoppers are trained on really expensive goods, expect clothes in a lot of cases to be inexpensive more broadly. and then inexpensive duplicates of hit items have created real challenges for emerging designers.

2:03I actually did a story specifically on that about a year ago. It makes it harder to juice a breakout signature piece if you have one. It kind of shortens the runway and can create real challenges there. Added to that, it's really hard to break out on social media right now. There's a lot of noise and marketing costs are really high. And then perhaps the biggest challenge of all for designers is the decline of multi-brand retailers. Absolutely. That last one, I want to double click on that for a second because it's probably the biggest, longest running issue. And it's like department stores have been on the decline for years now.

2:42We've seen them go notch down year after year after year. Can we talk about the role that department stores have historically played in building up emerging designers and new brands. We've seen matches go away. We've seen Essence file bankruptcy. I can fill in the list for days at this point. What was the role of these retailers in helping brands grow? Yeah, wholesale is a really important channel for young designers to build awareness. It's where a lot of discovery happens on the shopper's side. You walk into a store, you see something new. So back in the day, wholesale really served as an incubator for young brands or more so than now, perhaps.

3:21Kind of, you know, let them develop. There was kind of a promise of buying season after season a little bit more consistency. Also, this like kind of recognition that these brands offered them something. Really creative piece is the next new thing. Having that was kind of a differentiator for stores. And there was a real recognition of the value in that. Now, as we're seeing wholesale more broadly challenge, buys are more inconsistent. Designers say wholesalers and retailers want to see performance from the get-go. And there's more pressure to just be in a store, be slotted in, immediately perform.

4:03And then at the same time, we've seen e-commerce kind of fall apart under the rising costs of everything. And that more recently kind of was this boon to emerging brands, specifically like a retailer like Essence was really key in bringing these brands volume and like getting them to wider audiences. Yeah. You know, the point about department stores sort of wanting profitability and big sales right away is interesting because it reminds me of investors. that there used to be a time that you understood that the market ebbs and flows, so do sales ebb and flows. But it seems like they're doing the same reaction that investors are now, which is like, if you can't show us huge growth trends right away, we're not willing to take the long road with you.

4:50We're not willing to endure the ebbs and flows. And I think designers used to be able to rely on that, that they'd have a partner in a department so that if they have an off season, they'd come back to them next season. It's not happening. Yeah. And I mean, it's not across the board. Obviously, there are some exceptions, but just generally, it's an environment where there's less appetite for risk. And also, I mean, it makes sense. This is just the environment that we're in. These retailers are really under pressure. or investors have, you know, after like a few decades of kind of being willing to take more risks, like they haven't seen the return on that.

5:25So yeah, it is this moment where it's hard to blame anybody. It's just kind of like what fashion is going through right now. But it is tough too, because as we know, like these things like take time to percolate and like fashion is not a fast business. And on top of that, in the department store space, you have retailers and you know, let's just be honest, Saks has become the poster child for this, that have been falling behind on payments, paying late, doing these net 90 payment cycles. If you're a big brand, an established brand, you may be able to absorb that. But if you're smaller, you're not able to wait 90 days to be paid.

6:02How does that also add to the equation of challenges? That's a huge challenge for emerging brands right now who now kind of, you know, find themselves in the position of being a little bit defensive about who they're working with and how much they're relying on wholesale. Cash flow is always a problem for young designers, emerging brands. How do you fund the next production cycle? How do you pay your employees? Things like that. And in this environment where payment terms vary drastically season to season or designers often kind of wondering, am I going to get paid? That just makes everything all the more challenging.

6:41Well, the other part of the equation is that we're just not in luxury boom times, right? Like when brands were getting big investments like Christopher Cain and Nicholas Kirkwood, and then more recently the DTC brands, those investments were made in a different season. Is there a chance then that as the industry changes or as the macroeconomic backdrop gets less challenged, that this could come back around? Potentially. And I think right now, you know, especially as we are in this this moment of luxury upheaval and kind of diminished consumer demand, there is a real recognition of like the value of creativity and creativity being so linked to being able to drive sales.

7:24We're calling it the big fashion reset. So there's hope that things can be reset. The other issue that I think you mentioned this earlier, but a lot of the emerging designers struggle with being susceptible to copycats. You used to be able to come up with a hot product and you had years of runway maybe. If it was like a good hero item, a good interesting item, you could milk it for years. you now have this really reduced runway where if something is hot or interesting on social media, you will be knocked off in a week or two. How does that hurt a designer when the idea is that you need to be very creative, make something interesting, and then you can sell it at a good premium and that's going to be your key to revenues?

