Authored by Áslaug Magnúsdóttir and can be found here: http://is.gd/PaYGhr
Finding Your M.O. is an on-going series by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. In Part 3, we broke down the critical elements of a business plan. Today, we tackle the topic of good mentorship.
NEW YORK, United States -- Earlier this month, my mentor, former boss and business partner, Marvin Traub, passed away at the age of 87. Marvin was a defining figure in the American retail industry and the man who, in his longtime role as president and CEO of Bloomingdale’s, pioneered the concept of bringing entertainment to retail. With his out-of-the-box ideas and ability to rally people around his vision, Marvin put an indelible stamp on the way the industry operates today. And even in his later years, possessed of a rare energy and passion for life, Marvin worked harder than anyone I have known. I was extremely fortunate to have had the opportunity to work closely with him, learn from his vast experience and meet many of the industry contacts that he nurtured over half a century of work.
Marvin’s passing got me thinking about the extraordinary importance of good mentors. In life, in general, we often rely upon select people — parents, teachers, spouses — to help mold us into who we are. The business world is no different: we need bosses to grow us into successful business people. And, in turn, we need to mentor those who are looking to become the same. Marvin was a boss and mentor who greatly shaped my career. And now, with him gone, he has inspired me to do the same for others.
Not all bosses are Marvins. Sometimes a boss is and will always be nothing more than somebody you work for. But even in a more favourable scenario, mentoring and being mentored isn’t easy. We don’t always like to be shaped and it’s not always fun doing the shaping. Indeed, many of my most important learnings from bosses like Marvin came during bumpy moments when we did not see eye to eye on a particular issue. Similarly, the process of mentoring some of the people of whom I am most proud was almost as painful childbirth. The fact is, great mentors and mentees are not necessarily great friends. With that said, here are some words of advice on how to mentor and be mentored effectively.
HOW TO BE A GOOD BOSS AND MENTOR:
1. Lead by example — and stick to it.
Good bosses and mentors take a stand on how they want things done, which sets the standard for the organisation at large. No manager’s style will make everybody happy. The key is to be consistent, so that employees learn how to operate within your particular approach.
While at McKinsey, I worked on a project for a manager with incredible attention to detail. His reports were premeditated and polished to a tee: the structure of the document, the choice of words, the rigour of the analysis, even the labeling and placement of the footnotes. At first, I grumbled about his “anal-retentiveness.” But I soon learned that his painstaking approach drove real results and I benefited greatly from employing it throughout my time at the company.
In my next job, I made investments for a billionaire entrepreneur who was a risk taker, unbound by process, structure and other norms. At first, this was chaotic and confusing. But he, too, was incredibly successful and he taught me to be comfortable operating in an environment in constant flux. I learned how to anticipate the unpredictable. And without this guidance, launching and running an internet start-up would have been a daunting task indeed.
The key is: whatever your style, teach it and bring others onboard. They may not love your approach, but they will adopt it. Nobody respects a flip-flopper.
4. Share yourself
Have the confidence and willingness to share your experiences and relationships with your people. That’s half of what they are looking for.
Marvin Traub went out of his way to share with me his vast network of contacts. Over daily breakfasts at the Regency and lunches at the Four Seasons, Marvin and his business partner, Morty Singer, introduced me to hundreds of colleagues and associates — including my co-founder, Lauren Santo Domingo. Many of these introductions have formed the basis of my professional community. And Marvin’s generosity in this regard motivated me to work even harder for him. The point: be generous with your network of knowledge and contacts and your mentees will bend over backwards for you. Hoarding only slows their growth and fosters resentment.
5. Encourage debate
Just because you are the boss, it doesn’t mean you have all the answers. Sure, you know that, but you really have to believe and show it. Encourage debate among your people. Get them to speak up and voice their opinions, even if they’re unpopular opinions, particularly with you. Let feisty people tell you your idea is stupid. Help timid people articulate their support for your idea. Good mentors listen and learn and develop outcomes that take into account different personalities and all sides of the argument. To be clear: this is not about letting people be rude — it’s about enabling people to say whatever they think about the idea at hand.
HOW TO BE A GOOD EMPLOYEE AND MENTEE:
1. Debate respectfully
In keeping with the previous point, when your mentor encourages debate, be vocal in expressing your opinions. Articulate your point and provide evidence to back it up. But don’t get out of line if your boss doesn’t see it your way. Your boss is usually your boss for a reason. Pattern recognition and concern for other factors may influence the final decision, even if the outcome seems counter-intuitive to you.
2. Learn from the good and the bad
Nobody is perfect. All bosses and mentors have good and bad qualities, just like you do. Don’t lose sight of the good because you are preoccupied with the bad. And try to learn from what you don’t like: make a note of what you don’t agree with, so that you might do differently when you find yourself in a similar situation. If you’re not also a mentor already, you will be one day and you’ll want to draw on all of these notes.
Make sure you share the work you are doing. Your mentor isn’t psychic. So share loudly and share often. Provide regular updates and schedule frequent one-on-ones. Pick up the phone, pop into the office. Do not wait until a mentor or boss has to ask about something. Indeed, if he or she has to ask, it’s a clear sign that you are undercommunicating.
