Many growing clothing businesses are perplexed by ever shrinking profits.Despite steadily rising sales and good customer retention, profits are inching down towards zero.In every business costs rise each year, whether its rent, wages or stock purchases, they all become slightly more expensive.Annual cost increases of just 3% can quickly erode otherwise healthy profits from your business.It's often the case that we focus on sustaining sales and achieving growth, but many businesses can receive an unwelcome surprise when they find that these have been achieved, but profits have actually evaporated.So how can you keep your profits and even grow them? Here are some useful tips to consider:Increase your prices: No one likes to do it, for fear of a customer revolt. But the bottom line is, if you haven't raised your prices in the past year, you've actually decreased them in real terms. Most customers won't notice a price increase of 5% and the ones that complain are probably already doing so at the current levels.Up sell: A successful fashion business is about creating the whole fashion experience. Consider what other complementary products you can package with your existing range, as many accessories have profit margins well above those of traditional clothing items.Tell the world: Customers only buy items they know you stock and can be quick to pigeon hole you as a seller of just the products they've previously purchased. Broaden your customer's knowledge of your products, by keeping them up-to-date on your entire range and let them know of new products as they arrive.Fact and figures: It's a golden rule in business management to have a reliable Watch The Pennies: Whether it be the phone bill, printing or bank charges creeping up, keep an eye on increases in your businesses more basic costs. It's good to hammer out the best price on major purchases, but a small investment in ongoing bills such as your phone will also save you substantial amounts in the long run.Debt and equity: Two of the most common reasons that businesses have insufficient financial returns are excesses of both shareholder drawings and loan borrowing costs. The two go hand in hand, as businesses commonly borrow to replace equity that's been withdrawn by shareholders. Every shareholder deserves the fruits of their investment and labour. But it would be wise to postpone the plans for a new car or bigger house until you're sure the business can afford it, and any associated interest costs that may now be necessaryMaximising profits is a lot easier than launching new fashion lines or founding a successful fashion company, so take the time to manage profits and you'll be rewarded with the dividends.
Introducing Harla
Natasha Wyer was thrilled with the location she chose as the backdrop for her latest collection.“Everywhere we went in Rovinj was perfect – so picturesque,” enthuses the Sydney designer behind women’s resort wear label Harla.The Croatian city’s fishing port and old world charm worked a treat for the Spring/Summer 2018 offerings Natasha will present at Fashion Exposed NOW in February.But why travel so far for a fashion shoot?Partly to promote Harla’s wide appeal, though Europe’s seaside delights are nothing new to the designer who confesses her top favourites are Capri and Saint-Tropez.Behind the resort wear that first emerged in Sydney in 2010 as Tasha Collections, it rapidly won a strong following and is poised for major expansion under its new label, Harla - a remarkable adventure story.“I was 23 when I went overseas with a girlfriend, for my “European Tour ” says Natasha. “Initially I only meant to travel for a couple of years but 12 years later found myself based in Italy working in the yachting industry."“I started out as a stewardess, sailing across the Mediterranean and Atlantic for various charter yachts. Eventually, my last job in the yachting industry was with an Israeli family whom I worked with for 7 years. They treated me like family. Starting out as their chief stewardess and purser which turned into equipping and styling the interiors of their super yacht collection. This was a defining moment in my career.”Like many expats, returning home in 2010 wasn’t without it’s challenges. “Having spent the last 10 years in an industry that doesn’t exist on the same level here in Australia, it was always going to be a challenge. I really didn’t want to lose or waste the incredible knowledge and experience I’d gained, which ultimately led itself into a concierge and luxury gift business”.
