What it takes to run a fashion store

There are various types of fashion stores. We use the term retailers to broadly refer to all those who sell clothing to consumers.

Retailers include chains such as Scotch & Soda, H&M and Zara, as well as department stores such as John Lewis, Harvey Nichols and Selfridges. However, the term retailers also refers to independent retailers – entrepreneurs with one or more of their own fashion stores. In this article, we will focus on the latter, independent retailers.

FashionUnited dives into what an independent retailer is, what the added value of a physical store is and what is involved in running a clothing store. In the final paragraphs of this background article, we will focus on the buying and sales process of independent retailers.

Contents

1. What is an independent retailer?
2. The added value of independent store owners
3. What is involved in running a fashion store?
4. More about the buying process of independent retailers
5. More about the sales process of independent retailers
6. Visual: this is what a retailer works on monthly

An independent retailer is a trader who sells (fashion) products to consumers. They buy clothing from suppliers, which are fashion brands, or their representatives such as an agent. The independent retailer sells clothing from various clothing brands in their store – this is called a multibrand store in the sector.

Target group and (price) segmentation

An independent retailer offers a range of shops for its own unique target group. That target group is determined by style, age, location, budget or a combination of these.

The retailer often chooses a clear segment. In fashion, retailers segment by fashion style – think very trendy or very classic. They can also segment in terms of specific needs, such as casual clothing, specific sportswear, work attire, or party clothing.. Almost all clothing stores also segment based on price to capture a specific consumer.

In the fashion industry we distinguish five price segments:

• Mass market or budget tier: Primark and New Look
• Low-middle market: H&M and M&S
• Middle market: Black and White Denim in Wilmslow, Cheshire, COS, &Other Stories
• Mid-high market: Flannels, Our Daily Edit in Brighton, The Hambledon in Winchester, Reiss, Joseph and Diesel
• Premium or high-end: Independents like The Place in Mayfair, London and Cricket in Liverpool, as well as Liberty’s, MatchesFashion, Browns and Selfridges or fashion stores Karl Lagerfeld, Coach and Michael Kors. Also consider luxury brands such as Gucci, Prada and Bottega Veneta. Designer labels are also referred to as high-end fashion, indicating a higher price level.

Fashion mini department store The Dressing Room in St Albans is in the mid-high segment, offering an edit of more than 100 brands, such as Lily and Lionel, Essentiel Antwerp and Hayley Menzies, alongside premium brands such as Citizens of Humanity, Paige and Veja.
Other examples of independent retailers are Kiti in Cardiff, which is owned by Gwenno Penrhyn and stocks Scandi and LA brands like Anine Bing, Ganni and Stine Goya; Maze, a family-run independent with two stores in Clifton, Bristol, offering menswear, womenswear, and homewares from both established and local designers; and The Clever Dresser in Sevenoaks, Kent offering sought after designer pieces, including Alice + Olivia, Ba&sh, Bella Dahl, Birgette Herskind, Chinti & Parker, Diana von Furstenberg, Isabel Marant Étoile, Penelope Chilvers, Rebecca Taylor, and Vince.

2. Unique value proposition

What is the added value of independent retailers?

An independent retailer is important for the high street, neighbourhood, or city. They make shopping areas and/or the city centre more lively, more diverse and build communities because they often have their own unique proposition and character, compared to well-known retail chains, where the branches can feel more uniform and impersonal.

The uniqueness of an independent retailer is formed by, among other things, the target group and segmentation (see paragraph 1), the visual marketing (all efforts to show the customer the face of the store, from the product presentation to the chosen furniture, to the layout of the newsletters), the core values of the retailer and team, and of course personality and service.

That personality and service, which has a high focus on customer experience, often results in repeat customers for independent retailers. Marion and John Mulder from Mulder Mode, an independent family-run Dutch retailer located in Waddinxveen, South-Holland, The Netherlands, which sells more than 50 mid-high-end fashion brands for women and men, is a prime example of this. The fashion store has many regular customers from the region, but also regularly sees new visitors. “Yesterday someone happened to be from Stolwijk (a village 17 kilometres away),” when speaking to FashionUnited. “We really benefit from shoppers who become brand ambassadors and who spread the word,” added John, and that is why staffing is so important, the store owners said. “Besides us, they are the face of the store. Your staff must be enthusiastic and radiate that, and offer the service that the customer is looking for.”

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3. What is involved in running a fashion store?

The work of a shop owner is very versatile. Self-employed entrepreneurs are responsible for everything that comes with running a store. They manage the daily affairs of their company, both in front of and behind the scenes. They are there for the customers and the staff, and keep track of the administration and finances of their clothing store. The duties include making buying decisions (e.g. about buying in paragraph 4), sales (more about sales in paragraph 5), management, marketing, and of course matters such as making business plans and policies.