4. Ask for help
Always ask your boss or mentor for help when you need it. Whether you don’t fully understand a task or feel stretched by your workload, it’s your obligation to ask for back-up. If you think you might need help, then you need help. Said differently: it’s unacceptable to not ask for help and then miss a deadline. That’s a sure fire way to get fired. No boss should be upset with you for asking for help. A boss will, however, look at you critically if you overpromise and underdeliver. Don’t mess this one up.
5. Your boss is human too
Just as you want your mentor to take a genuine interest in what you are doing, take a genuine interest in return. It can be lonely at the top and there is often a lot of good that comes from trying to get your boss to open up in an appropriate but personal way. Having a relaxed human dialogue with a boss or mentor is often the best way to strengthen your relationship and make the most of your learning. But be honest and respectful about how you reach out. Idle chatter or kissing-up is interpreted as just that and may do more harm than good. Better to pick a topic of common interest and dive deep, batting stuff around over a period of time, like an extended chess game. Bosses need love, too, and sometimes the best form of love is a conversation with about something where both parties temporarily put business aside and lose yourselves in something personal or even frivolous.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/KQOv5N
Finding Your M.O. is an on-going series penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. In Part 2, we examined the need for speed. Today, we break-down the elements of a business plan.
NEW YORK, United States -- Early stage entrepreneurs often ask: is a business plan really that important or can you get away without one?
The quick answer is: yes, it’s really that important, and, no, you cannot get away without one. If you’re looking to third parties to raise capital, they’re understandably going to want to see a plan for what you want to do and how their money is going to be spent, with some very specific topics addressed along the way.
Certainly, there are exceptions to the rule. Friends and family sometimes just want to fund your business no matter what, or maybe you’ve found an angel with such an understanding of your concept that a plan isn’t necessary to get the checkbook out. My partners and I at TSM Capital sometimes invested in fashion brands that did not have business plans, but did have management teams with very clear ideas about growing the business. But even in those situations, our first order of business was always to sit down together and map out a plan. A business plan, at its core, forces the entrepreneur to clearly articulate the business in writing so that the entrepreneur, key team members and investors all stay on the same page in terms of product, strategy and financial expectations.
In short, you’re most likely going to need a business plan to get funded. And if you’re lucky enough to get funded without one, you’re still better off having one as it will serve as a roadmap for your early months.
So beyond wanting exceptional management to be pioneering a high margin, scalable business that takes advantage of an exploding industry trend, what else are investors looking for in a business plan? Here are a few general rules to keep in mind in terms of the presentation of the plan itself:
Be brief. Professional investors like short business plans, generally no more than 10 pages and certainly no more than 20. Remember that you are catering to a short attention span, since these people see lots of plans. Get in, make your points and get out. Yes, there can be exceptions: The investor deck for Moda Operandi’s last round of financing crept up to nearly 70 pages, since we had multiple investors with numerous requests, and, thankfully, we ended-up being oversubscribed. But honestly, what do you accomplish with 70 pages that you can’t with 20?
Be visual. If a picture is worth a thousand words, in a business plan, a picture might be worth a million dollars. Your goal is to make sure your potential investor understands and is focused on the beauty of your concept and good graphics help convey good ideas. I learned this the hard way: an ex-lawyer and a McKinsey alum, I drowned M’O’s first business plan in a sea of microscopic data, lists and charts with very few pretty pictures. One investor, gasping for air, (who, fortunately, did come in on our Series A) asked whether I came from McKinsey’s German office! Your business plan needs to let investors breathe so they can digest what is going on. I now always balance key data with gorgeous visuals, and I have a brilliant art director who helps create this precise aesthetic.
Be numerical. As you might imagine, financial investors are particularly focused on — you guessed it — the finances. Not only do they want to see financial projections, they want to see these same financial projections twisted and contorted into a baffling array of numerical analyses: P&L projections, cash flows, unit economic analysis, customer acquisition costs, customer lifetime value analysis, conversion funnels, etc. At the risk of jeopardizing the brevity point: the more numbers, the better.
If you want to stick to the 10 page rule, below is a framework that works for most businesses:
Page 1 – The Team. Either start with “The team” or “The summary of the concept” (see Page 2 below). I like to start with The Team because when you’re presenting to investors in person, it makes sense to introduce everyone at the beginning of the meeting. The goal is to give investors a quick summary of the experience you and your team bring to the table. Don’t spend more than a minute on this when presenting.
Page 2 – Summary of the concept. Here you want to give the big picture about your concept before diving into details. For example, at M’O, this was a description of an “online trunkshow service that sells luxury clothes and accessories to consumers immediately following their presentation during fashion week,” plus a couple of other points.
Page 3 – The problem you are trying to solve. This is critical. Why is there a need for your business? What real problems does it solve? What voids does it fill? Investors are going to love to debate this one with you so make sure you really drill down to the specific value add your business provides. M’O example: “Customers can only purchase a small percentage of a designer’s overall collection at traditional retail and often only in a limited number of sizes.”
Page 4 – Your solution to the problem. What is your solution to the specific problem? How does it benefit the various stakeholders (customers, businesses etc.) M’O example: “M’O consumers can order any item from our designers’ runway collections in any size the designer offers, from the privacy and comfort of home.”
