Scaling production in modest fashion – lessons from successful fashion e-commerce companies

Photo: MUS, TURKEY - APRIL 24, 2011: Unidentified women ironing shirts in clothing factory / Thomas Koch / Shutterstock.com

Almost all major fashion e-commerce companies go through similar stages of growth and production to emerge as successful players. However, many promising companies have failed along the way.

In order to succeed, as brands gain traction with customers online and as demand grows, companies need to scale their production capabilities, requiring more sophisticated design, improved inventory management and increased financial resources.

What are the major challenges for modest fashion companies as they scale and what best practices can set them up for success?

FORECASTING DEMAND

The ability to get demand forecasting right impacts the business financials. While initial success may have been achieved through responding to a specific gap identified in the market, keeping up with trends and determining which products will sell requires the ability to forecast demand and prepare inventory, tying up essential cash reserves, the complexity of which increases as the company scales. 

As companies scale, they will need to accommodate significantly higher volumes for each individual product, as well as an increase in the number of product categories they carry (SKUs or Stock Keeping Units).

“Trends sway very quickly. Meanwhile, you have to create samples and prepare your production line before you are able to launch new products to the market,” says Adlina Anis, owner of the eponymous modest fashion label from Singapore.

Anis’ concerns were echoed by Windri Widiesta Dhari, Founder and CEO of Jakarta-based NurZahra. “We spend up to 50 percent of our capital for production and material purchases; we hit breakeven as soon as 50 percent of our stock is sold,” she says.

To address increased demand, companies need to adapt the garment production process, from design through to production and delivery.

Developing prototypes for new product lines is an essential first step in production and requires sophisticated design capabilities.

LEVERAGING MANUFACTURERS

Leveraging manufacturers to turn designs into garments at the scale and in the timeframe needed is the next critical piece.

For startups such as Modcloth, which has offices in San Francisco, Los Angeles, and Pittsburgh, designers tend to contract with manufacturers. According to ModCloth’s founder, Susan Gregg Koger in an interview with Mashable in 2013, “[a manufacturer] might get a big order from Macy's and our order won't be significant any more. Building a relationship with the vendor is really important.”

HIRING THE RIGHT PEOPLE

It is equally important to hire the right people at the right time, starting at the top, and incorporating the right mix of analytics and brand building.

It is critical to build the right management team and implement the correct mix of skills sets, going beyond fashion to incorporate data analytics and brand development.

For example, fashion e-commerce company Stitch Fix, which has raised $48 million in funding to date, built a strong team with a diverse background, including the Vice President of Data & Engineering from Netflix, the former COO of Walmart, and former general manager of emerging markets at Nike, with the founder herself having experience in brick and mortar retail.

However, there is a risk of hiring people too soon, a key part of “premature scaling” which is a common reason for fashion startups failing.

FINANCING

Financing the business is contingent upon achieving critical scale but investors need to be convinced the business has thought about how to scale operations.

Investors need to see real progress and potential.

As Modcloth’s Koger told Mashable in 2013, “We focused on getting the business to $1 million in sales before we raised our first round of capital.”

MODEST FASHION-SPECIFIC CHALLENGES

Coming up with modest designs requires more creativity and more careful production planning.

According to Anas Sillwood, Co-Founder and Managing Partner of Shukr Islamic Clothing, oftentimes designs that are suitable for mainstream fashion would not work for modest fashion, such as plunging necklines or knot-tied designs over the chest area. Designers have to be more creative to come up with modest designs.

Modest fashion still requires production in small quantities and is still niche relative to mainstream fashion, with in-house production more likely required.

As the business builds scale, the first to third years of production in particular are challenging. It is particularly challenging to find the right suppliers for exclusive designs and fabric selections, according to NurZahra’s Dhari, who indicates that the best manufacturers had a minimum quantity order in their policy and payment terms.

Shukr’s Sillwood adds that for each style, to “produce high quality, competitively priced clothing usually requires significant production quantities”, which for Shukr, resulted in in-house production.

Maintaining ethics in both production and financing is critical to the underlying values of modest fashion brands. 

The values of modest fashion companies need to be very clearly reflected in the supply chain. Sustainable fashion is a key emerging trend, with consumers increasingly focused on ethical and sustainable supply chain practices, following disasters such as the Rana Plaza tragedy in Bangladesh that killed over 2,000 workers. Accordingly, an increasing number of brands are seeking to provide “fair trade” products verifying fairness practices in their supply chain.

Furthermore, raising financing is a challenge for modest brands, with brands often seeking Shariah-compliant funding, and unwilling to raise conventional debt or funds from investors that may also take on debt.

BEST PRACTICES

Three companies have started using a crowdfunding model to predict demand and to manage orders.

Online retailers Gustin, The Petite Shop, and Before the Label have started using an “in-house” crowdfunding model for their businesses, with each apparel or accessory item listed in its own campaign with its own production minimum. Items are only produced if they receive enough pre-orders.

Implementing ethical practices has helped Shukr gain recognition and improve employee productivity.

The consistent implementation of this policy has not only made Shukr an industry leader in ethical production but also increases workers’ productivity within the company.

Instead of choosing to produce in cheap labor countries such as China or Bangladesh, the company chose Jordan as its in-house production sites, opting to pay a higher wage to employees.

“When Shukr was founded, it pledged to not follow the immorality of exploitative labor practices… To this day, Shukr pays its workers above the market wage, guarantees employee rights … and strives to maintain a religious work environment that provides the opportunity for all staff to grow spiritually,” said Anas Sillwood in an interview with Green Prophets.

Both Shukr and UK-based modest fashion brand Aab were able to grow organically, managing their production in-house.

Shukr was able to grow organically over 15 years through managing its production in-house, which Sillwood indicated gave them the flexibility to produce as many styles as they wanted, by growing the number of designs offered, and having the flexibility to produce small quantities of each.

Aab’s production facility has grown from a workshop with few staff to a factory with over 200 employees, proving that it is possible for a modest fashion company to successfully scale its productions and team through internally generated funds.

“There is a saying that ‘necessity is the mother of invention,’” muses Altaf Alim, Aab’s commercial director. “We have our own dedicated factory which we have grown organically since day one and we are proud to say that we make our entire product range in-house using ethically sourced products, which means we control the entire process from design to manufacture.”

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