BoF Insights is The Business of Fashion’s in-house consultancy. We partner with leading fashion and beauty brands and investors to help them sustainably grow for the long term. Get in touch to find out how we can support your business.

Khaite got its start in 2016 as a homegrown, New York-based womenswear brand with a fan base that celebrated its chic, “cool girl” aesthetic. Founder Catherine Holstein turned that buzz into a lasting luxury label with global reach and multiple product categories, including apparel, handbags and eyewear, surpassing $100 million in revenue in 2022.

It’s a textbook example of what to do after a brand establishes itself in its hometown, home country or niche community. After capturing that critical early buzz, a fast-growing label’s leaders must look towards diversification levers to translate that cultural heat into commercial momentum, and access a larger audience before they’ve saturated their initial market.

That task is harder than ever: Both direct-to-consumer and wholesale distribution are challenged, with increased costs of customer acquisition and financial challenges across multi-brand retailers. And with funding harder to come by, brands are further constrained by an inability to invest extensive capital expenditures into global expansion and the introduction of new product lines.

In conversations with BoF Insights, The Business of Fashion’s in-house consultancy, indie brand leaders and investors outlined a new approach to diversification across distribution channels, geographic markets and product categories in today’s environment. In part two of this series, BoF Insights breaks down the formula for transforming community buzz into lasting commercial performance via diversification, outlining the steps brands should take at different stages of growth to hit $100 million in annual sales.

The Ruthless Approach to Distribution

David Belhassen, founder and managing partner of NEO Investment Partners, which has invested in Victoria Beckham and Ami Paris among others, recommends indie labels prioritise direct-to-consumer distribution in the early stages of growth. Building the data-driven culture required to sustain an e-commerce business can be more difficult for mature brands that get their start in physical retail.

“I’m very, very focused on digital natives because it’s very hard, when you’re a wholesale play or a retail play, to [adapt] to digital culture,” said Belhassen. “It’s so data science driven . . . [so from] day one, the team and culture needs to be around that.”

Once brands have achieved between $10 million to $20 million in annual revenue, Belhassen recommends that they swiftly introduce wholesale. But they must be selective about the wholesale partners they choose to work with.

While relationships with a swathe of major wholesalers may have once served as a signal for a brand’s legitimacy, casting a wide net today may mean diluting focus and reducing the performance of the wholesale channel as a whole.

Brands that juggle multiple wholesale partnerships must manage a range of distinct cash and payment terms and split their attention across multiple doors, limiting their ability to curate distinct retail experiences and ensure face time and commitment across retailers.

Experts recommend that brands focus on relationship-building with two to three key wholesalers at most during the early stages of growth to maximise value. In practice, this means visiting wholesalers in-store to view products on the floor, working with partners to design displays that tell the brand’s story and building feedback channels for retail associates to relay customer commentary back to headquarters.

For some, channel curation means bypassing wholesale altogether. Polène has opted to rely solely on direct-to-consumer and own retail distribution to protect the brand’s core DNA.

“We love to manage a very clear DNA of Polène, not just adding points of sales . . . what we want is to build, to give knowledge to our clients. And the store [experience] is the best [way] to give knowledge,” said Mothay. “[The store] should always be like a small Polène world where [customers] can learn more about us and understand the brand more.”

Polène creates links between its distribution channels to further enhance performance across the full business, for example by leveraging e-commerce data to track product sales across global markets to gauge demand for retail expansion into new geographies.

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Expanding to New Geographies

Brands that successfully scale in today’s climate are prioritising strengthening their reach across their home markets before eyeing new geographies.

Take Staud. The contemporary brand began as a Los Angeles-based customisation concept but pivoted towards ready-to-wear once early customers wrote in to share their enthusiasm for the brand’s own merchandise. Today, Staud is focused on building a worldwide accessible luxury label — but it is looking to first build out its US presence.

“We want to create a global luxury lifestyle brand . . . [but] we’re starting domestically,” said Staud president Jon Zeiders, noting the company’s recent openings of two Hamptons-based stores. Staud also operates stores in Los Angeles, New York City, Palm Beach, Nantucket and Boston. Zeiders said that the brand is approaching $100 million in annual revenue.

A patient approach to global expansion is crucial as moving to a new geography necessitates significant investments of time and capital to ensure broader cultural resonance. Brands must appropriately tailor their product, merchandising and marketing strategies to each geography. By doubling down on their home markets, they can spend more time building out their core DNA before localising it to new contexts.

Self-Portrait, a contemporary womenswear label, first launched in London in 2013 and waited until 2020 before pursuing a major expansion to Asia. Sales have doubled each year between 2020 and 2022, amounting to £51.7 million (approximately $66.7 million) in 2022. Founder Han Chong credits the brand’s success in Asia in part to its highly localised approach to product design.

