On trend: Invest in the new era of British fashion brands
The past few days have been some of the most important in London’s fashion calendar.
As Fashion Week graced us with its presence once more, City A.M.’s Alys Keys reported on the shift towards a more democratic industry, propped up by the power of digital influencers.
The internet will continue to redefine how we shop, and high street fashion retailers are set to suffer in the process. But fresh-faced companies are emerging from this fashion revolution – and for investors, this new era in retail brings some pretty attractive opportunities.
Over the past two decades, specialist asset manager Livingbridge has been an early investor in a number of British fashion companies, including the likes of Fat Face, Bench, and Crew Clothing.
Investment director at Livingbridge, Steve Cordiner, says he’s seen the industry move towards “fast fashion” models over the years.
While traditional retailers typically order a clothing range six months ahead, the supply chain for fast fashion models (used by the likes of Boohoo and Missguided, for example) are a lot shorter. Stock is kept in a central warehouse rather than shops, and companies can list hundreds of new items each week – which means they are more adaptable and can offer much fresher clothing lines.
“Fast fashion can really tap into those current trends,” says Cordiner. “These companies can order more of the items that are selling well, or if they come up with a concept that really resonates with their customers, they can keep providing that concept on demand; it’s a dynamic model of providing retail.”
Livingbridge manages the Baronsmead venture capital trusts (VCTs) which allow investors to tap early stage fast fashion company, In The Style. “Companies like this are actively taking share from the high street because they are more aligned to how young consumers want to shop,” says Cordiner.
But the investment boss also says that the collaboration with social media influencers gives some fashion retailers the edge. In The Style, for example, works in partnership with British fashion blogger Sarah Ashcroft to design a clothing range, which is then marketed to her followers.
“This is not just a celebrity endorsement; these companies work very closely to add authenticity to the range” Cordiner explains.
The Baronsmead VCTs also invest in Silkfred, a company that uses a business model similar to Asos by allowing independent fashion brands to sell their products through its website.
Silkfred uses its wider marketing investment to drive sales and add value to the brands. “It’s not just a shop window,” says Cordiner, pointing to the challenges young brands face when trying to access an online customer base. “Silkfred essentially gives these entrepreneurs options, and drives revenue to help the brands create scale.”
Online presence is clearly important, but it can be equally important to have a niche – as London-based home fashion label Buster & Punch proves. Founded by architect Massimo Buster, the company provides designer decor, and secured funding from Mobeus Equity Partners last year – allowing you to invest through their VCTs.
“Buster & Punch had built up a strong following over the years; it’s had a lot of unprompted demand from end consumers, as people discovered the brand when they were doing their own projects on their homes,” says investment director at Mobeus, Greg Blin. The company now sells its products in 79 countries – largely through e-commerce and deals with major retailers such as John Lewis and Harrods.
While Blin admits that the wider sector is likely to have a tough time as margins and labour forces are squeezed, he says those niche brands that distribute their products through a range of channels will thrive.
But it’s not always easy to identify which young fashion brands will win. “Consumer habits and behaviours are changing so quickly that sometimes there is a fine line between a company being incredibly successful and less successful,” says Cordiner.
As the pace of fashion trends moves ever-faster, it’s clear that the business models underpinning the sector need to keep up. And for investors, fast fashion is a trend to watch out for.