Page 5 – The size of the opportunity. This one is also critical. You want the bread baking in the oven and wafting over to the dinner table. While some investors are willing to invest in strategic but financially “small potatoes” opportunities, most VCs are looking to invest in businesses that have the potential to generate hundreds of millions of dollars in revenue. So you need to research and quantify the opportunity and then paint a picture that tells it clearly (and aggressively), i.e. a top down analysis of how big the market is to how big a share your company will take.
Page 6 – Your competitors. Who else has tried to solve the specific problem, or a similar problem, and how have they done it? What makes you unique versus them? How do you position yourself versus them?
Page 7 – Why will your concept succeed. Time to peacock. Why are you good? What is your competitive advantage? What assets — IP, expertise, contractual rights, relationships, technology etc — do you possess that will allow you to demonstrate success? You want to show off here anything that is unique or superior. Don’t be bashful.
Page 8 – Your marketing and customer acquisition plan. Assume in the beginning that you are unlikely to have a significant marketing budget. How are you going to get the word out there about your business without breaking the bank? Think PR, partnerships, customer relationships, social media, etc.
Page 9 – Five year financial projections. Full disclosure: no one has a crystal ball and it is unrealistic to create a perfect (or even near perfect) five year plan for a completely new business. Investors know this, too, but they want to see how YOU think about growing the business; whether you’re really in it to win it. There is no right answer to how you shape these financial projections. Different entrepreneurs have different approaches, ranging from being aggressive (fearing investors will deflate the numbers anyway) to under promising and over delivering (hoping investors will appreciate a conservative tact). Bottom line, the numbers need to look attractive but achievable. You need to show them the money. And if you can’t, then why are you launching this business?
Page 10 – Next steps. Take a deep breath, you’re almost done. Let them know quickly where you are in terms of the product, the team and your timing. “Next steps” is less about what’s on the page and more about how you talk around it: that this is a huge opportunity for investors, that other investors are interested, etc. Remember that fundraising is like dating: honesty is important but go slow. Don’t reveal all of your quirks and flaws on the first date, it is up to the other party to discover those attributes over time. By that point, hopefully both parties will be in love.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/VotI1m
Finding Your M.O. is an on-going series penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. In Part 1, we looked at the path from big idea to launch. Today, we tackle the topic of growth.
NEW YORK, United States -- When founding a company, one of the most important decisions you will make is how and when your company grows. Growing a young company is not an involuntary, linear process, like how a baby grows. Growth tends to happen in sizeable, step-up increments, like a set of stairs, based upon deliberate decisions you and your team make. The key is to balance careful planning with speed of execution.
The implications of this tricky balance are multiple and very real. Do you “get it right first,” subordinate growth to perfecting your product or service, or do you “get big fast” and shun polishing the decks while it’s full speed ahead?
As you will hear me say often, there is no right solution to this kind of puzzle. But as co-founder of Moda Operandi (M’O), I mulled this balance carefully and decided I needed to “get big fast.” I saw an opportunity for M’O to be first to market with our unique “pre-order luxury goods” concept and I knew that meant aligning myself with key people and companies to help me do it quickly and cleverly. In short, I felt the need for speed was a critical competitive advantage that outweighed hoarding equity and control. This decision had significant implications for how I thought about taking on a partner, where to raise financing, and how much. And since, 16 months later, M’O remains the only store in the business with our dedicated pre-order model, this decision has turned out to be one of the most important I’ve made for the company to date.
TO PARTNER, OR NOT TO PARTNER
One of the first decisions to make when you come up with a business idea is whether to do it alone or with a partner. You have probably heard that entering into a partnership around a company is like entering into a marriage, and it is true. Partnerships, like marriages, are exciting because the whole is greater than the individual parts and together amazing offspring can be born. But also, like marriages, partnerships require work and compromises and they have real costs. Decision-making and control is shared; equity and wealth potential is diluted. So just like getting hitched on a whim in Vegas is not necessarily a great long term idea, you shouldn’t pick a partner unless you think you need to. And if you do need to, make sure that person is kick ass.
I knew Lauren Santo Domingo, my co-founder, would be the perfect partner. Why?
Investors are your friends. They give you money, you build cool things, consumers spend money, everyone is happy. However, there are different kinds of investors and each has pros and cons. Specific to speed to market, here are a few things to consider:
HOW MUCH MONEY IS ‘ENOUGH MONEY’?
Another common question I am often asked is, how much money should I raise and how quickly should I raise it? Fundraising is painful and time consuming. Some founders prefer to raise just enough to get something to market now. On the other hand, some founders prefer to go the extra mile and aim for a bigger raise so they won’t have to suffer through the process all over again in just a short while. There are pros and cons to each approach.
At M’O, we went the extra mile. While we were fortunate enough to have some seed money to get our proof of concept going, we parallel-tracked the fund raising process in full swing until we secured our first round of venture capital. Grabbing market share was critical. We had to build the car while driving it down the highway.
This may not always be the right decision. A young company might be better served in its early days focusing its attention on perfecting the product rather than on fundraising. And depending on the economic environment and the appetite of the investment community, raising more early on might mean giving up more equity to investors than if you wait. But you probably will need more money than you think. And it is always good to stash away cash today for a rainy day tomorrow, like a sudden downturn in the market or the unexpected arrival of a formidable competitor.
