Fashion is a high-risk business at the best of times, but the current economic crisis poses huge challenges for Irish designers. How they adapt will affect us as well as them, writes DEIRDRE MCQUILLAN, Fashion Editor
WHEN ONE OF Ireland’s most promising young fashion designers, Eilis Boyle, set up her business five years ago, among the many orders she received for her first collection was one for €8,000 from Italy. But having dispatched the clothes on time, she never received payment and, saddled with an unexpected debt, she took out export credit insurance to guard herself against future setbacks.
Last year one of her biggest French customers went bankrupt and, although Boyle recovered 60 per cent of a €14,000 order, when it came to renewing her insurance this year, it had trebled, “and now I can’t afford it”, she says.
Such are some of the difficulties of establishing a fashion business, and they are greater now than ever before because of the credit crunch.
Another Irish designer, Aideen Bodkin, whose company is 10 years old this year, has seen her sales slump by 40 per cent in the UK, which had been a steady growth market for her up to last year. Even Lainey Keogh, the successful knitter whose business is 70 per cent US-based, took the knock last October with a 50 per cent drop in orders.
All of them, both established and up-and-coming designers, have taken remedial action.
For Lainey Keogh, reviewing price points while keeping collections fresh and new has ensured that US buyers are responding positively. Aideen Bodkin has made her collections “more flexible and less special-occasion and we have been a little cleverer in the way clothes are designed”. Eilis Boyle can’t afford a marketing or PR budget, but is reassured by the fact that cautious Irish customers are now re-ordering from her collection. All are watching costs closely.
Despite its perceived glamour, the fashion industry is not one for the faint-hearted, particularly in a small country such as Ireland. Its cyclical and cash-intensive nature means that designers have to wait a year, sometimes 18 months, before they get paid for a collection. They select fabric in March, make samples in April, offer a collection for sale in July/August, start manufacturing orders in September and make deliveries in January, with payment usually two months later. There is, say insiders, no other way.
“It’s like building a house,” says Joanne Hynes, whose collections represent an investment of around €20,000 each season. “You can’t build a house without bricks and mortar, and clothes can only be turned into working capital for a couple of months. The nature of fashion is that it is a high-risk business.”
It takes a lot of adroit financial management to keep in control, to accept the fact that success doesn’t happen overnight, and to face the prospect of a straitened lifestyle for 10 years.
“If I knew then what I know now, I might never have started in fashion,” says Boyle, who is nonetheless determined to survive. “If you invest €20,000 in a collection you need to be turning over €200,000 a season to survive, and at the beginning you are not doing that, so you lose money for five years before you break even.”
Like Aideen Bodkin, Deborah Veale set up in 1999 and her business in the UK was doubling every season until the recession hit.
“It does affect how you design, and now everything has to earn its justification,” she says. “We have rebalanced ourselves and diversified by going into accessories. And we have also worked very hard on the corporate side, and that has remained steady. It is critical to have people around you who know the business. I have always invested back into the brand.”
Like others, she remains optimistic. “I do feel there is a slight turn,” she says. “People will still be spending for special occasions, like Holy Communions and weddings, and anything that is well-priced and well-designed will hold its value.”
DONAL BOLGER, of BLG Marketing, an accountant specialising in fashion and retail consultancy, and known for his association with John Rocha, says that the designers who survive and thrive in the current economic climate are those who have taken corrective action.
“In one case, they are having their best year ever,” he says. “They reorganised rents, restructured staff costs, changed the product mix – and all of these things have made the business profitable, whereas in the good old days it was a break-even situation.
“It’s not all doom and gloom, but the next two to three years are not going to be easy for any designer or retailer, and it’s the same for every other company in every other sector. Designers will have to work extra hard and even with that, it may not be enough for some – but that’s the industry for you.”
