Your dream is build a fashion brand (and profit from it), but how do fashion brands make money? There are a variety of business models you can approach when you're starting your fashion brand - I explain this further in my course, which you can find out more about here.
However, there are two main business models for fashion brands that I'll discuss with you today:
Retail vs Wholesale.
What's the difference between Retail and Wholesale?
Understanding what both entail, allows you to make an informative decision on which model would work best for you and your brand.
In simple terms, retail means the producer/ product manufacturer (aka you) sell the product directly to the consumer. While wholesale means you sell the product in larger quantities to a middle man (i.e. other retailers) who then sells it directly to the consumer.
The Retail Business Model
If you're starting your own fashion brand and decide to use the retail business model (sell directly to the consumer), you'd be buying product/stock directly from the manufacturer, which means, you'd be buying product at cost price not wholesale price.
What does that mean?
Well, most importantly, your price per item will be lower, meaning your profit margin will be greater! Awesome right? Yes, but there's an element of risk once your order the stock. It's yours there's no sale/return deal or other loophole. Meaning, you're loosing money if you don't make sales. However, there is a lot of freedom in this model; often the more quantities you buy, means the lower the cost price. This is where planning comes into play. Running a retail business gives you total control over your product: when it’s sold, where it’s sold and for how much it’s sold. You have the ability to interact with your customers one-to-one and get feedback in real time, which means you can react quickly with new designs acknowledging that feedback. This means that you're wearing multiple (or all) hats at all times, so it's important you're organized, listening to your consumer and reacting timely!
The Wholesale Business Model
As a wholesaler you're selling more product at once, and to multiple venues. Opening up new revenue streams and more stability. There are numerous ways you can run and manage your wholesale business, using different agreements, minimums and contracts, giving you some control over your revenue. A large portion of your time will be spent managing logistics: getting product to a certain location, managing the manufacturing process and maintaining inventory
Your margin is a lot smaller than that of a retailer, but it is a great option for those who can mass produce a product and get it to market efficiently. Wholesale might be an option for you if you are more business savy and want less of a risk.
Can you do both?
Absolutely! It is totally possible to operate as a retailer and also have a wholesale element to your business. For some, this is truly the best option; you get to interact directly with customers while also seeing your products sold far and wide by other retailers.
However, there is a chance you will be directly competing with your resellers, which could eat into your profits, if you aren't on top of your margins, and purchases. What's stopping one of your resellers from selling it for less?
There is huge potential to both models, and there's not one size fits all. You can design your model to suit you and your business, perhaps taking some policies or operations from both retail and wholesale and merging them together. If you're creating a product with demand, people will conform to the way you operate. If being able to sell your own creations and manage your own business is a dream; whether as a retailer or a wholesaler, it is important you choose the right business model for you to avoid unnecessary stress later on.
Really serious about starting your own fashion brand and want to know the essential information to make that dream a reality? Enroll in my course, or join my community to get more tips and info like this to help you out!