During our latest fund raising, I had a meeting with a Chinese businessman, one of the most successful retail tycoons in the world. He said, “You guys are hot. Everyone is talking about M’O. Raise as much money as you can now.”
The point? If capturing market share is of the essence, raise as much money as you can now. Having too much money is a good problem, even if it means dilution, giving up control and sharing the throne. But get to market. Raising all the money in the world means nothing if you aren’t open for business.
Authored by Aslaug Magnusdottir and can also be found here: http://is.gd/gGgP9X
This is the first in a new series of articles from the Business of Fashion website on the basics of having an idea to its' fruition. Originally published in June 2012, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
On the heels of last week’s announcement that Moda Operandi has raised $36 million in new funding, we are pleased to launch a new BoF series, Finding Your M’O, penned by the company’s co-founder and CEO Áslaug Magnúsdóttir on her experience at the helm of a fashion technology start-up.
NEW YORK, United States — In February 2011, I launched an online store — Moda Operandi — with my business partner, Lauren Santo Domingo. Moda Operandi (M’O) was the first of its kind, offering the latest runway styles for immediate pre-order following their presentation at fashion shows in New York, London, Milan and Paris. The site was the result of an idea that I had back in the Fall of 2009 while I was running the premium division at Gilt Groupe: why not allow fashion lovers to buy anything off the runway, in any size offered by the designer, from the comfort and privacy of home? That idea became an obsession that I knew I had to see through to fruition. And I did: Friday last week, M’O announced a Series C round of financing in the amount of $36 million. Investors in the round included venture capital firms RRE, NEA and NAV, as well as strategic investors Condé Nast, LVMH and IMG. Champagne was uncorked. M’O was cemented as a real business.
While celebrating the closing of our latest round, I sat down for coffee with my friend and former McKinsey colleague, Imran Amed, founder of The Business of Fashion. Imran suggested I write a column for BoF about my experience as a founder and CEO of a fashion startup. Our conversation got me thinking about my career, M’O and how it all came to be. Specifically, what are the key requirements for success as an entrepreneur? Why do some start-ups prosper while others fail? How much of it is a result of planning and skill, and how much is just dumb luck?
There is no perfect script for launching a business and I don’t pretend to have all the answers to these questions. But I do hope that sharing my thoughts and experience over the weeks to come can shed some light on the issues that fashion start-ups face and tease out some lessons learned. And, most important, I hope that my story might help others obsessed with an idea to take the plunge to see it through.
1. SOLVE A PROBLEM, EVEN IF OTHERS ARE ALSO PRESENT
You have heard it before and you will hear it again: a start-up that solves a problem, addresses a need and/or fills a void is one that is best positioned for success. The fact that M’O fills a gap in the market has been one of the key factors that has taken us this far. M’O also is unique in that it is the only business specializing in letting consumers pre-order the latest designer runway styles. But if solving a problem is critical to a company’s success, is uniqueness a requirement as well? Absolutely not. Many examples exist of successful companies that were not the first of their kind. In the online fashion space, Gilt Groupe is a good example of this. Gilt took its concept (selling exclusive fashion at a discounted price through limited-time “flash sales”) from a business previously launched in Europe, Vente-Privée, but shaped the concept to address the needs of a US customer base. And Gilt is not alone: flash sale sites have taken the US by storm, delivering discounted goods and services to customers who crave them. The bottom line is that while filling a void is key, being first to do it is not.
2. ACTUALLY, IT’S REALLY ALL ABOUT THE TEAM
When I started thinking about the concept for M’O, I immediately knew that Lauren was the perfect business partner. We had both worked in the fashion industry for a long time and we had complementary skills. My background was steeped in the business side of fashion, having worked as both an investor and consultant to fashion brands. Lauren’s expertise was in the creative side: a long time stylist and editor, she has an exceptional eye for fashion and deep relationships with designers around the world. We knew that technology was our weak spot, so we embarked on the notoriously difficult task of finding a qualified CTO in New York. Once this problem was solved, we knew we had the key skill sets covered. We could then move on to building our initial website with a small, but highly qualified team of passionate people.
The key take-away? Your initial team is everything. Nail down the key people at the get go who are critical to success and then get going with it. Don’t get bogged down with hiring in non-essentials at the early stages. Outsource other needs or just acknowledge to your investors and partners you aren’t wasting time on those areas now and will address them later.
3. PASSION WILL GET YOU FAR
People often ask me what it is like to be a founder and CEO of a start-up and whether this is a path I recommend. My answer is simple: don’t start and run a company unless there is nothing else in the world you want to do. Being the CEO of a start-up is all consuming. You no longer have weekends, holidays or a truly carefree drink after work. You are on constant alert, thinking about the people who work for you, planning out the future of your company, fussing over every small detail that might contribute to the success (or demise) of your business. The ups and downs are real and extreme. So the one thing you absolutely need to keep yourself and your team motivated is complete and utter conviction in and passion for what you are doing. Anything short of that and your team will smell it, your partners will smell it, your customers will smell it and you will fail.
Years ago, while living in London, a business partner and I spent several months researching and developing a concept for a healthy fast food chain. Despite it being a solid business concept that catered to a real need in the market, it just wasn’t my passion. And when things started to get tough, I didn’t have the conviction to keep myself going. M’O, on the other hand, has captivated me from the day I picked up the phone to call Lauren. With that kind of love for our company, I am motivated to wake up every day to nurture and grow the company.
