Bursting at the Seams: Fashion insider reports industry profits by Nigel
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The fashion industry is a utopia where money rains down on streets paved with gold; where the citizens are bedecked in the finest fabrics and jewelry known to man. They live in extravagant homes surrounded by diamonds that grow from trees. This utopia is such an amazing place that words cannot describe it. Well, okay maybe I'm exaggerating a bit. But when you see the staggering amounts of money that are made in the fashion industry annually, it is hard to not compare the industry to a fairytale.
The fashion industry seems to attract money like iron filings to a magnet. Clothing lines make millions of dollars each year, some well-established lines and designers even make billions of dollars. Now the fourth largest industry in the world, the fashion industry brings in $4 billion a year and includes the revenues from old established companies and a host of new clothing lines introduced by the urban market.
Contemporary Fashion History at a Glance Initially Contemporary fashion as we know it was run by such top couture companies and designers as Channel, Calvin Klein, Karl Lagerfeld Gloria Vanderbilt, Dianne VonFurstenberg, Ralph Lauren, and Liz Claiborne to name a few. These and others such as Donna Karen, Guess? and Tommy Hilfiger bought couture style to the ready-to-wear market. Today, new clothing lines have made their mark upon the fashion industry, and include the wave of urban clothiers like Phat Farm, Sean John, Rocawear, and at one-time the mega clothing company FUBU.
Given the laundry list of clothing companies and fashion designers, one would think the market is over saturated. But quite the contrary is true. Like an elastic waistband, the market has simply expanded to accommodate each new clothing line, many of which have been able to capture a significant portion of market share to be rewarded with millions of dollars for their creativity, fashion sense and work efforts. Simply put, if you are the owner of a hot clothing line, chances are, you're rich!
Marketing Genius Tommy Hilfiger should be considered the poster child for marketing innovations. He was the first traditional clothing designer to capitalize on the Hip Hop world. From 1990 to 1993 Tommy Hilfiger was only bringing in $25 million a year. But that all changed in 1994 after a performance by Hilfiger-clad Snoop Doggy Dog performed on NBC's Saturday Night Live. After the performance Tommy's sales quickly jumped to $67 million. Since then, Hilfiger's sales have continued to claim nearly $900 million. In 2002 Tommy Hilfiger reported sales of up to $1.9 billion. The company has remained around the billion-dollar mark. In 2006 Apax Partners, a global private equity investment group bought Tommy Hilfiger, Corp. for a reported $1.6 billion along with the agreement that Hilfiger would stay on to run the company.
Ralph Lauren, designer of the POLO brand is synonymous with the word fashion. Since the 1980s Ralph Lauren has been a dominating force in the fashion industry. His sales consistently hit record numbers and in 2006 for the U.S. market reached $3.75 billion. Projections for fiscal year 2007 are anticipated to reach $4.5 billion.
The company Guess?, by designer Maurice Marciano is yet another example of clothing line that has remained on top. Since 1981, the brand has dressed infants to senior citizens. A crossover brand, it has earned sales from both the urban and suburban markets, and in 2006 the company reported profits of $1.2 billion. Both Chairman Maurice Marciano, and co-chairman and CEO Paul Marciano command million-dollar salaries in their leadership positions in the company. The men of fashion are not the only ones commanding high salaries and huge profits. In 2006 Liz Claiborne Inc, reported sales of $5 billion. While Liz Claiborne unfortunately died on June 27, 2007, her legacy lives on as does the testament to the longevity of the Liz Clairborne brand.
A self-taught fashion designer, Claiborne founded her company with her husband Art Ortenberg, Leonard Boxer, Jerome Chazen in 1976. Within a decade, the clothing company became a billion-dollar business. That type of growth is a testament to just how great and rewarding the world of fashion can be.
Another of the many top women in fashion is Donna Karen, founder of DKNY (Dona Karen New York). The DKNY name commands great respect in the fashion world and in 2006, the privately owned company reported earnings of $1.2 billion. The company's 2007 sale projections are expected to stay steady at around the 1.2 billion-dollar mark. It should be noted that some companies partner with others to achieve their high financial earnings. For example, DKNY Jeans and DKNY Active are partnered brands of Liz Clairborne, Inc.
In 1967, fashion icon Calvin Klein graced the industry with his presence. Since then, Calvin Klein has become a household name. Another designer to use apt marketing strategy the Calvin Klein Company has also hit the billion-dollar mark. In 1980, Klein pushed the envelope with his Jeans ad where a young Brooke Shields stated, "Nothing comes between me and my Calvins." Since then, the sentiment has been true for many. By 1996 Calvin Klein company surpassed $3 billion in sales worldwide, and by fiscal-year 2006, its subsidiary, Calvin Klein Jeans Wear Co., hit $90 million in sales. Just as Hilfiger sold his company to Apex, Calvin Klein sold his brand to the Phillips-van Heusen Corporation, the largest shirt maker in the United States. According to industry financial reports, the Calvin Klein Company was sold for $400 million dollars in cash and $30 million in stocks.
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 Est e Lauder Company has held on to its market share for quite some time. Est e 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.
Trail Blazers 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!
Jay Arrington co-owner of www.startingaclothingline.com
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!
Jay Arrington co-owner of www.startingaclothingline.com
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 Est
e 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
Article provided to Apparel Search by Nigel Christopher.