“When designing the collection [for Asia], we have to think of their lifestyle, their culture reference, the body shape,” said Chong. “In general, in Asia, they are slightly more petite. So [we need to adjust] the fit [and] the length. [The] colour of the pieces also needs to match to their skin tone. [We] need to understand that territory [and] what their reference is.”

Some investors recommend that brands do not begin exploring global expansion before achieving over $30 million in annual sales. Of course, this target may be lower when starting out in smaller markets further away from traditional fashion capitals, or higher when operating in larger consumer economies like the US.

Data plays a critical role in prioritising new global markets for physical retail expansion. Polène opened its first flagship store in its home base of Paris in 2020. The brand later opened a New York City store in 2022, then a Tokyo store in 2023. The US and Japan were its largest export markets for its direct-to-consumer business.

But today’s growing brands are simultaneously leaning on intuition to back up expansion decisions.

“[When] you choose another market, [choose] a natural one that makes sense,” said Belhassen. “When you travel there, you feel your brand really belongs.”

Brands that invest wisely are also testing and learning before entering new markets through permanent retail. Bode held pop-ups in Tokyo, Paris and New York throughout spring 2024 to promote its new sneaker collaboration with Nike and generate customer love in new territories.

“The purpose is contextualisation,” said Bode. “For us to be able to show up, even if the pop up is only three days, . . . [we are able to] introduce the brand to people that otherwise wouldn’t have been able to enter into a Bode space.”

The pop-ups also provide opportunities to build stronger relationships with potential global partners, further paving the way for future collaboration.

Launching New Product Categories

Brands will undoubtedly hit a scale ceiling if they rely too heavily on the buzz around a singular hero product. Those that push beyond this ceiling consolidate hype into carefully merchandised collections that are appropriately priced to appeal to a wide consumer group.

According to Stefano Martinetto, the culture surrounding a brand was previously the dominant force that informed Tomorrow’s investments — now, it’s product.

“You cannot rely on the ‘wow effect’ to have sell-through. You have to also create a product which is relevant at the price point you’re offering and offers differentiation for the customer,” he said. “Product is back at the centre of every consideration we and everyone else is making.”

For some brands, this might mean introducing a more accessible line or product category. Martinetto suggests that labels with cultural cachet should consider a secondary line that offers a simplified version of more experimental designs to introduce a shoppable price point, similar to diffusion lines in the 1990s.

“A lot of creative directors, more in the past than recently, have considered their own brand an art performance or a sort of portfolio for them to achieve status,” he said. “Now, for these brands to survive, they need the acumen of a super commercial collection [that respects the brand] DNA.”

Introducing high-margin categories like bags and leather goods that appeal to a wider range of consumers is another approach. Staud was ahead of the curve — the brand was conceived around the concept of chic, logoless handbags — and has expanded by prioritising the accessories, along with the two other major lifestyle categories — clothes and shoes.

Investors, however, urge caution around expanding too quickly. NEO Investment Partners’ David Belhassen recommends indie brands do not pursue category expansion until they’re established in their hero segment and making at least $75 million in annual revenue, depending on the sector. Founders and creatives will encounter thousands of temptations to expand into other categories, but the most successful will learn to say no. “The biggest problem we see in small businesses is they’ve gone too many places, too many trials, too many directions for their size,” he said.

Once brands meet this threshold, category expansion choices need to be faithful to their DNA. Emily Adams Bode Aujla produced only menswear for several years before introducing a womenswear line. Female customers were shopping the men’s collection but jumping through hoops to understand how to shop products designed in men’s size and fit. The impetus behind the womenswear collection was more than just offering the men’s styles in women’s sizes, but translating the brand DNA to womenswear categories like lingerie to offer something new. Next, the focus is on launching a sportswear line called Bode Recreation.

By building out the customer’s full wardrobe in this way, it encourages them to come back time and time again. According to Nanushka’s Baldaszti, while categories like bags and shoes are “very different animals than ready-to-wear,” transitioning between them is much easier if house codes are clear.

Throughout the lifecycle of a brand, leaders may need to pivot and enter, or even exit, a product category. Maintaining flexibility and malleability is key.

“Anyone who tells you that flexibility isn’t a key success characteristic to scaling a brand probably hasn’t scaled a brand,” said Zeiders.

This article is part two of a series by BoF Insights that outlines today’s playbook to translate cultural heat into commercial success. Read part one here.

BoF Insights is The Business of Fashion’s in-house consultancy. We partner with leading fashion and beauty brands and investors to help them sustainably grow for the long term. Get in touch to find out how we can support your business.