4. LIKE IT OR NOT, CASH IS KING
At the risk of stating the obvious: you might have a wonderful business idea, but unless you are independently wealthy or able to convince someone else to fund your idea, it is unlikely to go much further than the drawing pad. Raising money is like most things in life, an acquired skill that requires practice and dedication. When I moved to New York in 2006, I started an investment company, TSM Capital, with retail legend Marvin Traub. TSM invested in fashion brands, such as Matthew Williamson and Rachel Roy, and I spent a good deal of time (and heartache) raising capital for early stage fashion companies. This was an extraordinarily difficult task, as many investors were not comfortable assessing the competitive advantage of individual fashion brands. I had to hone my fund raising skills by learning the do’s and don’ts of selling brands to investors: what motivates them, what scares them. That learning was critical during M’O’s fund raising process and we have been blessed with the ability to access capital to fund our growth and development, having raised nearly $50 million in under two years. Without this money — and without knowing how to raise money — the beautiful idea behind M’O would have stayed a sketch on the drawing pad.
5. LIFE IS ALL ABOUT TIMING
This lesson is may be the hardest. Timing is everything, too. Some ideas are great but they are just too far ahead of their time and they fail. Some ideas are great but they arrive at the party too late and they fail. This is as true in the online fashion world as anywhere else. Gilt got its timing completely right, launching just when the economy was experiencing a significant downturn and full price luxury sales were suffering heavily. As a result, Gilt’s business, selling discounted fashion merchandise from previous seasons, was an instant success.
At M’O, we knew our time was now. We saw the writing on the wall. Consumers were demanding online access not just to commodity products from Amazon but luxury goods from designers. With the economy rebounding, we worked hard to get to market fast — even at the expense of making mistakes along the way. As a result, M’O has been able to generate the sales and financing required to put the company in a unique place. In short, while you can’t time everything, do your homework to determine the right moment for your idea. Once you see that wave coming, paddle as hard as you can to catch it. There might not be another big one on the horizon for some time.
Áslaug Magnúsdóttir is co-founder and CEO of Moda Operandi
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/FDHBpi
This is the ninth in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NY-based entrepreneur and strategic advisor. Today, we provide a practical primer on how emerging brands can seize the direct-to-consumer e-commerce opportunity.
NEW YORK, United States -- It’s no secret that the web has become one of the most effective tools for fashion brands to market and sell their wares. According to market research firm Emarketer, online sales of apparel and accessories are now growing faster than any other e-commerce product segment (20 percent per year). By 2016, the category will account for $73 billion worth of online purchases in the US alone, just over 20 percent of all online retail sales. And while young fashion brands will always need to maintain offline touch points where customers can touch, feel and try on product, seizing the e-commerce opportunity is equally crucial to long-term success.
Thanks to platforms like Net-a-Porter, e-commerce already accounts for a large percentage of sales for many young fashion brands. Yet to be competitive, every emerging brand must eventually consider launching their own e-commerce presence. Not only does this allow young labels to provide consumers with a more controlled and pure online brand experience, but the economics of selling directly to consumers, bypassing wholesalers, allows a brand to capture the entire margin between the cost and retail price of each product sold. This can often mean 20 to 30 percent more profit.
Many young fashion brands worry that setting up their own e-commerce site will compete with existing online wholesale accounts, which can be an important source of revenue and exposure. But the simple fact is, the Internet is a big place with varied traffic patterns and diverse customer profiles. And having your own site, like a brick-and-mortar retail store, can actually help your sales on other sites by increasing exposure and offering consumers a more powerful brand experience. That said, it’s probably wise to offer some amount of exclusive product on your site, which can help to generate buzz through a unique experience that can’t be found elsewhere.
Selecting an e-commerce platform
While it’s clear to most emerging fashion brands that there is a compelling opportunity in e-commerce, their quandary is usually how and when to launch. This is often exacerbated by the level of investment required to get started and a lack of technical expertise.
Luckily, there are some great new tools available that enable easy setup of an e-commerce site at highly affordable rates. Platforms like Shopify, SquareSpace and Tictail offer off-the-shelf, plug-and-play options for companies new to e-commerce. These services require few technical skills to set up and are extremely simple to use, though they are heavily templated, with little scope for customisation. As for cost, however, most offer simple revenue sharing schemes or low monthly fees. Open source e-commerce platform Magento is another, more flexible, option, though deployment requires greater technical expertise. Generally speaking, these kinds of platforms are ideal for brands with expected sales below $1 million annually.
If your business is expected to sell over $1 million online, annually, you may want to consider more advanced platforms, such as DemandWare, Venda or Sellect. These services are more flexible and offer more robust, customisable feature sets, including easy-to-manage, drag-and-drop merchandising tools, but require significant investment to deploy.
Before choosing an e-commerce platform, you should be clear about your specific business goals and sales targets.
An equally important point to consider before you build a website is who is going to run it on a day-to-day basis. As with any storefront, e-commerce sites require constant management, as new product arrives and marketing messages evolve. If you or your team will be managing your e-commerce business day-to-day, the site must allow for easy, regular changes. Make sure you fully understand the content management system that accompanies the platform you choose, so you can operate the site and train others.