With both businesses falling into a niche market, Natasha decided to turn things around and utilize her time spent in the resort capitals of the world to create her own range of resort wear.The idea grew as women regularly stopped Natasha in the street to ask where she’d bought her fetching dresses and separates, further confirmation of her talents came when she started selling her ranges at Sydney’s markets including the popular Bondi Markets.“From the start, I concentrated on timeless designs that were flattering, affordable, versatile, and selling face-to-face in the markets was great for customer feedback,” says Natasha.“For the first six years, I turned down retailers who wanted to carry my product. As a one woman show I felt I just wasn’t ready and wanted to focus on creating my own fabrics first to give that point of difference. This was ultimately the best decision as it’s the fabric prints and their colours that are what first draws attention to my customers.”Steady growth has changed all that. The recently launched Harla website not only welcomes stockists, but features an online store.It offers numerous temptations, many of them suitable for day-to-evening, but just one swimsuit style which doubles as a bodysuit – albeit in a range of delectable colours - and a small offering of leather bags and belts.“That’s deliberate,” says Natasha Wyer. “There are plenty of swimwear and accessories specialists, so I concentrate on the clothes and for that matter, Spring/Summer.”She has no plans to design a winter collection, though a luxury Harla range is in her sights.Don't miss Harla exhibiting at Fashion Exposed Now from Saturday 10 - Sunday 11 February 2018 at the Royal Hall of Industries in Sydney where they will be showcasing their latest collections. Registration is free for trade visitors.
The wake up call for Australian fashion
For independent fashion labels and retailers in the Australian fashion industry who have been banking on the high turn over and lower priced sales strategy, it’s quite possible this strategy may be over.Whilst turnover is an integral part of retail, in the last 18 months many fashion players are finding the slow down in retail is affecting their profitability. The volume card they once relied on with lower price points, faster turnover, lower margins to obtain high sell through is simply not working as effectively anymore. Why? Quite simply, the volume sales they once enjoyed have gone.
Since 2011 when Zara first landed in Australia, we have seen the influx of the overseas chain stores and overseas online players aggressively target Australian shores. However it’s really been the last two years we have seen the impact of the big players. With their arrival, they have taken millions away from Australia, lining the pockets of the global players overseas.So how has this changed sales for Australian independents retailers? In terms of volume, retailers are simply unable to sell any more products at a lower price rather than a higher price could. Coupled with an oversaturated market, this has become a headache for many brands and retailers wondering what strategy to take.Interestingly however, it seems the overseas global retailers are also not immune to their margins being cut with the lower price strategy.In an article in the Sydney Morning Herald, it was reported, Global fast fashion brands Uniqlo, Zara and H&M snared more than $600 million in sales from Australia, but cited “Weird weather and the soft Australian dollar weighed on profitability”.According to Macquarie Wealth Management even these big players have found their margins have been under pressure, with warm weather for Winter 2016 affecting Japanese fast fashion brand Uniqlo."Uniqlo's margins have now stepped down well below the lowest among the major internationals at just 53.4 per cent, a slide from 58.9 per cent in 2015. We expect margin management to remain difficult for the apparel retailers over 2017." Stated analysts from Macquarie Wealth Management.While no one is going to be exactly feeling sorry for these global players, it does beg to question how can our smaller fashion operators even compete on the lower price sales anymore? Is this a category best left to the chain stores?
Independently owned, Australian Fashion Labels, founded by Dean and Melanie Flintoft in Adelaide, which encompasses labels (C/meo Collective, BNKR stores, Finders, Jaggar Footwear, Keepsake, Keepsake Intimates & Fifth Label, is a company which has changed strategies since they started in 2007.Starting in their lounge room, Australian Fashion Labels is now a global company which is currently turning over 60 million annually. They export to 22 countries with wholesale and target 60 countries with online retail. With 140 employees in 3 countries, they initially started with their first label, Finders Keepers with retail price points under $99.00, which were reflective of the GFC and the demand for price pointed merchandise at that time.Fast forward ten years later, and they are finding the market different to when they first started and maintain having strong brands and quality product is key to their success with more varied price points. “Our retail landscape has changed with the arrival in Australia of Zara, H&M and Uniqlo which has redirected hundreds of millions of dollars of retail spend to these retailers. They are world class and they have global purchasing power never seen before in our industry. Competing on price is difficult and for many Australian brands and retailers it is impossible. Branding, selling a story customers buy into, having superior quality and exclusive design are ways to compete for the retail dollar and maintain market share and possibly grow. “ Dean Flintoft, CEO of Australian Fashion Labels states.