With retail sales topping €200 million a year and products on sale in more than 100 countries, John Rocha is upbeat about the current downturn having just renewed his contract with the new US investors in Waterford Crystal. “We are still doing well and revenue from licences is up on last year,” he says. “People are buying less, but still buying. I want to concentrate on fashion, and my other projects are the icing on the cake. Luckily, we have a strong business and what we do, we do well. But I worry about the small people – they are the future of the industry and if they can’t survive, it’s terrible.”
The heirs apparent, the new John Rochas, according to Donal Bolger, need to focus on two important things: firstly, to identify a commercial partner (a financial backer, mentor or license deal); and secondly, to have a realistic rather than aspirational view of their business and its costs. He also points out that the failure rate of fashion retailers in Ireland is very high, so the credit and investment risk is high for designers. The amount of business they have to do to cover overheads forces many into the entirely different UK market, just to break even. Yet certain designers are going from strength to strength, Bolger argues.
ONE WHO ADMITS she is “thrilled with the way things are going” for her at the moment is Joanne Hynes, who realised her ambition to open a concession in Brown Thomas earlier this year.
“When I started, I managed because I was working five days a week teaching,” she says. “Fashion is very hands-on, but there has to be a lot of passion because it is all-consuming.
“I am not carrying huge debts, I am not a company with 40 stockists in the UK. I was not riding the Celtic Tiger and in my world my brand has been progressing.”
Her advice to fledgling Irish designers is to start with a small collection of six or eight dresses and build up slowly. “It’s a tough industry and experience is important, but you have to get an investor, or work, or do something to get it up and running. You have to learn the hard way.”
For Boyle, the recession has its positive side. “It means you can step back and breathe again,” she says. “All those early deliveries, tighter margins and huge pressure was all about volume and speed, and was very damaging for small designers. We are selling design, and if you haven’t the time or money for that, what’s the use?”
Fashion bargains? Are retailers bringing down prices?
HAVANA
Donnybrook, Dublin 4
“I’m not taking prices down, but offering a few more labels at lower price points . . . We offer loyal customers discounts of 5 to 10 per cent and a special one before they go on holiday – something we have always done. But the current situation has forced us to keep the shop interesting and work harder and get a better balance of prices.” – Nikki Creedon
KALU
Naas, Co Kildare
“We have cut down on our spend, but not on quality. We still have a huge choice, but it is tighter. Prices have not come down because we are still buying the same quality product. We will do a good sale and the only difference is that we may bring it forward to the end of June, when we’ll offer between 30 to 50 per cent reductions.” – Kate O’Dwyer
EDEN
3 Market Square, Dundalk
“We have to do promotions all the time, we have to reduce items. There are sales in all the shops here and people expect reductions. We are getting people asking: ‘Is that your lowest price?’ You can’t do that in the big stores. In my sales room we have things selling at below cost – some are 80 per cent reductions and still people ask if it’s the best price. I think it’s a dangerous climate, but we have to be smart. The one designer who has reduced wholesale prices for her bags and wallets is Orla Kiely, who has reacted to what is going on. We are reducing everything we have right across the board – clothing, children’s wear, fragrances.” – Gillian Leavy
MARKS & SPENCER
Branches nationwide
“We have looked very closely at our volume lines to give customers a better deal, such as two T-shirts for €8 euros for both men and women, and three pairs of knickers for €6.50 . . . We’ll be offering customers some good bargains every week, so that wherever you go there will be an offer. For the Bank Holiday weekend (May 30th to June 1st), for instance, there will be 40 per cent off furniture and at least 20 per cent off homewares. In the next few months there will be gradual reductions on all clothing as the euro/sterling rate buying power comes into effect.” – Carmel Brehony, marketing manager
BROWN THOMAS
Branches in Cork, Dublin, Galway and Limerick
“We are upping the game as much as possible and revising our brand portfolio and choosing gorgeous things for autumn/winter. We have run some limited discounts and offers, such as the 20 per cent sale at Easter after the Budget. But we don’t like discounting, and didn’t realise how tough it would be when we bought last August.
“Of course there will be good bargains in our summer sale, which will be short and sharp”. – Stephen Sealey, group buying director
