What Are You Working For?

Imagine this: you wake up tomorrow to find out that you’ll never need to work another day in your life. All your financial problems have been resolved — past, present and future. What would you do with your life?

When I ask most people this question, their answers reflect a desire to make up for lost time — they would pursue hobbies, work out more, make more time to see friends, travel. But take it a year down the line — is that enough material for an interesting or meaningful life?

Now imagine that you’re three months in to this new life of carefree leisure. You are at dinner with someone you really love and care about. They’re introducing you to friends for the first time and the inevitable question comes up — “So, what do you do?”. Are you going to be comfortable telling these strangers that you weave baskets or do Pilates full time?

This is the paradox of work — even if we have little passion for it, or outright despise it, work is the only way that most people can wrap their head around shaping their own identity in relation to society. Many dream of sitting on a beach every day without a care in the world, but no one wants to be thought of as a bum.

Don’t worry, I am not pivoting into a career in life coaching. Answering this question — What are you working for? — is the key to unlocking the future of New York’s struggling fashion industry.

Why do designers go into business for themselves? For the past three decades, the press has pushed the narrative that “legitimate” designers go into business to gain the freedom to express their unique genius, and that success is defined as a billion dollar IPO, PE firm acquisition or acqui-hire by a luxury conglomerate. This is the rubric of success presented in a recent Financial Times article that questions why New York has failed to produce the next Michael Kors or Tory Burch.

The problem with this narrative is that the intrinsic motivation doesn’t align with the outcome. Going into business for your own creative gratification is a trap — if you thought your boss was hard to please, wait until you meet your customers. And seeking scale alongside creative freedom is also a trap — the bigger you want your business to get, the more you need to compromise your vision to broaden its appeal.

In the “good old days” of the fashion industry — pre-recession, pre-Facebook/Google duopoly, pre-athleisure — this conflict was resolved through the runway show. Designers could use the runway for pure creative fulfillment and most of the clothing never went into production. It was a marketing expense. Then, as the corporate finance framework began to turn the screw on this “marketing expense”, the cracks in the model began to show in the psyches of creatives themselves.

Designer-entrepreneurs began to realize that they were not interested in making the sacrifices required to hit a billion dollars in sales. The big capital allocators started to realize that it was lower-overhead and lower-drama to hire creative directors who were either willing to work with merchants or were strong merchants themselves.

This is why the status of so many designer-entrepreneurs and, by extension, New York’s fashion industry, is now in limbo. There is no roadmap or playbook for running a designer ready to wear house as a lifestyle business. And that is why every business owner needs to ask himself or herself not only “What am I working for?” but “What part of owning this business is most fulfilling for me?”.

This is one of the best things I’ve seen on Twitter in a long time:

You can set any goal you want, but you may not be willing to do what it takes to get there. The first tradeoff designer-entrepreneurs need to consider is freedom of creative expression versus the scale of that expression.

On one axis, you have freedom of creative expression. This ranges from the freedom to pursue and produce any idea that catches one’s fancy on one end, to having a VP of merchandising hand down a line plan that dictates every delivery on the other.

On the other axis, you have scale. This ranges from high budget runway shows and campaigns on one end to scrappy, direct-marketing focused shoots on the other.

When you layer these axes, you get a pretty clear picture of today’s fashion landscape.

At the top right are the billion dollar luxury brands that invest large sums in marketing, and then realize those investments by selling status symbols priced under $500.

At the lower right are venture-funded “modern luxury” brands that produce decent product but can start to feel soulless and indistinguishable after a while.

At the top left are expensive hobbies — brands with niche aesthetics and mass creative budgets. These are also known as “impending bankruptcies”.

Finally, at the lower right are lifestyle businesses — brands with a level of creative overhead that matches the scope of its audience.

You need a base of relatively predictable business to support your creative overhead or you will run out of money. That base can come from a core replenishment program, an accessories line, a string of hit items or a significant number of rabid fans. The more ambitious the scope of your creative vision, the more you may need to broaden the core brand vision to drive enough business to support it.

Back in the “good old days” a fashion brand could count on wholesale partners to manage stability and drive perpetual year on year revenue growth. In today’s world the relationship between brands and multi-brand retailers is more mercenary — they’ll overexpose your hot item today and use you to comp their markdown tomorrow.

Back in the “good old days” investors of many types — from PE to P. Diddy — were pumping capital into fashion brands in search of a Michael Kors-style exit. Brands who took on outside investors proceeded with little operational discipline, investing in non-strategic “brand building” as the path to a payoff that never arrived.

Back in the “good old days” there were semi-formulaic ways for an apparel brand to launch a hit bag or shoe that could sustain the brand for years. Now those formulas — which involved print magazines and mainstream celebrities — are no longer valid.

Designer-entrepreneurs today need to weigh the scope of their creative vision against the tradeoffs required to sustain that vision financially. If you’re pursuing a niche creative vision with impunity, you are never going to make enough money to stage two shows and shoot four campaigns a year.

But many designer-entrepreneurs who launched their brands in “the good old days” view the shows and the shoots as not only incredibly fulfilling, but a core part of their professional identity.

That is why there is no playbook for operating a modern fashion brand successfully at the scale of a lifestyle business — the big money shows and shoots are still seen as criteria for being a “legitimate” designer.

Two fashion shows a year cost close to a million dollars. Four campaign shoots can cost from a quarter to half a million. These are gigantic expenses that put a $20–30 million floor on a brand’s revenue if they want to stay in business. And these gigantic expenses often confer no incremental benefit other than “legitimacy”, although today’s consumer defines legitimacy on their own terms.

There is a crop of emerging brands coming to market without the psychological baggage around what it means to be a fashion designer. They know that they must balance creativity and stability on their own terms, and appear to be doing it successfully:

Telfar: Telfar Clemens describes his brand as “genderless, democratic, and transformative”. He’s a young black creative on a mission to redefine the industry’s POV of who a luxury customer can be. So it’s pretty brilliant that he has created an “it bag” that represents belonging to this movement, instead of the traditional status symbol. Priced between $150–300, it is aspirational but still attainable for his target audience of young creatives.

Marine Serre: Based in France, Marine Serre benefits from a local fashion industry that is more supportive of experimentation and a culture that is more supportive of fashion in general. She stages runway shows that push the boundaries of creativity and imagination, but she has been able to monetize this energy of the bat via a signature half moon print and distinct accessories priced below $500.

Khaite: Creative director Catherine Holstein started this label from a merchant’s perspective, drawing on years of experience in the industry and focusing on high quality daywear delivered at a price point that, while high, felt like a steal within the spectrum of luxury brands. More fashion-forward and creatively-driven pieces are layered in to the assortment each season.

These are only a few examples of designer entrepreneurs taking a pragmatic approach to realizing their vision.

As a business owner — if you can’t be honest about what you want to get out of it, no one around you will ever be able to help you get there effectively. And if you can’t be honest about what it will take to get where you want to go — you won’t.

I used to design mom jeans (really). Now I help build bridges between quants and creatives and write about the future of retail.

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