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Private Label – What is it? and Why you Need to Know!

Many successful apparel manufacturers also opt to develop lines for other retailers that will carry another’s label other than their own branded label. This can mean additional sales but often entails that the retailers require cheaper wholesale prices. Manufacturers’ should fully understand the impact of this type order on their own costs of doing business before accepting to develop Private Labels for retailers.

When a branded manufacturer produces “Private Label” specifically for a retailer it will usually have a similar look and feel to their own branded label. The manufacturer is expected to price the private label products at a lower price point usually with a lower markup. It is another way for the manufacturer to get more orders and keep the cash flow active. Due to the volume of orders placed, production of styles often go offshore to get produced at a considerably lower price than if it were to be done domestically. Since the manufacturer has already spent the money to develop the line, generally, it is only a matter of minor changes to a style, trims and fabrication

Major Stores are moving more and more into the sphere of developing their own “LABEL” and promoting it to compete with the higher prices of “Name Brands.” In many cases, it is a very similar product in style, fabric and quality to the Branded Label and may indeed be competing with their own branded label they are producing as private label for the retailer. With an economy that is watching their discretionary income purchases, Private Label products are being promoted to a much higher degree.

Style and Co Advertisement Private label

Manufacturers that spend money to create and show a line at a trade show have made a large investment in the design, sampling, duplicate and pre production processes. These same companies that had been seeing substantial profits by doing Specialty Store and Boutique business have found themselves struggling due to the following reasons. 1. Most small stores are no longer getting Factor Approvals. 2. These stores are placing smaller orders but when it comes to shipping the order, manufacturers are finding the small stores are refusing the goods due to either shrinking sales, no funds available on their Credit Cards, or are requesting Net 30 to Net 60 as a House account. In some cases CONSIGMENT sales!!! A big NO NO!!

In most cases, a Major will “test“one or two pieces with a manufacturer in relatively small quantities for the first purchase. If the items are delivered on time, with acceptable quality and sell well in the store, it is likely the Major will place larger orders in the future. Additionally, the manufacturer will be able to “design” along with the Private Label dept. of the store and become “partners” with them in the development of new styles.

 

Though it may be an “EGO” issue with many designers and manufacturers, not seeing their name on the product, it is certainly a way to increase sales. Ultimately it often leads to a profitable partnership between the retailer and the manufacturer.

WIN WIN Approach: Target has taken private label to whole new level. Now some branded labels are being developed and produced specifically for Target. This enable both the branded label and Target to both enjoy cross branding. Target gets the cache of the brand and the brand gets to realize huge orders from Target. This is a win win model for all concerned.

 

In some instances a large retailer like Macy’s will develop their own brand “INC”, which cuts a pre- branded manufacturer out all together. They have become so successful as a private label they have creating their own branded label! I am seeing more and more specialty store buy branded product, then attach their own retail label over the branded label. This seems to me to be unethical, but I guess if they have purchased the goods then they own them. From the stand point of federal law, each manufacturer must have an RN number in the garment, which identifies the manufacturer in case there is a problem with the product, e.g. dyes used that may causes

inc at Macys

the branded label. The orders are often so large the manufacturer will produce for a small mark up, and or developed the product with cheaper materials which will then mean that the retailer can sell for what is perceived by the customer as a markdown price. This is also often the case with branded labels producing cheaper product for their own outlet stores. In the case of Costco they may only mark up a small percentage but as the qualities are enormous and Costco makes a profit from their membership sales it is again a win.

Manufactures just have to watch out for those nasty Chargebacks that larger retails have a habit of doing! But that will have to be another blog… Frances Harder

Business Plan Basics – Questions You Need to Answer before you Start your Business

 

Company Description?

What business will you be in?

What will you do?

Describe your industry?

To whom will you market and sell your products?

Where you want your business to be in six months, one year and two years?

Describe your most important company strengths and core competencies. What
factors will make the company succeed?

What do you think your major competitive strengths will be?

What background experience, skills, and strengths do you personally bring to the
business?

Describe in depth your products or services.

What are the pricing, fee, or leasing structures of your products or services?

List all of your major products or services.

Identify your targeted customers, their characteristics, and their geographic
locations, otherwise known as their demographics.

What products and companies will compete with you?

List your major competitors.

How will your products or services compare with the competition?

