The fashion industry is not limited to clothing. It also includes accessories and shoes. The cosmetics industry is different yet closely related market that cannot be overlooked when discussing fashion. Many designers, such as Chanel for example, branch their brands out to include cosmetic and fragrance lines, and for many consumers, cosmetics are just as important to their overall sense of fashion and style as clothing, shoes and accessories. The Estée Lauder Company has held on to its market share for quite some time. Estée Lauder sales for fiscal year 2007 were reported at $7 billion dollars. For the year, that figure breaks down to approximately $19.2 million per day. The company's sales were up 9 percent from its recorded 2006 earnings of $6.46 billion, which shows just how much the cosmetics industry parallels the fashion industry.
“The fashion industry is a best-kept secret. There is so much money to be made is this business that it’s unreal! If you have a good name and some really hot fashion designs along with the knowledge to bring it to the market and keep it there, chances are good you will do quite well for yourself! In the fashion industry the potential is always present for a clothing line to make millions or even hundreds of millions of dollars. This business is unreal and that’s why it is a best-kept secret!”
–Jay Arrington co-owner of www.startingaclothingline.com
New Kids on the Block take the Industry by Storm
Talented, new urban designers have imposed their will on the fashion industry with the same force, if not a greater one, as their fashion predecessors did. They have opened new doors to an industry that was difficult to break into. This phenomenon started in the early 1990s with the former companies Cross Color clothing and fashion designer Karl Kani. While they are no longer active companies, they were the trailblazers for FUBU, Phat Farm and many other clothing designers.
Cross Colors was founded by Carl Jones in the early '90s. Cross Colors. Upon its arrival on the market, the company was so hot, that they had major problems filling orders. With $130 in pre-paid orders, they could only ship $89 million. The company grew at an uncontrollable rate. In its first year of business, Cross Colors made $15 million, and by 1992 it made $89 million. These figures are staggering and show the kind of market share that the new, urban market was able to capture easily.
Designer Karl Kani started his career with Cross Colors (Threads 4 Life), but left the company in 1994 to start his own label. In its first year the Karl Kani label had $22 million in sales, ranking him No. 38 on the Black Enterprise Industrial/Service 100 list. In the following year, Kani had $59 million in sales—a 37 percent increase over the previous year. The 1995 numbers earned him a leap from No. 38 to No. 25 on the Black Enterprise Industrial/Service 100 list. After such an impressive first two years, the line lost its market share, but Kani managed to reinvent himself and the company. Often called "the godfather of urban fashion," in 2002, Kani returned with the introduction of "Life" a new clothing line that made $25 million in its first year. Achieving success where Hilfiger failed, Kani partnered directly with Hip Hop artists, rather than just having them wear his product.
For Us By Us, (FUBU) was an inspiring slogan that motivated four friends from Queens, New York to follow their dream. According to legend the guys from FUBU went to the Magic Show in Las Vegas. Magic is the biggest clothing convention in America, and at the convention, buyers were so impressed with their designs that FUBU took $1 million in orders from stores across the country. Lacking the capital to fill the orders, they placed an ad in the newspaper for investors. It read: "One million dollars in orders. Need investors." The ad attracted the attention of the conglomerate Korean company Samsung, which made an investment in the company and helped FUBU fill the orders. Since then, FUBU has been a household name.
FUBU went on to take the fashion industry by storm. They went from selling hats on the street corners of New York to selling full collections in stores all over the world. Their operation moved from a basement in Queens to the entire 66th floor of the Empire State Building. In 1997 FUBU made $75 million, in 1998 they made $200 million; in 1999, $ 350 million and by 2001 their sales reached $380 million. Overall, the company's worth grew to $450 million.
While FUBU does not currently have the same market strength that they had a few years ago, last year, they still managed to make $12.1 million from international sales. It is this ability to capture both domestic and international markets that shows the versatility of the fashion industry.
“With respect to the urban market, Carl Jones of Cross Colors invented it, Karl Kani solidified it and FUBU refined it!”