8:04How does that hurt you when you can be knocked off in a week or two? Yeah, it makes you feel more pressure to like just keep producing and that you have to go faster. And then also at the other end, like a lot of young designers looking to grow will kind of take a hit on margin to kind of appeal to more shoppers, make their items cheaper. And I guess it like kind of adds the pressure to do that as well, which can be a tough situation to manage. But yeah, namely just kicking up the speed and the churn. Well, and then there's a good side to social media. Social media can manufacture these viral moments for young designers.

8:41It can set them up to be popular and to get a lot of hits. But there's a conversion gap. There are people that will be excited about your product online. Things can go viral. People are not ready to spend. I believe it was Nancy DeJaca, the example in your story, she talked about like she oversold on momentum from social media and then people weren't actually ready to order. They were just excited on social media. They were commenting and they don't actually follow through. Talk a little bit about that conversion gap, that being popular, getting all the hits online, but doesn't actually turn into revenues.

9:13How much of a struggle is that for these hot designers? Yeah, there definitely in recent years has been this like social media problem. And, you know, fashion, again, always has been this industry of kind of smoke and mirrors. But in recent years, that's been really exacerbated, especially with like the fashion hype machine. And yeah, it's led to this moment where designers felt very well known on social media. It felt like you had this large awareness, but on the other end, not much of a business. A lot of awareness, not much of a business, a lot of buzz, not much of a business kind of thing.

9:52And yeah, it's hard for a designer to manage. Like that's another thing that I think we're seeing a lot of brands confront right now is that they've built these really big audiences online. They have a lot of fans on Instagram. They have a lot of followers, people that are like really loyal to following them and like kind of like their aesthetics, their vision, et cetera. But perhaps don't have ways to buy into the brand or just don't buy the brand. And so I think we're seeing like a lot of a lot of labels really confront that right now. Or you have this very like energized social media audience that doesn't buy at the price point that you sell at.

10:30One of the interesting things that we can talk a little bit about it as we're recording this, we're in the middle of New York Fashion Week. And a lot of the conversations that I overheard after shows at the cocktail hours was around this idea of designers, emerging designers, trying to recognize when to come down to earth with prices that you're speaking to a certain customer base, but you're not able to sell to that customer base. How do you make that one in the same? Yeah, I think we're seeing brands at every level confront that right now. Luxury prices drastically inflated post-pandemic. And that's one thing that designers are really, really thinking about really closely.

11:05I spoke to Area, which is this buzzy New York brand. They're very known online for their like eye-popping dresses. They've like made out of like googly eyes and like bananas and things like that. And very beloved by celebrities, pop stars, etc. And then at the other end of that, they also have this kind of commercial hit, which is denim that has a lot of crystals on it, a lot of slashes, a lot of cuts, that sort of thing. But they're really focused on right now is building more inroads for those shoppers that are big fans of the brand but don't necessarily have ways to buy it. And so what that means is cutting costs on the back end but also thinking about, okay, what are these people buying?

11:49What's the area take on this? This one example is they're introducing this line of basics where there's really cute basics and they have little rhinestones on them. And then, you know, more just like fun dresses at a more accessible price point. So I think that's something that we're going to see a lot of people focus on going forward as well. That is a positive take on how you can do this. Like there are it's the department stores are one part of the conversation. There's also your DTC business, right? There are other ways you can connect. There's the price points and there's going directly to your consumer.

12:22Talk to me about the opportunity for DTC for these brands. So you can do that. It is also expensive to have a storefront. You may not be able to always drive customers directly to your site, but it is an option if you're smart about it. Yeah, I mean, it is a real challenge, particularly for younger labels. They don't generate enough sales per square foot to justify a store in a great location often or can't drive enough traffic to their website just alone. But, you know, we are seeing in the kind of this great fashion reset, we're seeing more brands kind of try to give their DTC a boost. another thing that they're doing a trend that i've noticed is that more and more brands are going back to like the trunk shows and creating these like really intimate moments with their shoppers which is still hard because you have to drive people to these events but it is i think a positive that people are like getting more intimate and like more focused on what sales what their customer wants particularly from them and then the other thing this is still wholesale but a lot of brands are looking to build more intimate relationships with specialty stores right now.

13:32Specialty stores and independent boutiques who have like a very close relationship with their own shoppers too. And so it's a little bit closer to demand and that, you know, you build a good relationship with the buyer there. They kind of talk you through like what their shopper wants, like what's working, et cetera. And also, you know, people have said to me in the past, like those buyers are buying with a specific client in mind, which is helpful for emerging designers as well. Staying on a positive trend, are there instances, we talk about this macroeconomic environment, we talk about department stores struggling, we talk about how hard it is to go DTC if you're small, and then alongside opportunities like the trunk shows and the specialty boutiques.

