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.

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

For many fashion founders, generating buzz is the easy part. Where these creative visionaries often struggle is with how to build a strong business foundation that will allow their brands to scale.

For that, they need help.

“You can drive a business by being a very hot brand with the consumer begging and wanting and desiring it. But that’s just one small component of what makes the brand successful,” said Christopher Burch, founder and chief executive of investment firm Burch Creative Capital, which invests in LA-based contemporary label Staud. “If you were to say to me [that] you have a great creative [founder], I’d say to you, then we need the best CFO or COO in the world.”

This is especially true in today’s cooler financial market. Leaders who make good choices on financing, choose the right path to profitability and are willing to take a hard look at their brand’s DNA are primed for success.

“The world’s changed,” said Burch. “VCs around the world have learned that profitability is more important than growth.” Brand leaders need to flip the growth playbook and double down on strategic fundamentals before moving onto riskier, capital-intensive expansion activities.

By strengthening their internal cash flow position, recruiting executive talent and reinforcing the distinct DNA that gave them their initial start, independent labels can lay the groundwork for a sustainable scale journey that effectively translates buzz into performance.

In conversations with BoF Insights, The Business of Fashion’s in-house consultancy, independent brand leaders and investors outlined the imperative to foreground business fundamentals to secure future growth in the long term. In the third and final part of this series, BoF Insights breaks down the formula for transforming community buzz into lasting commercial performance by strengthening a brand’s foundations.

Recruiting at the Top

Investors and experts concur that lack of executive leadership is one of the main obstacles for unlocking growth past the $10 million revenue mark in the fashion industry.

Pivotal roles like the chief executive officer, chief financial officer and chief operating officer are natural complements to the skillsets typically found in creative founders. By recruiting executive skills, creative founders can prioritise the development of a vision and cultural positioning without sacrificing commercial discipline.

“[2024 is] a year to work on the foundations,” said Frederic Court, founder and managing partner of venture and growth investment firm Felix Capital, which invests in fashion labels Ami Paris and Anine Bing among other brands. “It’s a great year to hire people. There is a lot of instability in teams [so] it’s a great time to support talent and attract talent.”

According to Court, Ami Paris creative founder Alexandre Mattiussi brought on chief executive Nicolas Santi-Weil when Ami was generating around €1 million (approximately $1.09 million) in annual revenue. Court said this hire played a key role in the label’s successful scale journey. As of 2023, Ami Paris generates over €300 million (approximately $327 million) in annual revenue.

Represent, the British luxury streetwear label, found itself at a relative standstill until bringing on new chief executive Paul Spencer to complement the founding team in 2022.

“Before I hired my CEO . . . I felt like I was out of my depth when we were around £20 to £30 million, and everyone was working way more than what they needed to,” said co-founder George Heaton. “But when [Spencer] came in, he put a really strong team in place . . . [and we] were able to actually scale at a much faster rate than what we would have been before.”

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Setting Your Own Pace

In periods of slower economic activity, growing brands should put measures in place to protect their financial positions. To do so, several indie labels have eschewed the external financing route to focus solely on organic growth as a means of forcing discipline and cost management.

“We have great relationships with banks and debt financing. It was all about organic [growth] from the beginning,” said Emily Adams Bode Aujla, founder of the American luxury label Bode. “I wanted to make sure that we were always going back to my mission statement of what I wanted to create, and not have outside voices.”

This approach enables brands to dictate their own pace of growth and avoid burning out too quickly. Bode recounted that she knew it was the right time to open the brand’s first flagship based on natural demand indicators. “It was an intuition that it’s time. We had enough people coming to the [studio to shop for private appointments that,] if I could sell two more jackets, I could make rent,” she said.

Bode also leveraged fashion prizes as a key funding source to fuel a brand’s early growth. She won the CFDA’s Emerging Designer of the Year award in 2019, as well as CFDA Menswear Designer of the Year in 2021 and 2022. She was an LVMH prize finalist and Woolmark prize winner in 2019 and 2020 respectively. However, while the prize money was helpful in Bode’s early stages and empowered her to prioritise sustained organic growth, the amount of work and travel required to compete for these titles may render prize monies a less dependable funding source.

Brands that opt to take external financing can maintain a sustainable pace of growth by ensuring clear alignment with prospective investors on timelines, objectives and performance metrics.

“[Brand leaders] should not be afraid of asking where the money is coming from,” said Court. “They should not be afraid of defining success together [with investors], because if success for an entrepreneur is to run the business for 10 years before looking to liquidity and [the] investor is at five years, that’s going to be a problem.”

Regardless of the funding strategy, cash flow discipline is a key differentiator for the brands that scale successfully. Profitability is imperative, and in order to ensure a strong cash position, companies must pursue aggressive cost control. For some, this may mean pausing capital intensive expansion activities for the time being.

“The fashion industry as a whole is temporarily out of fashion as an asset class . . . organic growth and cost control is the only way forward,” said Stefano Martinetto, chief executive and co-founder of Tomorrow, a growth and development platform for fashion brands. In this environment, cultural heat can only take a label so far. “You can be very relevant and entirely broke. So it’s important to acknowledge the relevance is important as much as it translates into a financially sustainable model.”

Maintaining an Edge

For many investors, a clear DNA is a key ingredient for a brand’s staying power. This may mean revisiting specific values and narratives at regular stages in the growth journey.

Péter Baldaszti, chief executive of Budapest-based contemporary label Nanushka, recounted that the brand has been “soul searching [to define] who we are and what we stand for” amid today’s tough climate for indie labels. This enabled the company to refine its approach to expansion into other categories such as handbags and “gave us this beautiful foundation of… what a Nanushka bag should be, in terms of branding, shape, form, material, size,” he said. “We really needed to nail down that identity part to be able to deliver on these categories.”