The classic urban brand, Phat Farm, created by the godfather of hip hop, Russell Simmons is another line that took the fashion industry by storm. While the company did have its ups and downs, including going bankrupt, with the perseverance and business savvy of Simmons, the company has thrived. A resilient entrepreneur, Simmons pulled the company out of bankruptcy and went on to make millions of dollars. He started developing his collection and product line slowly. In 2000 Phat Farm made $120 million dollars; by 2001 it made $200 million. In 2003 Russell Simmons reported earnings for Phat Farm of $350 million. Taking a cue from other successful designers, Russell launched the subsidiary Baby Phat line in 2000. In its first year Baby Phat made $10 million. A year later, Baby Phat tripled its sales. In the last seven years, Baby Phat's earnings have continued to climb the chart and in 2006, reached $100 million in earnings. Phat Farm kids was also launched by Simmons, and made $15 million in 2000 and $25 million in 2001. The entire Phat Fashion line brought in $659 million from licensing deals and in 2006, the Phat Farm label had around $740 million in retail sales alone overall, the entire Phat Fashion Label made approximately $2 billion in 2006. Without sound business practices however, the company might have suffered the same fate as many other new companies.
In early 2004, Russell Simmons sold Phat Fashions to The Kellwood Company for $140 million in cash. He stuck around for two years to make sure that the company stayed on track and judging by the numbers reported above it did. Russell, job well done!
“You see, most people don’t understand the fashion business. You start a brand and you make it hot! And then you start licensing out the name to other companies to create more products and that helps to build your brand and your company. That’s how you get to the billion-dollar mark. And when you do licensing deals, others do the work and you get a cut of the action. Why? Because it’s your name! I love this business!”
Rocawear was founded by the Shawn "Jay Z" Carter, Damon Dash and Kareem Burkes in 1999. Since its inception, the company has been a force in the fashion world, bringing in an average $300 million annually. As Jay Z states in the lyrics of his song The Watcher, “I had it laid out before you knew what a plan was $300 million later now y’all understand us.” Rocawear’s annual sales are currently up to a staggering $700 million making it one of the highest earning clothing lines in the industry. Carter recently reported selling Rocawear to the Iconix Brand Group, Inc. for $204 million in cash and $35 million in stocks. Two years before the sale, Damon Dash sold his stake in the company for $22.5 million in cash and controlling interest of several spin-off apparel and fashion brands. His business manager estimated the total value of the deal to be approximately $30 million.
Another Hip Hop star to cross over into the fashion business is Sean Combs. Known during his musical career by several different names, he has made his mark on fashion with the Sean John line. As Sean Combs would say, "It’s not a brand, it’s a lifestyle." And apparently it is a lifestyle that the world is buying. In the first year of Sean John’s full arrival, the company received great reviews and quickly shot past $100 million in sales. In 2002 Sean John brought in $325 million; in 2003, $450 million. In the short time that Sean John has been on the market, the company has consistently maintained an average of $400 million a year. With the upcoming introduction of his women’s line, earnings in the billions can only be expected in a short time as well. Comb’s has also signed a licensing deal with power house Estée Lauder to distribute his fragrance worldwide. The fashion business is not local or regional, it is global, and those who really succeed in the business for years and years know how to capture a global market share.
“You know one of the reasons why I always praise this industry is because you can be a self-taught clothing designer and still make millions or even billions of dollars! Tommy Hilfiger, Liz Claiborne, Karl Kani, Christian Dior, Yigal Azrouel are all self-taught, but a lot of people don’t know that.”
–Michael Harper co-creator of www.digitalfashionpro.com
Miskeen is a new company that in 2002 started out making t-shirts into wearable art canvases. They created original designs on each shirt and in the first year Miskeen made $502,000. In 2003 they made $4 million and in 2006 the company increased sales to $12.5 million! Like with many other companies, Miskeen could go far, so I will be keeping my eye on them. With sound business practices along with great designs and good marketing strategies, they could be another FUBU or Phat Farm. And who knows? Maybe one of you will be the next hot clothing designer that catches the public eye. Until then, think fashion and you will always look your best!
Sources: High Beam.com, Answer.com, Allbusiness.com Yahoo.com/finance, Black Enterprise, Selectory Business Database, startingaclothingline.com, Forbes.com, CNN.com, findarticles.com and staff.
Special thanks to Jay Arrington of www.startingaclothingline.com
Design Clothes 2008