How will you get the word out to customers?

Advertising: What media, why, and how often? Why this mix and not some other?

Have you identified low-cost methods to get the most out of your promotional

In addition to advertising, what plans do you have for graphic image support?
This includes things like logo design, cards and letterhead, brochures, signage,
and interior design (if customers come to your place of business).

Promotional Budget

How much will you spend on the items listed above?

Explain your method or methods of setting prices.

Compare your prices with those of the competition. Are they higher, lower, the
same? Why?

Legal Environment

Describe the following:

Licensing and bonding requirements

Permits

Health, workplace, or environmental regulations

Special regulations covering your industry or profession

Zoning or building code requirements

Insurance coverage

Personnel

Number of employees

Type of labor (skilled, unskilled, and professional)

Where and how will you find the right employees?

Quality of existing staff

Pay structure

Training methods and requirements

Who does which tasks?

I. Management and Organization

Who will manage the business on a day-to-day basis? What experience does
that person bring to the business?

Brochures and advertising materials

Industry studies

Blueprints and plans

Maps and photos of location

Magazine or other articles

Detailed lists of equipment owned or to be purchased

Copies of leases and contracts

For Raising Capital

What initial capital do you have?

Amount of loan

How the funds will be used

What this will accomplish—how will it make the business stronger?

Requested repayment terms (number of years to repay). You will probably
not have much negotiating room on interest rate but may be able to
negotiate a longer repayment term, which will help cash flow.

Collateral offered, and a list of all existing liens against collateral

Service Businesses

Service businesses sell intangible products. They are usually more flexible
than other types of businesses, but they also have higher labor costs and
generally very little in fixed assets.

What are the key competitive factors in this industry?

Your prices

Methods used to set prices

Sales projections and funding required

System of production management

Once you answer all of these questions, you just might be ready to get started in your new venture. Tell me what you think? Are there any questions on my list that you wished you had asked yourself in the beginning? Did I miss any questions?

- Frances Harder

 

Non-Disclosure Agreements

Let’s talk about non-disclosure agreements…

If you don’t have one yet, you can find one here in our downloadable forms.

We get emails all the time from people who have ideas for products or already have the products and they are coming to us because they need help. They make the initial contact with us and then ask us to sign a non-disclosure agreement. THIS is the first indication that you are a novice.

Consider this… for everyone who is in this business of fashion, they are in process all the time with things they are working on. They don’t have time to steal your idea because they are too busy working on things that already exist, products that are real, that are going to market, products they are supplying to their buyers. You are sitting there with just an idea, now the question is… who knows what they’re doing in this and who doesn’t?

If you go to someone for help, the only way they can help you is if you tell them what kind of help you need and you have to be able to say enough for them to determine very quickly whether or not they can help you and what kind of help you might need. If, after you make the initial contact with them, you then say, “oh, and I’m going to need you to sign a non-disclosure agreement”, consider that these people are very busy, they are professionals in the industry and you are wanting their help. Do you think they care about your idea? Do you think they have the time to steal your idea? Do you think your idea is so original that someone is going to stop everything they’re doing to run off with your idea? Be reasonable, THAT is not how this business works especially when you are the one who is asking for help.

Consider this… if you are looking for an investor in your company, they have the money, you don’t… now how can you possibly think that you have ANY power in that relationship if you end up getting the money. They have the money, you don’t, you need it, they have it, you have to let go if you are going to move forward…

Consider this… you spend all kinds of money trademarking your brand name in the beginning and then lo and behold, you get some interest in the product but the buyer hates the name and wants it to be called something else. Your choice is, change the name or look for another buyer but what if that buyer is coming to you with a million dollars??? You change the name and get on with it so you can be successful and profitable. So there you spent all kinds of money on protecting something that ultimately changed into something else.

What you have to recognize is… the idea or product you have today may not be the idea or product you come to market with so the idea of having professionals in the industry sign a non-disclosure agreement so early in the process is not going to benefit you and is only going to take time away from getting to the business at hand. It also reveals that you’re a newbie.

