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The Fashion Industry: Challenges and Opportunities

It isn’t easy being an entrepreneur. In the early days of a company, you have to do everything: hire, fire, manage, and make sure that nothing in the company spontaneously combusts. If you are one of the lucky ones to raise a round of funding, you will experience the added pressure of investors’ expecations laid on top of your own, although your concerns about money will diminish. For a time, that is. But unless you are a profitable company, you can rest assured that you’ll be kept up late at night calculating your burn rate obsessively. At least, if you are anything like me you will.

Fashion startups can be especially challenging. The first is that fashion is an extremely competitive industry. Why the competition? There are three reasons as far as I can tell: market, barrier to entry, and margins. The market for clothes is huge and basically encompasses everybody on the face of the earth in some capacity.

Market Size

Clothes are like food and shelter- everybody needs them.

Of course, there is a multitude of sub-markets within this fashion, and your startup in all likelihood shouldn’t aim to target every conceivable wearer of clothes. That is simply too big a market to get a refined, targeted message to.

So let’s say you hone in on your demographic and realize that it is 20 something sneakerheads with an interest in streetwear. That is still a massive market. And while your idea no doubt feels compelling and original, rest assured that other people have noticed the size of this market and tried to cash in on it as well. So while it is indeed a large market, there is going to be some stiff competition. To be honest, I consider this more of a positive than a negative, because at least it shows you that there is a pre-existing demand for your product, which is always an important thing to identify before jumping into a business. I did it before working on my current company and I am glad I did.

The Margins

Here is another reason everybody wants to get into fashion- the margins are insane! Next to software, there are very few industries with margins this attractive. Because of the subjectivity of fashion, you might find that a dress that costs $2 to make in Bangladesh retails for over $200. Beauty products offer similarly appealing margins, and again, most people buy have at least cosmetic indulgence. This combination of high margin and strong consumer demand means that many people enter this industry.

Bonus: The Barrier to Entry

OK so there is another reason that so many people are keen to get into fashion, and that is the fact that the barrier to entry is virtually non-existent. What does it take for you to start a t-shit company? In an era of Tee Spring and Alibaba, the answer is that it takes virtually nothing. You can crowdfund your entire endeavor or bootstrap it with just a few hundred dollars.

Additionally, a clothing company is one of the first business ideas that aspiring entrepreneurs have. It’s easy to conceptualize and easy to execute, which means that you can expect plenty of competition in the space.

Conclusion:

At the end of the day, it’s not the competition that makes the fashion industry challenging. Instead, it’s consumer fickleness. What is popular today might cease to be of interest to anybody tomorrow. Those who manage to stay on top of trends year over year reap benefits that few can imagine, but trust me when I say that it is hard to do this consistently. A year or two of successful product launches- sure. But can you sustain this over the course of 20 years?

If so, you might just be the next Tommy Hilfiger.

This was posted in Bdaily's Members' News section by Sarah Summers .