“Being an independent retailer is extremely diverse, and there is always something to do,” said Marion and John Mulder. “Sometimes we think in the morning, I don’t know what I’ll be busy doing today, but before the doors open, there is something that requires our attention,” the entrepreneurs said with a smile. They also say this dynamic nature of the job is the best thing about their profession. “You are not just a salesperson, an administrator, or a personnel manager,” John explains. “And when you get tired of the sales, you start buying again. It is constantly moving.”

At the same time, the variety of tasks is also the biggest challenge. “We’re always looking at where we can improve and we also spend a lot of time working with our customers. On the shop floor itself – ‘we are really shop people’ – but also how we can reach them, for example with advertisements, newsletters and on Facebook.”

The window dresser comes every three weeks, and the store is turned around just as often, “to continually present the customer with something new”. John said that when the company closes its doors during work hours when the weather gets colder amid rising energy costs, the retailer wants to make it clear to its customers it is indeed open for business. “We try to look for things that are more original than simple decorations like planters or sidewalk signs,” he said.

When FashionUnited spoke to the Dutch retailer, John said he was busy with rent negotiations amid high inflation and energy costs. While Marion was working on salary increases for 2023 at the time of the interview. “We have already decided that we will make a salary increase because we want to retain our people. There are stores around here that have lost their entire workforce. After all, the fashion industry is not the most profitable industry. We are now happy with our six employees, we have a well-rounded team. Beyond the salary, we are considering how we can enhance their experience with us. For instance, we’re thinking of giving them opportunities to accompany us during the buying process.

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4. Buying from independent retailers

Retailers order garments from the collections of fashion brands. Buying is often done by appointment, in the showroom of the fashion brand, via its wholesale agent, or in the store of the independent retailer when a representative of the fashion brand visits.

Every fashion season, at least two to four times a year, the independent retailer goes on a buying spree. Men’s and women’s clothing retailer Mulder Mode sells about 50 clothing brands, so you can imagine that there are many buying appointments.

But, first things first. An independent retailer has to approach the fashion brand. The retailer may want to sell the fashion brand in its store(s), but the label must also want to do business with the retailer. Of course, fashion brands are selective when it comes to the number of (wholesale) points of sale and which retailers sell their fashion collections.

Fashion brands look at the store’s reputation and location, among other things. For example, a fashion brand may want to have only one point of sale in a certain place or area. They also look at other brands in the retailer’s range: do they reinforce each other and/or do they fit well next to each other. Often, the retailer must also comply with the brand’s buying conditions. For instance, a fashion brand may set a minimum order value or minimum purchase quantity.

Once they have signed an agreement with a brand – the retailer can sell its products

Ordering/buying clothes – how does it work?

A fashion collection is a selection of clothes and accessories that are released together and fit together in style/theme/season. The items from the collection are usually for sale in different designs, in various colours, fabrics and/or prints. These are called styles. An average clothing brand that operates in wholesale and retail can have as many as 450 styles per season.

Retailers make their product selection for their stores based on sample garments, which serve as a prototype collection. (This is because the actual production of garments occurs after customer orders have been placed). In the purchasing process, these sample garments are physically displayed on racks and hangers for buyers to inspect and choose from. As clothing is a tactile product, the sense of touch is very important. It is nice to be able to see and feel the garment to know its texture and how the fabric falls or drapes, and see the colours and fabrics in person.

Independent retailers or their buyers have the flexibility to select different colour and fabric variations that may differ from the sampled garments. Additionally, they are responsible for deciding the specific sizes for the chosen styles and determining the quantities needed for each size. In essence, there are numerous decisions involved in this process.

When an independent retailer decides not to stock a particular fashion brand, it’s often based on prior sales history and a deep understanding of their clientele’s preferences.

Prior knowledge

Through direct contact with the customer, the independent retailer knows what their customer likes. “We are in the store all day, so we know what our customer wants. When buying, we always have a number of our customers in mind,” says Marion. “Some brands have never been to our store and then say during buying agreements, yes this (product) is good. And then I say, ‘yes, but not for our customer’. Our customer wants classic from one brand, and trendy from another brand,” she illustrates.

In addition, a retailer’s sales history also tells them what is selling well and what is not. The owners of Mulder Mode say their buying decisions are largely based on numbers. “Sell through, margin, return, we calculate all that with the help of retail service organisation EK Fashion (formerly Euretco),” says Marion. “We look at how each fashion brand is doing and, based on the analyses, also decide from whom we want to buy less or more next season,” John adds. “You can’t buy without numbers,” he ponders aloud, “although I hear it happens quite a lot.” Indeed, in the fashion sector, retailers also often buy based on feeling.