On Monday Bangladesh’s long-standing prime minister Sheikh Hasina resigned and fled the country in a dramatic culmination to weeks of increasingly violent protests that have roiled the world’s second-largest garment exporter.

The country is a critical supplier to some of the world’s biggest fashion companies, including H&M Group, Zara-owner Inditex and Walmart. Curfews and communication blackouts imposed as part of a harsh crackdown on dissenters have added to economic and geopolitical pressures already weighing on the local garment manufacturing sector.

Hasina has ruled the South Asian nation for more than 15 years, but faced growing calls to resign after moves to quash student protests this summer escalated into deadly violence.

What caused the protests?

The unrest began in late June, when students took to the streets calling to end a quota system that reserved a large number of government jobs for the families of war heroes from the country’s war of independence with Pakistan in 1971. The protests were met with a violent crackdown that stoked simmering anger over broader issues, including steep inflation, high youth unemployment and an increasingly authoritarian government.

Hasina secured a fourth term in office in January in an election boycotted by the main opposition parties. Political manoeuvring spilled over into the garment sector, which accounts for more than 80 percent of the country’s export earnings, as mass protests over minimum wages in the run up to the election were met with forceful repression.

At least 300 people have been killed in the violence over the last month and 11,000 have been arrested in recent weeks.

How has the situation affected the fashion industry?

The instability has dealt a blow to the country’s garment sector, with communications blackouts making it impossible to receive or process orders for days at a time and curfews halting work. Several factories were torched as unrest escalated over the weekend, according to the police.

Last month, the country’s premier trade group, the Bangladesh Garment Manufacturers and Exporters Association, said that the disruptions were costing the sector $150 million a day, according to media reports. The BGMEA did not respond to requests for comment.

The response from brands has been mixed. Clothing manufacturer Hula Global, which serves major US store chains, told Reuters it had redirected orders from Bangladesh to India to avoid disruptions. Meanwhile, sportswear giant Puma said it’s made no adjustments. “We have not stopped sourcing from Bangladesh … [and] we have not re-allocated or changed course,” the company said in an emailed statement.

The disruptions also place new pressure on the sector’s workers, who have been struggling with high inflation and reduced earning capacity as the industry’s broader downturn has weakened orders and overtime prospects. Many are still under threat of arrest as a result of criminal cases filed in the wake of last year’s wage protests, according to unions.

What happens next?

Army chief Waker-Uz-Zaman has stepped in to form an interim government, promising an investigation into the crackdown against protests.

Still, the country remains in disarray after weeks of turmoil. Protests continued after Hasina’s resignation on Monday, with crowds looting the prime minister’s official residence.

The question now is whether stability can be restored swiftly. The country’s manufacturing sector is adept at navigating upheavals, but the political crisis comes at a critical time with Christmas orders coming through and the threat of further disruption could prompt brands to shift sourcing elsewhere.

Meanwhile, labour groups say they are hopeful that the political upheaval could result in progress on long-fought issues around freedom of association and other labour rights.

“This is like our country becoming independent,” said Nazma Akter, founder and executive director of labour advocacy group Awaj Foundation. “The first time was in 1971, and now again in 2024.”

In-person shopping has made the comeback of a lifetime in recent years. Even as high interest rates and inflation eat into consumer spending, retail sales are holding strong.

The one problem, as retailers are discovering, is finding available space for new stores. In the US, vacancy rates have slipped to a 10-year low. Rents continue to rise globally, with the exception of Asia, where tourism and post-pandemic recovery overall have been slower.

For those looking to expand their footprint, there’s little hope of relief anytime soon, real estate experts say. Fashion brands find themselves competing for prime locations with a new generation of tenants including medspas, healthcare clinics, restaurants and entertainment concepts. All the while, construction for new retail developments has dramatically diminished since the pandemic. High interest rates and rapidly escalating construction costs have further dampened incentives to build.

As a result, the mismatch between supply and demand for retail real estate has never been more pronounced, data shows, with leverage for negotiation fully on the side of landlords.

“Tenants are just a lot healthier today and a lot of retailers are in expansion mode coming out of the pandemic,” said James Bohnaker, senior economist at Cushman & Wakefield, a commercial real estate brokerage. “But from a development aspect, given interest rates and the lending environment, it’s just not a time when you’re going to see new developments come on line.”

Apocalypse in Reverse

For years, “oversupply” was the key word in assessing the state of American retail. Hundreds of retail chains shuttered in the past 15 years as e-commerce emerged as a threat. Rents came down and vacancies soared in most markets.

That trend, along with the financial crisis of 2008 and its aftermath, left lenders wary of backing retail developments, which were considered higher risk than other projects.