14:13Is there any specific area or category or instance where a emerging designer right now has an advantage. One thing I've seen and heard during Fashion Week is just how nimble you can be when you're smaller in this environment. Like being nimble can be, can in some cases be a double-edged sword, right? Like you're so small, a big disruptor can topple you, but you're also small enough to pivot quickly. Are there any other areas where an emerging designer could have an advantage in this current climate that you've seen? Yeah. I mean, I think that that is a key one, you know, depending on demand, depending on what you're seeing in the market, depending on like the challenges that are thrown at you, you can either kind of like blow it up or like shrink in a little bit.

14:54And so you have that flexibility, which is a key advantage. The other one that I feel like I kind of mentioned earlier, but is this emphasis on creativity. I mean, as the market gets more challenging and we're seeing this consumer pull back, one thing that you keep hearing over and over again, even as like brands fashion widely is struggling with like under pressures, rising costs, tariffs, et cetera, is that consumers, you can't just go the most basic thing. You can't just like cut costs. Consumers are looking for things right now that are really, really special. Like if they are going to spend, they want to spend on something that like means a lot to them that really stands out that is really, really unique.

15:40And so I think while everything is really, really difficult, that does represent a key competitive advantage for young brands to lean into. Yeah, I've written about this before as well. It's that consumers are not necessarily cutting back on their fashion spending altogether, being more selective and thoughtful and calculated. And how do you produce something that gets them interested enough to spend the little bit of wallet share they're willing to dedicate to fashion in tough times?

16:09we'll be back with more of the debrief right after this

16:17a lot of what we're talking about is these emerging designers and how challenging the climate is for them and that they're not able to scale or to break through but it's not just emerging designers that suffer if they don't break through like the industry needs innovation. It needs creativity. What's at stake if we don't see a stronger pipeline of emerging talent? Yeah, the emerging designers really bring so much interest to fashion just more broadly and so much energy. I mean, just shoppers love to discover something new. Shoppers love a breakout story. So there's that element of it. But then on the other end, the industry and the way that it operates really needs a supply of design innovation to thrive.

17:04And often it's in these startups. It's in a creator breaking out with a fresh perspective where those creative ideas ferment. And that is something that the industry is really in need of right now. So as we look ahead to the next couple of seasons, what do you think the environment's going to be? What are these designers operating in for the next couple of seasons? What's the source of optimism and what keeps you up at night? Yeah, it is a really, really tough market. But one, I think designers and young brands and young businesses in general are trying to get closer than ever to their shopper.

17:46And like, you know, Nancy said it really well, like build on bricks rather than on clouds. and I think we're really seeing designers think about that. Figuring out like what is my niche? Who am I speaking to? Who am I serving? How do I serve them appropriately with product? I think we're going to see more designers smartly build closer to demand with a focus on profitability and sustainability and you know it's less about growth at all costs right now and more about just like building a steady, good business. So I think in a sense, back to basics, as well as there's a lot of opportunity in pricing right now, you know, like luxury at one end going up and, you know, tempering prices too right now.

18:35And then at the other end, you have fast fashion cheaper than ever. There's a lot of opportunity in the middle for well-designed products with a smart point of you that aren't exorbitantly priced. I love it. I, like my mom used to say, slow and steady wins the race. I think we're all correcting a little bit and slowing down, which makes sense. So we've spoken a lot about the challenges that are taking aim at these emerging designers, but there are sources of optimism. There are things that they can do to not just survive, but thrive. What is the source of optimism for emerging designers for the next couple of seasons?

19:13I think one big source of optimism is how much it has become evident, how important creativity is to this industry and how key that is to fueling sales, to building good businesses. And so I think that is a source of optimism. And we are also seeing emerging designers right now in this moment of struggle get really smart about how they're building their businesses. They're staying super close to demand, as Nancy put it, and her kind of like revamp that she's going through right now. She's focused on building everything on bricks rather than on clouds. And I think you're seeing that across the board, brands getting closer to their shoppers and understanding like where their competitive advantages are, who they're speaking to, and being really sharp about that and growing at a pace that makes sense for them, no longer just growth at all costs.

20:06And then also another brand that I spoke to, Autolinger, which is this Berlin based brand that was founded in 2016. You know, they spoke a lot about it's not that nothing is working right now. It's just that you have to have like a very specific product and focus your offering. And that that is a good guiding light is like, what is the creative differentiator that's going to lead to better products in the marketplace and better businesses. Joan, thank you so much for joining us. Thank you for having me. Please be sure to check out Joan's article, The Great Fashion Reset. Is fashion failing emerging designers at businessoffashion.com?

20:45It's part of a wider series of stories we're doing on the challenges facing fashion and the way forward as the industry enters a historic high stakes season. These and other stories are available to BOF professional subscribers only and you can find the links in the episode notes. you've been listening to The Debrief produced and edited by Olivia Davies and Eric Bria I'm Sheena Butler-Young we'll be back next week with a new episode thanks so much for joining us and be sure to follow us wherever you get your podcasts