Seasoned fashion and retail consultant, David Bush of DBC Consulting (formerly, ex-head of Womenswear at David Jones), also maintains value for money of product is key, and cites many retailers and brands have not properly planned for the incoming of these chain stores.“Too many brands have failed to plan for these new market entries. They have not developed business strategies to combat their arrival, utilising what should and could have been their success; local market knowledge, customer relationships & existing loyalty, product differentiation, service, experience or quality”. David Bush is adamant competing just on price is never the answer in retail, and focusing on key product with a strong understanding of the customer is paramount. He also maintains many retailers and brands just ignored the impact the global chain stores would have on their business.“They had stuck their head in the sand hoping these entries would just blow over. Now the big guys have arrived many domestic retailers / brands are left to fight a tactical fight, on price. Price is never a fight you can win as it inevitably turns into a race to the bottom of the pond.”He also says keeping brands aspirational is important to sales. “To quote Oscar Wilde, “Be yourself, everyone else is taken”. Focus on your own success, focus on your customer, and focus on providing aspirational product regardless of price.He also stresses brands to look inwards and ask themselves the hard questions about their own product.“Customers have choice, why would they choose your brand? This is the question. Those brands in this market with a clear strategy & value proposition rooted in great product and a clear customer and respect for some are doing amazingly well. Well deserved success I say.”
TV Shopping channel, TVSN Merchandise & Programming Manager, Judy Deuchar weighs in on the TVSN buying strategy.With a background stemming from the UK, formerly with TV Shopping Channel mammoth, QVC, Judy brings extensive experience to understanding the unique selling proposition, which is required to make TV Shopping so effective. And like David Bush, she maintains it’s not just about price but value.“I have learnt that playing the long-term game is more profitable from a financial and customer loyalty point of view. Staying true to your retail brand strategy of offer needs to always be front of mind. My team are very aware of me always mentioning, “Short term gain is long term pain”. Our strategy within TVSN is to offer brands, which tell a strong story, with a unique point of difference, which is not easily available. Our customers love the thrill of the find. This is the number one motivator for purchase, not price”, says Judy Deuchar.She also points out you can’t just create expensive product if it’s not a reflection of value or a reflection of the brands core DNA.“One cannot just up the price if it’s incongruent with your brand. Your story, offer, quality and service needs to justify the price. I have found, both here and in the UK, where I was in retail before. This formula stands the test of time and really results in the higher dollars and long term gain.”Judy also maintains staying true to the brand is always key.“Dependant on the scale you wish to reach, - whether a market trader, small web business or a large retailer, its best to stay true to your brand story. Truly talk to your customers and seek honest answers from them, and those within your business, as to what your point of difference / story is. Often brands are desperate to be the answer to high volume fashion, or the Millennials, yet forget to focus on why they have got to the success they had in the first place. Find your niche, develop your own handwriting and own it.”In this retailing climate, there is also a question of brands and buyers playing it too safe in terms of design for fear of missing out on every sale. Many apparel brands fail to do enough competitive analysis to determine a point of difference and end up producing monotonous product which can be quite often found across the board in many fashion labels.While there are some beautiful high-end and advanced contemporary designers who nail the aspirational designer story, it’s the middle market, which has to be careful. This is the category, which is most vulnerable to these overseas players. There is a strong demand for fashion brands retailing at under $250 with beautiful fabrics and quality with aspiration and great branding. Unless the middle market category starts offering better value to the consumer they are most likely to perish. The consumer is inundated with rehashed faceless product that fails to get them excited. You only have to look at what happens when a designer brand sells to a major apparel company to see that happen. It turns into an over-priced chain store brand when there is no ‘designer ‘at the helm.From a designer or fashion label’s point of view, keeping the buyer and customer excited is paramount to consistent sales in this fickle retailing climate. This extends from social media, images, to the look book, to merchandising to the actual designs and styles.It’s important brands stay hungry for success with aspirational product otherwise they can be left behind very quickly. From a buying perspective, just because a retailer enjoyed a good sell through last season of a brand, if they come in to see your brand next season and don’t love it, brands can experience an instant decrease in sales regardless of sell through. It can be swift, painful and can render a business null and void very quickly.We had a big buyer in this season that had enjoyed a great season of sell through saying “If I don’t love something this season, I am not buying it.”At the risk of sounding like a broken record, our fashion agency motto will always be “It doesn’t have to be cheap but it does have to be value for money and something that they love, regardless of it is of $40.00 or $400 or they simply won’t buy it”.About the Author, Phoebes Garland
Phoebes Garland is the Co-founder & Co-owner of Garland & Garland Fashion, a fashion & consultancy agency based in Sydney, and founder of Fashion Initiative. Between the two of them, Phoebes & Robert Garland have over 60 years’ sales experience in fashion, publishing and advertising. Phoebes is an industry mentor to designers with Australian fashion industry body, Australian Fashion Chamber and is on the Advisory Board for Fashion Design Studio (TAFE NSW). Phoebes Garland is also an ambassador to Shake it up Australia Foundation and contributes articles to Australian Fashion industry magazine, Ragtrader.
