Fashion Firms Brace for a Crucial Season

Fall looms a make-or-break season for smaller fashion firms.

Fall could be the make-or-break season for small fashion companies.

The heat is on firms with retail sales of $7 million to $10 million as stores reduce inventory, dump nonperforming labels and order collections closer to the season. Along with those pressures, the number of specialty stores that are typically more willing to take a chance on little guys is shrinking.

Given the horrendous retail scene since last fall, rumors of a possible demise swirl around almost every small company or young designer. And the list of casualties and labels struggling to make it seems to be growing. From Jane Mayle, who shuttered her Mayle line earlier this year, to Peter Som, whose future was uncertain until he inked a deal with Milan-based clothing manufacturer Margon and New York multiline showroom ADC in May, the economy has taken its toll across a wide range of designers.

Many of the newer designers don’t have the infrastructure or financial strength to weather continuing economic turbulence. They face few to no prospects of significant financing and aren’t ready or capable of opening their own freestanding stores to minimize the impact of woes at the department and specialty store level.

Industry consultants believe a number of smaller firms were able to survive the past two seasons on a shoestring, limping along without significant sales. But the third season of the financial meltdown looms as a crossroads — and could mean that, come January, there will be a raft of closures and liquidations.

“Now, if they don’t get the kind of sales they need, they will have to decide to go forward or not,” said Robert Burke, founder of the Robert Burke Associates consultancy. “Many of them were having a challenging time when the economy was good, and now, with retailers reassessing assortments and with the importance of timely deliveries, it will be challenging. The minimums have also gone down, sometimes affecting their ability to produce with factories at lower prices.”

Allan Ellinger, senior managing partner at Marketing Management Group, noted, “For a lot of companies whose businesses have been marginal and growth has been marginal if at all, their financial partners — if they have them — and their banks will be looking at the season very critically. You can only carry a business for so long. The economics have to work. Unless a company has unlimited financial capabilities, this is a very crucial season.”

Competitive pricing could become a key to a business’ health this fall and experts believe smaller firms that don’t have the clout of megabrands will be hard-pressed to negotiate better deals with their manufacturing partners.

“The established people and big retailers have more freedom to tighten their margins,” said David Wolfe, creative director at The Doneger Group. “When we hear people like Dolce & Gabbana saying prices will be [10 to 20] percent lower, we know they can do it. It will be difficult for a young start-up designer to [do] that kind of price manipulation.”

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