Every e-commerce platform should also come with a Customer Relationship Management (CRM) system, which will help you to collect and organise customer data. It’s very important to carefully vet these systems, as the direct relationship you develop with your customers through an e-commerce site can be one of the strongest tools in growing your business and result in significant sales lift.
No matter which platform you choose, you will need to design a compelling website. With simpler platforms, which allow for little customisation, you might consider doing this yourself. But more likely, site design will be undertaken by a professional web designer on your team, or by an outsourced individual or agency. While we could write an entire book on the finer points of building a great online store, we recommend that you work closely with vetted professionals to create a site that is not only a proper reflection of your brand, but also offers an engaging and enjoyable user experience. Working with a trained user experience professional, or UX, is as important as working with a visual designer. Be wary of agencies that tell you this function is not needed.
Your site should also work easily and gracefully across multiple types of devices, like smartphones and tablets. In 2013, around 15 percent of total e-commerce sales in the US will be made from “post-PC” devices, with 65 percent of those coming from tablets, according to Emarketer. By 2017, sales from mobile and tablet devices are expected to account for 25 percent of total purchases. With this in mind, it’s crucial that your e-commerce presence be optimised for these platforms. But rather than designing a separate mobile sites or apps, we suggest building your site using “responsive design,” an approach that enables you site to automatically detect your user’s device and adjust the experience to different display sizes and forms of interaction (like touch screens).
Remember, your e-commerce site is nothing without content. Beautiful brand images and product photography are a must. We recommend that you work with a trained photographer to shoot these images and remember to capture multiple angles. Zoom and 360 degree views of the product are also nice to have.
Inventory management is a critical part of operating an e-commerce site. For many brands, this site is their first foray into the direct-to-consumer sales channel. While this has several benefits, as outlined above, investing in inventory without the guarantee of confirmed orders can be a risky, cash-intensive undertaking.
Many young brands simply allocate a predetermined percentage of their offering to the online channel. While this approach may work for the inaugural season, we recommend a more precise planning process whereby you use past sales data for similar styles, look at traffic growth from season to season, and consider the overall “visibility” of each particular product. As can be expected, an item featured on the homepage, or one that might be planned for heavy press exposure, is likely to sell at a higher volume.
One of the benefits of an e-commerce site is the ability to manage your own liquidation channel. Whether it’s unsold units, excess inventory from returns, or even extra samples, you can utilise your new store to move goods. But it’s important that you do this in a way that does not damage full price sales, so be conscious of over-emphasising sales.
An e-commerce site must also be coupled to a fulfilment platform that can process orders, ship to customers and accept any returns. When some small brands first launch their sites, they fulfil goods right from their offices, or apartments! Other brands partner with a third-party logistics centre that will hold the goods, manage shipping and process returns. Often times, these warehouses do not manage customer service, so it falls on the brand to answer phone calls and emails from their customers. While this might seem a headache, it can often help a brand uncover important feedback that should be incorporated into future product designs and company strategies.
Finally, an e-commerce site cannot survive without ongoing promotion and traffic generation. There are many methods to achieve this. Our previous Basics article on marketing covers many of the most effective techniques that a brand can use to promote itself, but some specific methods to consider relating to e-commerce are search engine optimization (SEO), search engine marketing (SEM), affiliate marketing, email, and ongoing promotion via social media.
Ari Bloom is the founder of A2B Ventures. He has worked with numerous fashion brands as a consultant and a mentor working with the CFDA’s fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/0mRIsC
This is the eighth in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NY-based entrepreneur and strategic advisor. Today, we examine a critical element that can ultimately separate a successful fashion business from the rest: marketing.
NEW YORK, United States — Fashion is a hyper-competitive industry. Talent is readily available, so having a well-designed and a high-quality product is simply the price of entry. What ultimately separates a successful fashion business from the rest is often how the brand’s story resonates with consumers.
In the pre-digital age, brands were built with classic marketing strategies, using traditional media like print and TV to ‘push’ their latest campaigns at consumers. While these traditional tactics may never completely disappear, today’s Internet-era consumers have more power than ever before and interact with the brands they deem worthy of their time via a number of new channels. With the proliferation of digital and social media, the rise of ‘on-demand’ content and services, and the growth of micro-targeting techniques, people increasingly expect products and services to speak directly to their individual needs.
The most successful fashion brands will embrace a blend of both traditional and new media to communicate a consistent and authentic message across multiple channels in a manner that both piques customer interest and creates long-term brand value.
Defining Your Brand Story
Before marketing your brand, it is crucial to define what it is — and what it isn’t. In the most simple form, brands should think about key descriptions of any design or aesthetic features, define their pricing or market segments, and identify exactly who their customer is, factoring in elements like gender, age, geography, interests and anything else that helps describe their lifestyle and preferences. By the end of this exercise you should be able to clearly articulate a simple brand equity statement in one or two sentences, for example:
“Brand X is a contemporary American work wear collection featuring traditional fits and luxury fabrics for professional women ages 40-50. Brand X is unique because it offers exceptional quality at accessible prices.”
The Classic Marketing Framework
In the classroom, the 4P’s (Product, Place, Price, Promotion) has become a straightforward, foundational framework through which to think about marketing. There are many other frameworks available, but the 4Ps is a good place to start. It’s important not to be too rigid within any one framework, however.
