@mikemonnette I’m using nice round numbers here to keep things simple but directionally everything is accurate. For the established brand, I’m speaking to a breakdown of sales for full price items. If you look up COGS for a publicly traded company you’ll see them as a much higher percentage of sales (which also skews the rest of the expense categories) but this is driven by mix from discount sales. I’ve purposefully kept my assortment simple so as to avoid the need to discount bad inventory and maintain a high percentage of full price sales. This is an overview of how I thought about the finances of starting a clothing brand and how that would impact the brand's success. #abbreviatedapparel #fashion #entrepreneur #shortking #menswear ♬ original sound - Mike
With the failure rate of new clothing brands being above 98%, it’s important to have a financial strategy locked in if you’re going to succeed. Below is an outline of the strategy I’ve used at Abbreviated to make sure we succeed against those odds.
First you need to understand that when you buy something from an established brand*, about:
- $20 goes to pay for the actual product
- $20 goes towards marketing
- $20 goes towards paying for the stores and distribution
- $20 goes towards the salaries of HQ staff and other administrative costs of running a business
- and the last $20 goes towards taxes and profit
- Total: $100
Most new clothing brands get stuck in the following pattern:
- They try to create something unique and different, so they end up spending more on the product: $40
- They don’t have economies of scale when it comes to admin costs and salaries, and the cost to hire a bunch of experts adds up quickly: $50
- They’re unfamiliar so they need to spend more on marketing: $30
- They usually try to save on distribution costs with strict return policies: $15
- After profit and taxes ($20), they’re selling a marginally different product for quite a bit more money – it’s not impossible, but it is really hard.
- Total: $155
The way I approached things with Abbreviated was to:
- Start with basic items but at a higher level of quality than the competition: $30
- Kept operational costs super low by doing things myself. Before launching Abbreviated I worked for a few big American retailers in a bunch of different departments, absorbing everything I could, and for the things I didn’t know how to do, I tapped into my network for help and learned by doing: $15.
- I focused on an underserved niche audience, solving a problem that was personal to me – clothes made for shorter guys. This angle, combined with organic content has allowed me to be really efficient with marketing: $10
- Repeat customers are absolutely crucial for getting the flywheel going, so I’ve focused on great customers service, and I offer free shipping, returns and exchanges to make it easy for people to try the brand: $25
- The result is a product that’s priced lower but rated higher than the established competition, and a growing, profitable ($20) new clothing brand.
- Total: $90
*I’m using nice round numbers here to keep things simple but directionally everything is accurate. For the established brand, I’m speaking to a breakdown of sales for full price items. If you look up COGS for a publicly traded company you’ll see them as a much higher percentage of sales (which also skews the rest of the expense categories) but this is driven by mix from discount sales. I’ve purposefully kept my assortment simple so as to avoid the need to discount bad inventory and maintain a high percentage of full price sales.