Boutiques, is your accountant giving you a fair deal?
With a challenging trading climate, you can't afford to waste time or money on the wrong financial advice.Does your accountant assist you in the area of financial management; improving the bottom line of your business and achieving business objectives?If your answer is no, then you are not alone.There has been a growth in recent years of business coaches and/or consultants (usually non-accountants), to assist businesses and organisations improve their performance and profitability, achieve their goals and objectives and manage various projects.Public accountants have focused their attention for too long on tax and compliance matters for their clients to the detriment of assisting/advising clients in these financial management areas.In other words the focus has not been on assisting clients improve the bottom line and the management of resources to achieve it (strategic planning, budgeting, pricing, costing, working capital management, people management, etc) but rather what to do with the bottom line once it has been achieved (tax, audit, annual accounts etc).The rise of consulting and business coaching partly testifies to this neglect. This neglect has been patchy and some accountants have always provided their clients with excellent financial management as well as compliance advice. But not all.The following questions can be used to assess how well your accountant is doing in this area.
- Does my accountant do more than just handle the ‘red tape’ (tax, annual accounts, superannuation, audit) of business for me? Do I hesitate to ask for their assistance in financial management areas because of the cost involved?
- Does my accountant come to me with proactive advice or suggestions during the year? Has my accountant for example suggested to me to consider any of the government business grants and packages available (such as Enterprise Connect Reviews & Grants, or New Market Expansion Grants) in the last five years? Do I think they are so busy that they do not have time to really focus on my business or situation?
- Is our contact usually on my initiative? Does my accountant only contact me to ‘chase up’ compliance matters? If the main contact with your accountant is in the final month of the financial year or following you up after the year-end to do your accounts, then I would suggest he/she is not really providing you with value to improve your profitability and wealth. Most business owners will know if their accountant is really interested in their affairs or if it’s just a case of doing what needs to be done.
- Do they outsource any of my work overseas? If so, have they discussed this with me and/or reduced my fees accordingly? Accountants also have their own business to run, so they endeavour to operate as efficiently and productively as possible. The normative way they do this (beyond just increasing their prices) is to lower their staff costs which they are increasingly doing by utilizing computer systems to do a lot of the work (standardised reports and analysis work), to have unqualified (but supervised hopefully) staff do more chargeable work, and/or to outsource the work overseas to places such as India and Fiji (where the staff costs are considerably lower). This is all well and good so long as the standard of the work does not suffer, and that you are comfortable with this. Ask the question at least.
- Do I regard them as an invaluable asset or an expensive necessity? Do I really see value in what they offer or is it just one of those costs begrudgingly paid each year? Do they provide me with value for money? Have I complained to them in the last three years about the amount being paid for their services? Was I satisfied with the explanation and/or the standard of the work done?
- Do they hold on to their staff? Continual changing of staff overseeing your work can be costly (especially in time spent ‘educating’ new staff on your business) and can lead to poorer service. We are all human, and mistakes occur in any work however it can also be an indicator of a couple of weaknesses in modern accounting firms. These being (a) the high workload pressure on accounting staff to maintain high productivity rates (i.e. charge out a high percentage of their work), and (b) the greater utilisation of unqualified staff. Where these weaknesses become evident is in the high turnover of staff, and more mistakes being made.