In fashion, having a great product is the essential foundation of a great business. In the classical marketing framework, “product” is defined as an item or service that meets a consumer’s need or desire. But it’s worth noting that, in fashion, we are often designing products that people don’t yet know they want, then using our various marketing strategies to unleash their desire.
As we discussed in Part 5 of the Basics series, there are many business and trend considerations involved in the development of a collection. Likewise, when planning marketing initiatives, it’s important to consider whether they will be aiming to promote the brand or specific products. There is a place for both, but whenever possible, it is advisable to feature actual product, as this can directly help to drive sales and awareness of key items.
For example, is there an iconic piece from your collection that conveys your message best? Are there unique design or functional features to call out or focus on? Is there a particular lifestyle or activity that you want to associate with your product or brand? Is there a specific person or archetype you want to associate with your brand? What colours are important to the brand DNA, year round or seasonally?
In fashion, price is not only a reference to the nominal amount of money being charged for a product. It can also refer to the “value equation” that the brand creates in a consumer’s mind. For a price being paid, what qualitative benefits and functional utility is the consumer getting in terms of design, quality, goodwill?
Keep in mind that the resulting value equation will have a sizeable impact on how your brand is perceived. This should be considered before any price tickets are printed.
As discussed in Part 6 of the Basics, fashion brands have multiple sales channels through which to reach end consumers. In this framework, “place” refers to selling the right product at the right price (value) in the right place.
Where you sell influences which customers you reach and how your product is perceived. Therefore, picking the right accounts can have a major impact, not only on your financial results, but also on your brand image. Some brands may even justify selling or consigning to an account that is known to pay late (or not at all), simply for the marketing value. While we don’t recommend working with retailers on this basis, you should always consider the brand equity you can create or destroy by working with certain retail partners.
If you own direct-to-consumer sales channels (a physical store or a commerce-enabled website, for example), you have the benefit of controlling the environment and experience. This gives you an opportunity to tell the story exactly as you want it, which may well be the most powerful marketing vehicle of all.
Regardless of whether you sell online, it’s important for every brand to have a website. This may only require a small investment of time and money, but will be a crucial way to capture the traffic that you generate when you create interest in your brand. Think of your website as the first window into your brand and your world.
There are many promotional techniques available to brands, ranging from the traditional to the cutting-edge. All are effective in their own way.
Perhaps the most traditional promotion technique is advertising: in print, TV, radio and, now, online. This is also known as paid media. This is often one of the more expensive methods of communication, especially in print, but can reach a large audience and can bring prestige to your brand. Many new magazines will run ads for young designers and very low costs, or sometimes for free, as long as the creative elements are strong and in line with the quality of the rest of the magazine. Online advertising can be more affordable, though there is much debate about the effectiveness of traditional banner ads. But deployed intelligently, with specific goals, online advertising can help drive sales, especially to your own e-commerce site, and can be targeted and measured much more effectively than print ads.
Many retail accounts will offer (or require) brands to promote your designs in store or in distributed marketing collateral, such as catalogues and store advertisements. This usually comes with a fee attached and can be executed by the brand or the store. Signage can be very effective in drawing a customer’s attention to your product in store, especially when it is competing against other brands.
3. Public Relations
A strong PR strategy can lead to extremely helpful “organic” media exposure and influencer endorsements via celebrity placement, gifting, wardrobing and personal appearances by the designer or brand representative(s). One of the big questions most young brands wrestle with is whether to hire a PR firm or to keep PR in house. If you do decide to hire an outside firm, it is important that you spend time first setting a strategy with clear benchmarks for success and meet regularly to review progress.
4. Social Media
With so many new online platforms and technologies available to brands, it can be hard to know where to focus. In general, it starts with understanding your customer. If you are selling designer dresses, platforms like Facebook may or may not be the best place to promote your brand. As it stands today, it is usually in a fashion brand’s favour to focus on highly visual social media platforms, such as Instagram and Pinterest, where they can demonstrate the beauty and design of their products. Instagram, which has really caught on in the fashion industry, is an excellent platform for small brands, as it is highly visual and enables you to demonstrate the essence of your brand, even thought it’s a hard place to drive sales as Instagram does not currently allow live links in image captions.
No matter which social media platform(s) you decide to use, choose carefully and make sure you have the resources to keep your accounts active and engage your followers. Somebody on your team must be dedicated to posting regularly, monitoring reactions and responding in a timely fashion. And remember, these platforms are conversational — not bullhorns — so make sure to also use your social media presence as a way to listen to your followers and gather important feedback.
Ari Bloom is the founder of A2B Ventures. He has worked with numerous fashion brands as a consultant and a mentor working with the CFDA’s fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/KFoLFH
This is the seventh in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NYC-based strategic advisor to growth brands. Today, we examine one of the most important parts of running a fashion business: production.
LONDON, United Kingdom -- The least glamorous, but possibly the most important aspect of bringing a fashion product or collection to market is production and manufacturing.
Production describes the process by which concepts are made into a saleable physical product. In most cases, this means going from a small set of samples or prototypes to commercial quantities of the item or style, often across multiple sizes, colours and patterns. As you can imagine, it’s impossible to separate production from the overall success of a brand, as great concepts can be designed, developed and sold, but a fashion business will ultimately live or die based on what is produced and delivered to the end consumer.