When retailers were still going bankrupt, the lack of new construction was not an issue. But suddenly after the pandemic, when store closures hit a peak, the trend dramatically reversed. Left and right, retailers buoyed by stimulus checks switched to expansion mode.

The industry wasn’t prepared for the sudden reversal.

“I sometimes make the joke that retail was oversupplied for so long, until it wasn’t,” said Brandon Svec, national director of retail analytics at CoStar Group. “And now we find ourselves in a place where everyone was so concerned about supply that we really clamped down on new construction.”

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Rent rates for open-air shopping centres in the US have risen persistently since the beginning of 2020, reaching an average of $24.37 per square foot in the second quarter of this year, according to data from Cushman & Wakefield.

The vacancy rate, a measure of how much space is available for rent, for all types of retail in the US is 4.2 percent, the lowest rate albeit by a small margin in 10 years, according to CoStar Group.

But despite burgeoning need for new spaces, retail construction is still very much stunted. Last year, about 9.8 million square feet of new retail construction were completed. That’s compared to nearly 19 million square feet in total absorption, or the amount of space newly occupied by tenants — a measure of demand.

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This is because high construction costs and reluctant lenders have made retail projects commercially unattractive to developers, according to Svec. Rents, even on an upward trajectory, are not making up for the price of land, labour and materials today.

“Right now we’re at an all-time low for space under construction,” he said. “The economics of a new development has changed … and that’s why we won’t see a groundswell shift in construction any time soon.”

The Most Coveted Properties

Not every piece of retail real estate has recovered at the same pace. Undesirable mall storefronts vacated long before the pandemic have largely remained empty. Mall spaces have a far higher vacancy rate than retail overall, CoStar data shows, though this wasn’t the case prior to 2018.

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The current vacancy rate for malls in America is more than double that of the category at large, at 8.9 percent. The undesirability of struggling malls is exacerbating the retail supply crisis, Svec said, because not only are there no new retail construction, traditional mall tenants like Foot Locker and Bath & Body Works are now seeking relocation to either more premium malls or open-air shopping centres, creating more competition for the same pool of coveted spaces.

At the same time, some markets are hotter than others. Following the pandemic, cities in the Sun Belt of America have become hotspots for migration. These cities include Tampa and Fort Lauderdale in Florida; Phoenix, Arizona; Nashville, Tennessee; and Las Vegas, Nevada — the top five cities in terms of rent growth between 2019 and 2024. In Tampa, for instance, retail rents grew 38 percent in a five-year period — that’s compared to 8.5 percent in New York and 0.9 percent in San Francisco.

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One of the driving factors for their popularity, said Svec, is that states like Texas, Florida and Arizona all have low taxes that incentivise business, on top of favourable mild weather in the wintertime.

Between rapidly-paced chatter on TikTok and the emergence of ultra-fast fashion players like Shein, figuring out how to capitalise on trends has never been more complicated. That reality, in tandem, has made a fashion buyer’s job harder.

“Different shocks are happening to different parts of the system. The anxiety is at a fever pitch,” said Monisha Klar, director of fashion intelligence at trend forecasting company WGSN, who previously worked as a buyer at Gap, Amazon and Fast Retailing. “If something goes wrong, it’s the buyer’s head on the chopping block.”

To address these shifts, on Aug. 8, WGSN is launching a new platform for buyers that puts its tools — including its TikTok Analytics service, which launched in April and analyses what sort of staying power trends on the app have, and its AI features which use machine learning to classify trends — together in one place, so that it can provide forecasts for when buyers should phase items in and out under their typical commercial calendar.

The firm’s AI model works by first analysing years of data drawn from social media, runways and retail, and using statistics to weigh the importance of various factors (for example, it has found being on the runway is a strong predictor of the lifecycle of some trends, while social is stronger for others). Trend experts then review the data and account for outside factors.

Previously, WGSN’s products were mostly centred around designers’ process and workflow, providing inspiration through high-level reports. The firm saw an opportunity to speak directly with the buyers using its information, said Francesca Muston, WGSN’s vice president of fashion. The platform has been in the works for years and is part of a wider emphasis the company is placing on building products specifically for buyers.

“There’s this perception that TikTok is driving trends, what TikTok is really doing is marketing trends,” said Muston, adding that these changes have made many buyers feel unnecessarily helpless. “It’s not about going out and making a whole new load of product off the back of every single trend and hashtag … Our clients are chasing their tails the entire time and they’re compromising on quality, fit and margin. There’s a way to be much smarter about this.”

Learn more:

The Fashion Trends to Watch in 2024, by the Numbers

From Barbiecore to quiet luxury, fashion’s lightning fast trend cycle took brands and retailers for a ride in 2023. Here’s what we will take with us into 2024 — and what’s still to come.