Now, you may be thinking “what’s the big deal, just sign the NDA and then we can get on with the discussion”… well, the reality is, there are millions of people who are trying to bring ideas and products to market and there are far fewer people who are available to help them do that which means, the far fewer people are inundated with requests from people for help. If the experts spent their time signing NDAs all day, they would never get anything done and you would never get any help. Realize that an expert in this business of fashion is in such high demand that they are going to be very particular about who they’re going to work with and YOU have to make it as easy as possible for them to work with you. Remember, you need their help, not the other way around so when you make a request for help, follow these easy steps:

1. Identify the product you want to make or are making already.
2. Indicate how much money you have available to commit to launching your product.
3. Be very specific about the help you need.

If you can identify just these three things in any inquiry you make about getting help, you’ll be well on your way to getting someone interested enough in helping you. Remember, it’s not just about your product that is going to interest someone, it’s going to be YOU and you sound like someone that’s easy to work with, you’re more likely to get the help you need.

A First Time Exhibitor’s Experience at MAGIC

For many small start-up companies and designers, exhibiting at MAGIC is like the Holy Grail! And so, this past week, my company exhibited at MAGIC for the first time.

Here are my observations…

If this is the first time you’re doing MAGIC, do NOT spend your life savings on a booth! A tiny 10×10 booth will set you back a minimum of $5,500 and that doesn’t include any of the extras and it doesn’t include all of your travel expenses include shipping all of your product to the show. So, the best way to do it the first time is as one of the Emerging Designers that is a joint effort of the Fashion Business Inc. (www.fashionbizinc.org) and MAGIC (www.magiconline.com). Total cost of a 5×5 space… $800. For a first time exhibitor, THIS is the only way to go!

Next, do not go into your first exhibition thinking you’re going to get any sales. Keep your expectations in check! You’re there to figure out how everything works, to get feedback on your product and MOST IMPORTANT, feedback on your pricing! What a shock it was to find out what buyers were willing to pay for our product relative to what we have been wholesaling for! Completely different ballgame!

If, during the first day of the three day show, you get feedback that your pricing in too high, go back to your hotel room, or do it at your show table where you’re exhibiting and rework ALL of your numbers to figure out if there is any way you can reduce your pricing. Accept the fact that whatever your pricing is, it will be too high for the buyers at MAGIC. Once you determine if you can change your pricing, you’re ready for the second day.

Be prepared to change your selling strategy on the second day. If you can get a buyer to look at your product, ask them straight out, what do you need to pay for this to carry it in your store. Recognize that these buyers are looking at thousands of products and while you might want to negotiate pricing with them, remember, you’re new, you have no “street cred” as they say, your brand is unrecognizable and you NEED to get your product in their stores so if you can get them to give you a price and you can make it work, ask them how many they’d be taking at that price. Put together several of these verbal commitments (because you’ll likely just be getting a business card and calling them the following week) to determine if you have enough quantity to place an order with your factory. You’ll be surprised at how quickly the numbers will add up and be pleasantly surprised that you can actually produce your product because you now have people interested in buying and are ready to place an order.

Realize that YOU have to do the selling which means you get out from behind the table, you stand in the aisle with your postcards and you try and make eye contact and smile at anyone you can get to notice you. You HAVE to be aggressive and if you’re not, you can forget about it because the buyers won’t notice you, no way, no how!

Recognize that buyers are not going to come to you, you have to go to them which means you have to make every effort to get their attention which means you’ve got to have something interesting happening in your booth! It might be a large screen TV, some goofy looking costumed person, loud music, just about anything that will get people’s attention because remember, it’s you against 5,000 other booths!

On the third day, you will barely be able to stand up because you will be so tired and the show has significantly slower traffic BUT the traffic that is there, can be very important. Most people walk the show the first day just to see everything. Second day, hoardes of people are there buying, third day, buyers will circle back and zero in on what they want to buy and/or new visitors will be more serious because they only have a bit of time left in order to see anything so if they’re looking for your type of product, you just might land a sale out of it on that third day!

On the third day, this is when you will have the time to go and look at and talk to other exhibitors. You’ll be in close proximity to other exhibitors just by having a booth there and they are generally really friendly, especially to people who are newcomers, so don’t hesitate to ask questions. Ask them about their experiences, how the show has been for them, how the economy has been for them and their buyers. Look at the product that is being sold at the show and see how your product fits in and compares to what else is there.

BRING SENSIBLE SHOES! Forget about fashion, the buyers are in sensible shoes, you should too, otherwise you are going to find yourself collapsing off those high heels!

