Emerging designers bear the brunt of economic crisis

To receive the Vogue Business newsletter, sign up here. As the energy and cost of living crises sweep Europe, and economic concerns mount in the US, fashion’s emerging talents are being squeezed harder than ever. Major luxury houses often take precedence with suppliers and buyers, while young designers from New York, London, Milan, Shanghai and beyond face increased challenges. Razor-thin margins and less brand awareness means these designers find themselves in a particularly precarious position in a tough economic outlook. “It’s important to understand the challenging environment in which designers and fashion businesses operate today,” says Caroline Rush, CEO of the British Fashion Council (BFC). “The war in Ukraine and the cost of living crisis, teamed with a slowing growth environment, falling consumer confidence and [in the UK] the loss in the power of the pound means the ability for brands — especially the smaller or emerging ones — to scale their businesses is challenged.” In the US, the energy crisis isn’t as severe as it is in Europe. But designers, who often rely on European suppliers and international shipping, are still facing challenges, says Steven Kolb, CEO of the Council of Fashion Designers of America (CFDA). “They're still struggling [post-lockdown] with supply chain costs and issues. And materials costs as well,” he says. “There's some concern around the holiday season, which is always an important market for designers.” Production in this climate is “horrible”, says London-based designer Chet Lo, who started his ready-to-wear brand of spiky, brightly coloured knitwear in his bedroom in 2020. In 2021, he joined incubator Fashion East for two seasons, then the British Fashion Council’s Newgen programme — making his runway debut for Spring/Summer 2023. The brand gained eight new stockists after the SS23 collection, in addition to existing partners including Ssense and Farfetch. However, while this should be a moment of excitement for the designer, the current climate also makes him uneasy. Despite growing awareness of the brand, retailers have pulled back on buying budgets for SS23, he says. “It’s hard not to take it personally, especially because it’s my name on the brand,” Lo says. “Our retail partners explained that the [threat of] recession is super real. Clothes might be a luxury fewer people are buying into at the moment — and I totally understand. But, it’s stressful to have a business in this climate.” New York-based brand Puppets and Puppets, founded by artist turned fashion designer Carly Mark, doubled its sales for SS23 and is growing its team to meet demand for its sweaters, novelty cookie-embellished bags and artful dresses and separates. Mark notes that many buyers are hesitant right now to back emerging designers. “On top of all of the issues going on in the world, specifically in the fashion industry, so many new brands have cropped up since Covid and nobody knows who to invest in, especially when times are questionable,” she says. Turkish couple Ceylin Türkkan Bilge and Emir Bilge launched luxury brand Siedrès from Istanbul in February 2020. Its colourful, mediterranean-inspired dresses and separates are stocked at 31 retailers including Harvey Nichols and Farfetch. Like many emerging players, Siedrès already faced Covid-related production delays and studio closures. After the war in Ukraine, Turkey’s inflation rate hit over 83 per cent in October 2022, the highest rate recorded for 24 years, according to a report by Reuters. Siedrès has to raise employee salaries every six months in order to keep up. “Sales are really low right now compared to last season,” says Türkkan Bilge, “it’s really not looking good for us. Some of our retailers said they can't stop selling Gucci but they can stop selling us. So, they’ve paused us for a season. It’s difficult because we already made investments in production [before the retailers pulled back]. We have a team of 25 people here right now. When retailers cut their orders or place an order and then they cancel it, it's a huge problem for us.” Fighting for production capacity From raised prices from European suppliers to higher shipping costs from China, production and logistics have become a major challenge across the industry, but especially for fashion’s fledgling labels. Many labels reshored manufacturing to Europe during the pandemic to reduce shipping delays and costs. The increased demand at factories in Italy has been a challenge for local emerging brands, says Marco Agnolin, co-founder of Italian gender-fluid label A Better Mistake, which has been worn by Spanish singer Rosalía and American rapper Machine Gun Kelly. “Italian production capacity is not so big, therefore many new brands struggle to find production slots and competitive prices.” A Better Mistake has strong connections with suppliers, so it is managing to keep production costs stable, Agnolin says. Others aren’t so lucky. Upcycled Italian knitwear brand Vitelli uses deadstock and leftover yarn from small family-owned Italian manufacturers to produce its cool, colourful knitwear. But, as upcycling becomes more mainstream and more brands source from Italy, Vitelli founder and creative director Mauro Simionato has found himself in competition with major players. “In the last couple of years, the local suppliers are getting busier with bigger brands and conglomerates. So, sometimes now we are at the bottom of the list and orders take ages,” he says. To