Big volume buyers have been driving the fashion industry for several decades. They dominate retail and they have been the key to Asia’s manufacturing success. Not only did they account for the lion’s share of the production, they also helped make Asian manufacturing better.
That model is now starting to change.
The huge rise in independent and digital native brands has manufacturers and buyers facing a market change that could be even more disruptive than the advent of fast fashion several decades ago.
“We would basically look at the big volume buyers as a way to make our factories more efficient. We weren’t really expecting to make money. We’d like to, but that wasn’t really the full expectation. Then we had to pick and choose some smaller brands that we thought would be winners of tomorrow. We’d look to ‘hitch our horse’ to those guys early on. That’s not really the kind of business that we wanted to be in. But we needed a little mixed basket of ‘winners of tomorrow’, the middle sized guys that we could make profit on and then big guys who kept the factory running,” said Kevin Lynk, CEO and Founder of Creare, a New York-based agency that provides design product development and production and that leverages strong mill partnerships to deliver high quality raw materials.
From Massive to Micro
While there are a few larger digital native or direct to consumer (D2C) brands such as Bonobos, Everlane, and Gymshark to name a few, most are still micro players compared with the massive brands that still dominate the market.
However, while the volume each D2C brand does is small, the aggregate of all these brands is becoming a force in the market.
Few are big enough to be identified as adversaries to any of the big brands. It’s more a matter of ‘death by a thousand cuts’, where brands start to see an erosion of sales – one shirt or pair of pants at a time.
“These new brands are what’s going to hurt some of these bigger brands more than anything resulting from the pandemic or supply chains. When you look at people like Vuori that didn’t exist seven years ago and now have a billion dollar valuation, that’s a signal.”
Years of re-engineering products so they could sell at lower prices and with more promotions has now left many bigger brands in a very vulnerable position.
“I don’t think brands that will cheapen themselves now will get another chance,” said Mr. Lynk.
Not Just a GenZ Fad
While the popular belief is that D2C brands are being driven by GenZ shoppers, in fact a huge number of these brands are actually targeting a much more mature and certainly higher income customer.
Few D2C brands are the cheaper option. In fact, most don’t compete on price. They know what price points their customers will accept, but they are looking at quality and value to drive sales. They differentiate themselves in the market through unique design, premium materials and workmanship, sustainability and CSR, and closer communication with the consumer.
In a sense, these brands are becoming the ‘missing middle’ – the mid tier brands that used to offer quality at affordable prices. These new brands are providing the ‘better’ that consumers want – especially as they are now buying ‘fewer’.
This trend is particularly strong in menswear, where digital native and D2C brands are continuing to win loyal customers and market share.
Naysayers believe that consumers won’t trade up – won’t pay more for something better. A growing number of D2C brands are proving them wrong.
Sustainability and Quality are Priorities
“I would say all of our top clients have very strict parameters and expectations. If it’s going to be a stretch, it has to stretch a certain amount and recover a certain amount. If it has an interesting weave or whatever it still has to have the tensile strength. They’re demanding that we’re manufacturing the fabric in an environmentally friendly way, that we’re actually treating the water in a way that’s not going to pollute the rivers,” said Mr. Lynk.
“With all these new clients the first question they ask is, ‘What are your certifications? How environmentally friendly are you? What are you doing for the community?’ It’s not just, ‘What’s your price for this?’ They want newer, better, cleaner, greener.”
What D2C Brands Want from Suppliers
These new brands are coming from two distinctly different histories, according to Mr. Lynk.
“Usually they are designers or people who have a concept or an idea, but don’t understand the production side. They have no idea about timing, pricing, duty rates, how to find a warehouse and all the rest of it. So it’s almost as if our company serves as the back end for them.
“Then you have people who come from entirely unrelated industries. They might be very large companies, but they have no fashion background. They’ve never heard of a test manual. They don’t know knits from wovens. They can handle the back end, but they need us to handle the fabric, the garment manufacturing, and so forth.”
While big brands are notorious for putting price pressure on their suppliers, D2C brands exert different but often just as challenging demands.
“It’s important to choose the right people to sign up with because when you have these brands that start with one or two people, every single item of theirs is the most important thing in their lives. They don’t stop calling. They want to be in the office every day. That takes a lot of time. So you have to hope that you picked the right brands that will grow into bigger, more mature clients.”
Unlike the big brands, D2C brands also need a more tailor made service.
“It used to be that we would have a type of client. Now every client is their own type. How we handle each client is different because every client is different and we have to act accordingly,” said Mr. Lynk.
Despite some of the challenges, working with these new brands can be very rewarding.
“Once you help these brands they’re really loyal. They really feel like they wouldn’t have made it without us. They have the mindset of ‘let’s find a way to grow together’ and that’s nice, that’s a nice breath of fresh air compared to the heartless and transactional way we’ve lived for so long,” said Mr. Lynk.
