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Doing business in fashion industry is not that easy, even for once popular designer brands in New York fashion week.
According to reports from FashionNetwork, the sales of English designer brand Victoria Beckham increased by 17% to 42.5 million pounds last year, but the loss reached up to 10.2 million pounds.
It is noticeable that Victoria Beckham’s loss has worsened in three years in a row. In 2015, the loss was 4.6 million pounds, and 8.4 million pounds in 2016. Victoria Beckham claimed that the reason of loss was the building of brand, investment in staff and expansion in Asia and U.S. Victoria Beckham was founded in 2008, and it obtained the investment of 30 million pounds from private equity NEO to the digital and retail business. Ralph Toledano, NEO’s boss, was appointed as director of Victoria Beckham. Earlier, Victoria Beckham got a total of around 30 million pounds from Ami Paris, Miller Harris, Valextra, and Alain Mikli.
After the big success of cosmetics and glasses, Victoria Beckham is considering making investment in new products.
To fashion industry’s surprise, other categories and co-branded collections, not garments, are the main source of profits.
At present, there are three product categories under Victoria Beckham: apparel, eyewear, accessories. The sales of eyewear in 2009 was the best. To make more profits, Victoria Beckham released its cheap collections of high-class fashion, and it cooperated with Target to release the parent-child collection.
According to some analysis, the growth of business for Victoria Beckham has slowed, and brand’s expansion needs investment. In September 2016, Victoria Beckham for the first time did business in cosmetics, and cooperated with Estee Lauder to release the limited edition of high-end cosmetics Victoria Beckham x Estee Lauder. That was a great success. Then Victoria Beckham decided to release a second co-branded collection with Estee Lauder in 2017. Moreover, Victoria Beckham has a long business partnership with Reebok.
Up to now, Victoria Beckham has only two stores worldwide. One is located in Dover Street in London, and the other is in Landmark in Hong Kong, which is operated by Joyce. Recently, global retail industry has been in recession. Some analysis reported that to further development, Victoria Beckham must have better performance. But the high pricing makes its products only available for rich customers, which is the biggest obstacle.
Recently, the condition of business of Proenza Schouler has been in the spotlight. Some observers believe that although Proenza Schouler has great potential, its management of costs may have been out of control, and new investment is needed. Proenza Schouler never releases its revenue, but WWD reported that the sales in 2015 was around 85 million dollars. In fact, since the selling of the hot handbag PS1 in 2008, Proenza Schouler has never designed other hot-selling items, and the profits from apparel are limited. To reverse the situation, earlier this year, it releases its first perfume.
American designer brand Alexander Wang is also in trouble financially. After breaking the tradition of joining fashion weeks, it is seeking investment for innovative business models. In September this year, Wang publicly visited Ruyi Group in Jining for the first time. Alexander Wang planned to utilize the capital of Ruyi Group and its supply chain to expand business, but details were not revealed.
Since last March, there have been rumors that Alexander Wang was seeking investment, and designer Wang would even sell some shares. The negotiation with General Atlantic ended up with nothing. Earlier, there was news that Alexander Wang cooperated with The Raine Group to raise money to open more stores. It is reported that the annual sales of Alexander Wang is around 0.1 billion dollars. And the aim of this financing is 30 million dollars, and Alexsander Wang hopes to find a business partner to expand business.
The low pricing of fast fashion and the young generation targeted by luxury brand are making independent designers’ lives harder. Now, most designer brands have the right of independent operation, but if they want to further expand, it depends on investment.
On the other hand, large luxury groups such as LVMH have no plan to invest in new brands, and their focus is on how to manage these brands they already have and strengthen the competitiveness. That means they have to change the old strategy, which is using big companies’ influence. Unlike large fashion groups, ordinary investment institutions or investor are wary of investing in designer brands because of the unstability of profits from selling apparel.
In June this year, Victoria Beckham announced Paolo Riva as its CEO. Before joining Victoria Beckham, Paolo Riva was CEO of Diane von Furstenberg and founder of a consultancy in New York.
At present, after NEO made an assessment, Victoria Beckham decided to lay off 60 staff, which accounts for around one-third of total staff. The market value of Victoria Beckham is about 0.1 billion pounds. L Catterton reportedly planned to purchase Victoria Beckham, but the efforts failed.
The latest acquiring of designer brands took place in August this year. Ermenegildo Zegn acquired 85% stocks of Thom Browne from Sandbridge Capital.
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