face this competition for resources coupled with growing energy costs, Simionato is adapting his work with simpler designs that require fewer different yarns or textiles. “A lot of stockists don't realise how much work goes into production,” he says. “I think they are used to dealing with companies like Gucci or other massive conglomerates that have the funds to make their collection even before they've shown it, and then just immediately ship it out. We’re different from that.” Young French brands are used to being bottom of the pile when it comes to manufacturing, says Serge Carreira, head of emerging brand initiative at French fashion body the Fédération de la Haute Couture et de la Mode (FHCM). “Small orders are always put at the end of the production chain. But then, the issue is how young designers can be agile enough to keep their margin, the margin that allows them to survive.” On top of shipping costs and competition with major players, the cost of raw materials like wool, leather and polyester continue to rise. Sometimes price increases happen after orders are confirmed with factories, so brands have no option but to accept, Carreira says. “To keep our stockists happy we've had to take a cut from our margins [in order to keep prices stable], which is unfortunate,” Lo says. “I've spoken to a lot of my team and a lot of my agents and they’ve said this is an end game kind of play to keep prices steady.” Lo is also trying to find alternative materials, as his spiked fabric technique currently relies on polyester, which is now becoming more expensive than wool due to rising costs of shipping it from China. “This crisis is forcing us to rethink the way we design — but that can be exciting, too,” he says. Shanghai-based luxury label Shushu/Tong launched in 2015 and now has 60 stockists globally, including 40 in China. The brand sources half its fabric from Europe, which is driving up costs, says co-founder Yutong (Shushu) Jiang. “If it keeps increasing, I think it will reach the point that we have to use fabric from Japan and China. It’s a shame because the quality in Europe is so good.” Investing in DTC to recoup margin loss Some emerging brands are exploring direct-to-consumer channels in certain markets, to get around order issues with wholesalers, though this raises additional cost challenges. Turkey and neighbouring countries are not facing the same energy crisis as Europe, and tourism is thriving, particularly with customers from the Middle East and some affluent asylum seekers from Russia and Ukraine, says Siedrès’s Bilge. “The malls here are full!” Siedrès is investing in physical retail in Istanbul to capitalise on growing demand for IRL shopping. Shushu/Tong is also planning to open physical stores in China and internationally, to boost margins and be better connected to its consumers. Opening a store isn’t an option for many emerging labels. Collaboration with retailers or more established houses with bigger retail footprints can help them boost their profiles and bottom lines, says Kolb. “Despite inflation and despite the economy, consumers are still interested in collaborations, whether they be at mass retailers like Target or special products available at retail, those are opportunities.” Rather than dishing out universal financial support, the CFDA prefers to give mentorship and guidance, with some funding when needed, Kolb says. “Recently a young brand got their first major retail order, but didn't have the cash to actually produce the order. I was able to reach out to the retailer,” he says. “The retailer agreed to cover production cost as opposed to waiting to pay the brand after.” E-commerce is another priority. Lo is trying to sell more made-to-order pieces directly through his online store, where sales have a higher margin. “This is the first time that I've taken proper pictures to put in my e-commerce,” he says. “We're pushing harder with marketing. We shot all the garments properly with a fit model and everything was edited correctly. I have a shop that I'm actually proud of now.” DTC allows brands more flexibility in production and delivery times, which is helpful in today’s climate, says FHCM’s Carreira. “On the other hand DTC requires investment, not just in your e-commerce store but also it requires brand awareness. You need to have a community that wants to visit your own-brand site.” Bilge says the constant challenges can make it hard to stay motivated. “There was a terror attack in Istanbul two weeks ago and if it happens again, it could ruin the city’s tourism and shopping industry,” says Bilge. Türkkan Bilge echoes this. “We want to be more aggressive. We want to create a beautiful world with Siedrès, but every year something new is coming. How can we say what’ll happen in five years? It’s hard to predict.” However, Vitelli’s Simionato says adversity can inspire new ways of working. “I like the idea of working with smaller batch production but more unique and diversifying deliveries from retailer to retailer,” he says. “We also are looking at different layers of DTC. It’s good for smaller brands to rethink, be more unique and have better relationships with the stockists and final customers.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author Stockholm's new fashion talent: Edgy, artsy and sustainable ‘More visible, more successful’: Dior CEO Beccari on its massive Harrods takeover The young designers disrupting the $368 billion jewellery market

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