The purchase usually involves significant amounts of money

Suppose the retailer wants to purchase a jacket from a fashion brand from the medium-high (price) segment. The jacket costs 200 euros, which is the wholesale price – or the price that the retailer pays to the fashion brand. This wholesale price is made up of production costs, but also transport, insurance, import costs and the margin for the fashion brand – or the money the brand earns from selling this garment to the retailer (We explain that in this background story, paragraph 5 ).

The independent retailer writes the following order:

So he buys a total of 9 coats for 200 euros. The retailer pays 1,800 euros for offering one coat in his store. If he wants to sell the coat not only in black but also in camel, for example, he has to invest 3,600 euros.

Retailers can easily spend 5,000 – 20,000 euros per season at one fashion brand when they sell tops, knitwear, jackets, trousers, jeans and matching accessories in different colours and sizes. Now that you know that retailers sell several fashion brands, you can understand that amounts of hundreds of thousands of euros are involved per fashion season. In addition, retailers must pay their store rent and staff salaries, and above all ensure that the clothing is purchased by their customers. (More about the sales process of independent retailers in paragraph 5 of this article).

When does buying take place?

Exhibitions are the starting point for each new season

At the time of the interview in November 2022, sales of winter 2022 collections were in full swing and the buying season for autumn/winter 2023 (FW23) was just around the corner.

Mulder Mode uses trade shows to kick off the new season, and plans its buying appointments afterwards. “When I go shopping, I will look at what has been purchased, how much turnover has been generated and what has been earned. That information combined gives you a realistic picture,” John Mulder explains.

In addition, the store owners on the trade show floor can get an overview of what is on offer in one comprehensive place, adds Marion. “You can see and hear how the brands are doing. I can see who has good jackets and who has good sweaters. And if everyone offers orange in the collection, I decide where to buy that colour and from which clothing brands I choose other shades.”

The buying season for retailers

Traditionally, there are two seasons in fashion, namely spring/summer and autumn/winter.

Spring/Summer (S/S)

• In May/June, retailers work on their buying plan and budget for the summer of the following year.
• The summer editions of trade shows take place in July/August.
• Buying of the summer collections usually takes place in July, August and September. For example, orders for SS24 were placed in July, August and September 2023.

Autumn/Winter (A/W)

• In November/December retailers work on their budget for the winter of the following year.
• The winter editions of trade shows take place in January/February.
• Buying of the autumn/winter collection usually takes place in January, February and March. For example, orders for AW23 were placed in January, February and March 2023.

The sales calendar

The spring/summer collections are usually delivered to stores between January and March/April and are available for purchase until July. The autumn/winter collections are usually delivered between July and September and are available for purchase until December.

Summer sales are often from mid-June to July or August, and winter sales are often from Christmas to January or February.

Aim for a 70 percent sell-through rate

Retailers aim to sell 70 percent of their collection for the full price before sales initiatives start. If the retailer has sold 70 percent of his purchased collection to the consumer at full price – i.e. without discount promotions – then the retailer is doing exceptionally well.

Why? Retailers only have a certain number of weeks/months during the fashion season before the clearance sale starts. This is the period in which all purchased collections from fashion brands are delivered – in batches – to retailers. The moment new clothing arrives, it goes onto the shop floor as quickly as possible. After all, the retailers want to present the new clothing as quickly as possible to increase the chance of selling at full price.

Additional hurdles explained

Some new clothing items remain on the rails for less than twelve weeks before the sale starts. Retailers have large stocks of clothing and during the season they offer discounts on items for which there is little demand. And before you know it, the mid-season sale will start again: retailers often start discounting because other stores have also started doing the same. This is mainly due to fear that if they do not participate in a sale, the consumer will make the purchase elsewhere or online (think of well-known high street retailers chains and larger online stores). This encourages a ‘sales culture’. Consumers have become accustomed to discounts. And these discounts simply mean lower margins (less profit!) for retailers.

In addition, the weather also affects sales and the fact that the fashion seasons are not synchronised with the meteorological seasons or the weather. When it freezes outside, spring items are less attractive, while warm weather reduces the demand for autumn and winter clothing. That sometimes means even less time for retailers to sell the new clothing items before the sale starts.

“Take the (current) autumn/winter season. This is the first week that we’ve had cold weather for a week,” said John Mulder on November 30, 2022. “In September it was still 25C degrees here, in October it was still 18C degrees. This means that our customers are only now looking forward to the warm winter clothing that we already received from the brands at the end of August. But at the same time, Single’s Day, Black Friday and Cyber Monday are just around the corner. A store further down the road gave a 15 percent Black Friday discount and a retailer from another village gave a 30 percent discount on the entire collection for a week. We participated in Green Friday, but it is quite difficult to stick to it. It becomes quieter, people start waiting to see if there will be another offer,” he says. “Then the December clearance is getting closer. Winter officially starts on December 21 and then the sale starts. You actually only have 1.5 months of the autumn/winter season without price promotions,” explained the independent retailer. “And the long sales period is also the reason that the seasons in which the real margin can be achieved are short,” he adds.