In an industry where innovation is increasingly scarce, brands that can break through the homogeneity and commit to preserving the cultural relevance that gave them their start will stand out. “There must be something very, very specific because there’s so much noise in the world . . . you need to have a distinctive voice,” said David Belhassen, founder and managing partner of NEO Investment Partners, which has invested in luxury brands Victoria Beckham and Ami Paris among others. “The [brand] DNA is a differentiating factor.”

Without access to the free-flowing capital and cheap digital ads that characterised the 2010s, this focus on the fundamentals is now more important than ever. The brands that reach the $100 million revenue threshold will be those that manage to turn buzz into long-term business performance by combining cultural relevance with well-managed, well-timed commercial plays.

“It felt a little bit too easy to start [an independent label] for a period. That window of opportunity, I’m afraid, is gone for quite a long time now,” Martinetto said. “But I also think there’s a bit of justice in that. Funding and [enabling] a successful independent brand [to survive], it’s not a given; it’s one in a million or one in 10,000 or one in 100,000. And so be it, because the reward is so big.”

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

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.

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.

A sample of the report is available for download below. Full access to The BoF Brand Magic Index is for Executive members.

What is Brand Magic?

We instinctively know magical brands when we see them — those that seem to be at the forefront of culture and in almost perfect lockstep with their customers. But that judgement has always been more art than science.

Last year, BoF Insights and Quilt.AI introduced the concept of Brand Magic to bring data into the conversation. Unlike vanity metrics such as the number of followers, or basic sentiment analysis, we used proprietary AI models that understand emotion, culture and context to surface the nuanced meaning embedded in brand and user-generated content. Our analysis identified the brands that have the clearest and most consistent identities.

In Volume 2 of The BoF Brand Magic Index, we have taken on board your feedback to expand the aperture of Brand Magic, analysing millions of data points across three equally-weighted metrics:

• Alignment: how clear a brand is to customers, as measured by analysis of brand and user-generated content on Instagram, TikTok and YouTube.
• Engagement: how effective a brand is in inspiring customers, as measured by customer behaviour on Instagram and TikTok.
• Intent: how effective a brand is in driving action among customers, as measured by search volume on Google and Baidu.

By collectively analysing Alignment, Engagement and Intent, we reveal the brands that drive cultural conversations and captivate audiences without compromising their underlying essence. The result is the fashion industry’s most rigorous brand measurement tool, powered by cutting-edge AI technology.

For Volume 2 of The Brand Magic Index, we measure global performance between October 2023 and March 2024 across 70,000+ posts from Instagram, TikTok and YouTube and millions of search results from Google and Baidu.

Find out how the 50 brands ranked by reading a sample of the report below. An extended version of The BoF Brand Magic Index, including deep dives for all 50 brands, is available exclusively to Executive Members.

Magical brands master the art of digital storytelling, finding innovative ways to balance the timelessness of their identity with the timeliness of the culture

• Dior, ranked 1st overall, cultivates a well-versed brand image of dreamy glamour and couture excellence that is clearly understood and desired by its customers. Dior is the only brand to rank in the top 10 across all three metrics, placing 1st in Alignment, 7th in Engagement and 5th in Intent.
• Louis Vuitton, ranked 2nd overall, has benefitted from appointing Pharrell Williams as its Men’s creative director, using Williams’ influence as a cultural multihyphenate to bring virality to its collections and activations. Louis Vuitton ranks 15th in Alignment but 3rd in Engagement and 1st — by quite some margin — in Intent.
• Versace, ranked 3rd overall, has been revitalising its online communication strategy after wiping its social media pages to start afresh under new leadership. The result seems to be resonating with customers, who are playing back the brand’s bold identity. The brand ranks 10th in Alignment, 4th in Engagement and 14th in Intent.

Using three lenses to evaluate Brand Magic captures the nuances of brand building:

• Alignment: Brands that rank highly on Alignment tend to be those that present a clear narrative (e.g. Thom Browne, ranked 4th in Alignment, or Loro Piana, ranked 6th) or maintain a consistent identity that is well understood by their customers (e.g., Tod’s and Armani, ranked 3rd and 5th respectively in Alignment).
• Engagement: Brands that rank highly on Engagement generate buzz for the content they produce while inspiring their audiences to create content of their own. Calvin Klein, which ranked 1st in Engagement, drove significant conversation with its Jeremy Allen White underwear campaign. Maison Margiela, which ranked 10th in Engagement despite being a smaller brand, benefitted from the virality of its January couture show.
• Intent: Brands that rank highly in Intent are typically those with a robust e-commerce presence and wide audiences. The measure surfaces mega-brands (e.g. Louis Vuitton, ranked 1st in Intent) and more accessible brands (e.g., Tommy Hilfiger and Michael Kors, ranked 3rd and 6th respectively in Intent). Engagement and Intent are generally correlated. However, when compared to Engagement, Intent surfaces brands that create disproportionate desire relative to their marketing spend (e.g. Hermès, ranking 4th in Intent but 14th in Engagement).

Full access to The BoF Brand Magic Index is for Executive members. For unlimited access to this and all future editions, become an Executive Member now. To download a sample of this report, click here.

BoF Insights and Quilt.AI work directly with brands on bespoke engagements to measure Brand Magic in detail and over time, enabling brands to identify positioning opportunities, deeply understand their customers and measure their marketing impact. Contact our team at insights@businessoffashion.com if you are interested in learning how we can work with you.