Almost 95 per cent of clothes designers will fail, writes Alanna Gallagher
FASHION, DESPITE its allure, has a tough as nails interior where survival of the fittest, financially speaking, reigns supreme.
It's probably the toughest business to break into, admits Donal Bolger, chartered accountant and managing director of BLG Financial Consultants, which acts for numerous brands including John Rocha. Bolger has also been a director of John Rocha since 1995 and advises on his other companies.
"I'd be very surprised if, statistically, there is more than a five per cent success rate," he says.
These are the cold hard facts facing every designer showing at this season's Motorola Dublin Fashion Week (MDFW).
The event is the brainchild of model-turned-PR entrepreneur Sonia Reynolds, and is designed to lever designers into the global market.
Starting today, it runs until Wednesday 27th and has sales projections of €1.5 million, says Reynolds.
It's a figure not to be sneezed at, but how do young designers get onto that first rung of the real world ladder?
Having a unique selling point is essential, Bolger says. "John Rocha offers a clean, simple silhouette in terms of his product," he explains, "and it works extremely well. Louise Kennedy is very successful with structure and tailoring."
You need to also know your customer, adds Stephen Sealey, buying director at Brown Thomas. The Irish customer buys from a host of international brands, for a variety of reasons, he explains.
"Anything being offered by Irish designers has to compete on that stage in terms of design, level of finish, quality of materials used and delivery," says sealey. And it is in the manufacturing and delivery that most small Irish designers fall down, he says.
"As small independents they're up against multinational businesses with established supply chains and manufacturing bases," says sealey.
To succeed, designers need to be working with appropriate supply chain professionals, something that has been the key to success for Quin Donnelly, he explains.
To invest in manufacturing you need to do your research and you need your finances in order.
It is tough keeping on top of cash flow as the fashion business model is unusual, explains Bolger. He illustrates with the following example: "The collections selling at this season's Motorola Dublin Fashion Week are spring/summer 2009, which the designer probably started working on last February or March.
"They would have started developing a sample collection in June of this year and had to travel to buy fabrics. Then they spend from July to September this year selling at trade fairs, incurring more costs.
"And from October this year to February 2009 they receive and have to pay for their fabrics and their CMT production (cut, make and trim manufacturing of the garments).
"Their order books are not substantial enough to demand credit and they have to try to arrange the right manufacturing slots with the right factories to ensure on-time delivery of stock.
"Then from January to April next year the designer will dispatch goods to customers and only start to collect money from March till June of next year. It's very difficult to look for cash up front from retailers. This means writing cheques from March 2008 onwards and collecting cash for all your work one year later. There are very few business models like that."
So backing - a business person who sees the value of the brand and its intellectual property as an ongoing income stream - is essential if you want to develop your brand.
John Rocha is a fantastic example of good brand extensions, explains Bolger. That's the business argument for this type of investor, he says. "But even they don't fully appreciate the downside," he continues. "There are no guarantees."
Designers need seed capital of between €50,000 and €100,000 to kick start their business, says Bolger.
"Investors get blinded by the gloss and the glamour and the fact that a designer can produce bibles of press clippings, but a bank manager will not credit your account on the strength of your press clippings," says the accountant.
Therefore most investors in fashion designers tend to be family and friends, he explains.
"Given the high failure rate, the investor should know that without a doubt they'll never see that money again," he warns.
The key challenge facing new designers is trying to bring a new product or brand direction into the public eye and trying to get retailers to buy into that concept, says Bolger. They need to conceive a range designed with a customer in mind, adds sealey, rather than an idea the designer is taken with.
The case for setting up a fashion design practice in Ireland is anything but absolutely fabulous.
It takes time and money to establish yourself, says Bolger.
"All the so-called established designers are 20 years in business.
"There is no such thing as an overnight success. John Rocha has over 25 years in business and it has been his determination to succeed that is an essential part of his success story." Even with that Rocha went bust twice.
It's crucial to find investors with faith in your ability to deliver.
The lure for all designers is lucrative licensing deals. John Rocha's empire runs from jewellery to furniture, clothing and footwear for Debenhams to Waterford Crystal and beyond.
"Potter Stephen Pearse and designers Louise Kennedy and John Rocha have a retail value of close to €300 million across their design bases in Ireland and the UK, thanks to their licence deals, says Bolger.
Deborah Veale is also exploring that business model. Through her company Otif Ltd, the former Dublin Fashion Week exhibitor shows her main collection as well as DV2, a diffusion line, a range of accessories and DVProfessional, which designs uniforms for staff of the EBS, O2, the Fitzwilliam and Merrion hotels and Musgraves. The company has a turnover of €3.25 million this year but it's been tough, says Charlie Hanrahan, Veale's husband and business partner.
His background in sales and marketing with Heineken Ireland was very important to successfully growing the brand.
Despite his business foundation it has been a struggle because of the nature of the fashion industry, admits Hanrahan. "Brand diversification into accessories and business clothing was essential."
The company have just signed a jewellery licensing deal.
"This is where the watershed is," says Hanrahan.
Property is another fantastic opportunity for a designer to lever their brand, says Bolger. Successful examples include Louise Kennedy's interiors for the Streamstown Wood housing development in Malahide, Philip Tracy's acid op art interior at the G in Galway, John Rocha's Morrison and Beacon hotels in Dublin and Claridge's in London, while bag designer Pauric Sweeney is doing a hotel in Seoul in South Korea.
The designer end of the Irish fashion business is difficult to quantify but, based on worldwide sales, is worth in the region of €275-€300 million, Bolger believes. This figure includes establishment figures like Orla Kiely, Deborah Veale, Louise Kennedy, Lainey Keogh, Philip Treacy, Paul Costello, John Rocha and rising star Helen Cody.
The vast majority of these successful designers have a much more modest retail turnover - some in the region of €1 million, he estimates.
"Designers know how to make a garment but not how to run a business and the rules involved," admits John Fennell of Dublin City Enterprise Board who mentors designers on how to build their business.
This year, Bolger has met in excess of 15 up-and-coming names. The harsh reality, he says, is fewer than one in five has any real prospect of making it to the next level.
Motorola Dublin Fashion Week takes place between August 25th and 27th at the Radisson Hotel, Golden Lane.
Donal Bolger MD of BLG Financial consultants www.blg.ie gives a talk on the business of fashion on Monday 25th, at 6pm.
John Fennell is giving a joint talk on exporting on Wednesday at 1pm. Tickets €5. See www.dublinfashionweek.com or call 01 6432801.