For most small fashion brands and start-ups, finding sources of production is the most challenging element to get right. Too often, early-stage businesses leave this until too late, and sometimes find themselves with orders to fulfil, but nobody to produce them. This is something to avoid at all cost. Once you have taken orders, you must be able to fulfil them, or you risk scaring away retailers for years to come. Remember, this is a small industry and everybody talks.
While there are endless options for production, both domestic and international, finding quality suppliers can be difficult, especially in the UK and and USA, where many top young fashion designers are based. As a result, many in the industry tend to be secretive and protective of their production sources.
In recent years, producers in France and Italy have become more open to working with young designers. But your orders (in small, unpredictable quantities) may tend to get pushed to the back of the order queue, meaning that your deliveries may be later than bigger brands, which can negatively impact sell-through rates and vendor relationships.
With so much competition for vendors, it’s essential to make sure you can secure production before you invest time and money in the design process, sales process and marketing costs.
IDENTIFYING PRODUCTION PARTNERS
So how can you track down production resources? As with most things in fashion, it comes down to leveraging your relationships and seeking out help wherever you can find it:
Former Partners: If you’ve worked for another company previously, especially a larger one, some of your former producers may be willing to work with you, or at least make a referral.
Accounts: Often a retailer will have preferred production partners that their other accounts work with. They may even use them for their own private label product, and, if you ask nicely, they may be willing to make some introductions.
Sample Makers: Many small manufacturing labs or factories who create samples often have associated production facilities, or know the best local manufacturers. Use them as a resource as they may be able to point you in the right direction.
Fashion Schools: If you are a student or alumnus of a fashion school, check in with your professors and tutors to see what resources are available to you. They may also have relationships you can leverage.
Friends and Colleagues: It never hurts to ask. But beware, you may not get a straight answer.
Online Resources: There are some very helpful sites that, for a fee, will give ratings and testimonials on apparel and textile manufacturers. Panjiva.com is a great example, although you may be hard-pressed to find top-quality resources if you operate at the luxury end of the business.
PRICING AND PLANNING
Another good reason to identify your production partner early in the process is because their execution capabilities and associated costs need to be figured in to your early design decisions, and ultimately into your pricing. If you’ve followed our advice from earlier in this series, you should have already set wholesale and retail pricing targets for your product. Then, by simple comparisons of these prices to your quoted costs, you should be able to tell whether they will allow you to make enough profit margin on each item, at the right level of quality.
Many designers ask what a reasonable margin target should be. The answer, of course, varies depending on the size of your business, its overhead, development, sampling costs and many other factors. Most companies try to achieve close to 50 percent margins at wholesale and over 70 percent in retail. But again, there are no hard and fast rules, as each circumstance requires different treatment.
Remember that not all factories will have all the raw materials, fabrics and trims required to construct your product. If procurement falls on your company, you will need to source these yourself, and in doing so, incur costs that will likely need to be paid on an accelerated timeline. Most suppliers will require some sort of deposit or prepayment to cover raw materials and/or the labour needed for production. Whatever balance remains will usually be required once the goods are ready to ship. Some suppliers will be flexible on terms, allowing you to delay these payments for weeks to months, which will help your cash flow, as you are not likely to get paid by your accounts or customers for some time. Always ask for terms so you can give yourself some cushion on payments. And remember, whatever arrangements you agree on with your suppliers should always be captured in an official Purchase Order that should detail all transaction and delivery terms.
THE IMPORTANCE OF SAMPLING AND QUALITY CONTROL
In order to get started with production, you will need to create or designate an approved sample to work by. This “sew by” sample, or design prototype, is the model by which the factory will use to create “bulk” production. If you are an apparel company, you will use these samples to define construction guidelines, as well as fit specifications and the grading of sizes up and down.
When production is in process, it’s important to monitor quality, as compared to your samples, which are what buyers will use to write their orders. The single best way to do this is to visit the facility regularly. This is obviously made easier when producing locally, but do not underestimate the value of an investment in travel to see production before shipping. Depending on the situation, you may be able to conduct fittings on test or bulk units to make sure that they are executing correctly. If this is possible, it is highly advisable. If you are unable to visit your facilities, there are third party auditors that can oversee quality control for a fee.
SHIPPING AND DELIVERY
When goods are ready and approved to be released, you will likely have them shipped or delivered. Some companies will “drop ship” directly to their own retail stores or accounts. Most often, the goods are received in an office or distribution warehouse. Once you take possession of the final products, you should make sure to pull some (or all) of the units to check for quality on execution. This extra time and money is well spent considering that your customer or account is likely to return any faulty or ill-fitting product. Remember to have a clear understanding of any packing parameters required by specific accounts, as failure to adhere to these parameters can result in charge backs and even order cancellations.
All in all, production can be the most complicated and cumbersome part of running a fashion business. If you have the resources to hire an experienced production manager, they will often be able to bring both know-how and sourcing contacts to your company. In fact, a production specialist is often one of the first hires a growing brand will make. Those of you still considering a career direction in fashion, and who have a mind for managing complex processes and logistics, and an eye for product, should keep this in mind as it is consistently one of the most in-demand skills in the fashion industry.
Ari Bloom has worked with numerous fashion brands as a consultant and as a mentor to the CFDA fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.
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