IF you have been aggressive about trying to engage the buyers in the aisles, you will get a LOT out of your first experience at MAGIC. You will have been able to talk to REAL buyers and find out what does and doesn’t work about your product. You’ll get critical feedback on pricing and you’ll understand more about what’s REALLY going on in the buyer’s and retailers world right now! This information will help you to leave MAGIC and return home with a lot to think about and a lot that will help you make decisions about what you need to do next.

For me, this was one of the most valuable experiences I’ve ever had and will most certainly be heading to MAGIC the next time, better informed and knowing what I need to do to be successful at the next show.

Arlene Battishill, CEO, ScooterGirls, Inc. (www.gogogearla.com and www.scooter-girls.com)

Who’s Got “Skin in the Game”?

The magicians…

Let’s talk about how you see your money vanish before your eyes!

In the beginning of your new business, something might happen where you actually get a bit of press coverage. As a result of the viral nature of the internet, it is possible that some small blurb about you in a blog or somewhere else will find its way around the world. Right after this happens, you phone will likely be ringing off the hook or your email inbox full with solicitations from people with services they want to sell you.

Every consultant, vendor, seller, whatever, that gets word you’ve got something going on or that something’s happening with your company and you will not believe who and what will come out of the woodwork. Your phone will ring off the hook with calls from everyone from the credit card processing companies, cellphone providers, public relations companies, branding companies, advertising companies, everyone and their brother all wanting to sell you something. They think because you’ve gotten a little bit of press coverage that somehow you have money and you need to spend it all on them. There is no regard for what your needs actually are AND no regard for the fact that you’re a small company with very limited funds that have to be spent very carefully. In addition and most important, there will be no recognition or acknowledgement from any of these people that you might not need their services at the time they are calling you. They see what they think is an opportunity and will do everything they can to get you to buy their services.

You will not believe how much time you spend on the phone with people making their sales pitches, trying to build some kind of relationship with you so that you’ll buy their services but you will soon find that they are offering you nothing that you need in that moment and taking up all your time telling you how great they are and what they can do for you and how much they can help you build your company. You will get to a point where you won’t even answer the phone anymore because every call will be a sales call. This is particularly acute right after you get press coverage. You will find people from all over the world calling you tell you how great your product is and what they can do to help you grow your business or save you money, of course paying them all to help you do these things. This is the point when you need to be especially disciplined about what you’re doing, where you’re going and how you’re going to get there. If you’re not, you’ll find yourself spending all kinds of money on people who make you feel good about your product but aren’t necessarily going to do anything for you.  This is not a mark against anyone who has something to sell you, what it is is a cautionary tale of how you need to be aware of what can happen following some kind of press coverage and how to deal with it.

You will find that the people you most want to work with are the people who aren’t selling you anything OR if they are trying to sell you something, they will wait until you’re ready and in the meantime, they will honestly be trying to build a relationship with you. In this business like any other, it’s all about relationships and not cold calling from salespeople. The relationship is about building trust in and with the people you’re going to do business with because there is too much at stake to work with people you can’t trust.

Another thing you have to keep in mind is that there are a lot of people out there more than happy to help you spend your money. This is where the whole issue of having “skin in the game” comes in. No one knows your business and product better than you do and sometimes, even the people you trust the most, will make recommendations about doing things that are not in your best interest. For example, if you start experiencing growth in your company, you might have consultants suggesting that you do certain things, take on growth plans that could potentially put you at financial risk. A lot of consultants will want you to look forward at your potential growth and want you to plan for it BUT what they don’t consider is that it’s easy for other people to suggest what you should do because when you don’t have any “skin in the game”, you don’t have any risk. For you as the business owner or creator of the product, YOU are the only one at risk in this and all of your decisions have to carefully take that into consideration.

Perhaps the best advice is, manage your business as though you are going out of business. This means that you’re watching every penny and making sure that you’re not spending a dime anywhere that is not absolutely essential to the operation of your business. Take your consultants advice as feedback and evaluate it through the question of “is this essential for me to do”, “is there any way that I could potentially lose a lot from what is being recommended”, in evaluating things this way, it will cause you to take the time you need to evaluate every decision and ultimately result in decisions that are about the person who has all of the risk in the business – YOU.