So how much does a retailer earn from the sale of an item of clothing? And what are the costs incurred by a retailer?

We briefly build on the example of the coat with a wholesale price of 200 euros from a slightly more expensive fashion brand. The margin in the fashion industry is often around 2.7 (“ideally between 2.65 and 3.0 these days,” said John Mulder). The retailer multiplies its purchase price by this calculation number, and then you have the recommended retail price. Built into the recommended retail price is a percentage for any markdowns and also the retail margin: the profit for the retailer when selling the garment to the consumer.

“I think many people don’t know that only a small part of what they pay for a product in a store goes towards a retailer’s profits,” said independent retailer Marion Mulder in conversation with FashionUnited. “It’s not particularly transparent for the consumer.”

”If I give a 30 percent discount (on the retail or recommended retail price, ed.), I’m essentially sacrificing my profit,” Mulder explained.

That’s because from that 540 euro selling price, a lot is lost, starting with 21 percent VAT in the Netherlands (note that in the UK this percentage is 20 percent, ed.) and various cost items, such as:

• Wages
  When it comes to wages, you should think of the salary of the staff, but also the salary that the store owner pays themselves. On this, John Mulder said: “But beware everything you take out of it for yourself, you can’t use for your business. To start-ups, I advise using it for bills, because those who pay on time often get payment discounts. My advice is to make sure you become less financially dependent as soon as possible. Paying yourself a salary and a car will come after that.”
• Rent/mortgage
• Maintenance
• Inventory
  There must be (warehouse/storeroom) space for the products. Above all, there are the risks and obsolescence costs. The longer the product remains in stock, the less it is worth. Clothing is sensitive to trends: the goods become outdated quickly and go ‘out of fashion’. Ultimately, the products can become unsellable.
• Theft
• Discount
• Damage
• Advertising and sponsorship
• Interest to the bank etc.

Inventory/stock management

During the (sales) season, retailers are also busy with store inventory management. John says that retailers can increasingly exchange their slow movers – products that just sit around – with brand suppliers for products that are doing well. John says this is an advantage of the fact that things are currently a bit more difficult in the fashion industry.

Mulder Mode deliberately does not yet use an electronic inventory system (EDI), the owners say. “We don’t just want to replenish our fast movers (fast-selling items, ed.), but we want to sell everything,” says Marion. “If, so to speak, I have three blue turtleneck sweaters hanging and I am selling them from one brand, I don’t want that item to be automatically replenished, but I still want to offer the other two sweaters to my customers.”

Finally;
Retailers often use the revenue earned during a specific season, like winter 2022, to fund upcoming inventory needs. This includes paying for the products from the spring/summer 2023 collection that have already been ordered and are on their way to the store. Additionally, the earnings are used to place orders for the autumn/winter 2023 collection, ensuring a steady supply of products for the future. Essentially, the money earned in one season is vital for covering both immediate and future inventory expenses.

What a retailer works on monthly

Assuming two seasons per year, spring/summer and autumn/winter, to keep things manageable, the calendar for retailers usually looks like this.

January	-Sale (winter collections) in the store -First deliveries of the new spring/summer collections -Fashion trade shows next winter -The new buying season next winter will start< /td>
February	-Winter sales are generally coming to an end -Winter season is over (real figures, winter season + sale) -Buying agreements next winter -Spring/summer deliveries
March	-Buying agreements next winter -Spring/summer deliveries
April	-Selling spring/summer collections -Deliveries of intermediate collections (mainly in women’s fashion)
May	-Spring/summer sales -Deliveries of interim collections (especially in women’s fashion) -Creating a buying plan and budget next summer in preparation for the new buying season
June	-Summer collection sales start in mid-June
July	-Summer collection sale -Fashion trade shows next summer -The new buying season for next summer starts -First deliveries of new autumn/winter collections
August	-Summer sales are generally coming to an end -Summer season is over (real figures, summer season + sales) -Buying agreements next summer -Deliveries of new autumn/winter collections
September	-Autumn/Winter Deliveries
October	-Selling autumn/winter collections -Deliveries of intermediate collections (mainly in women’s fashion)
November	-Selling autumn/winter collections -Deliveries of intermediate collections (especially in women’s fashion) -Making a buying plan and budget for next winter in preparation for the new buying season
December	-Delivery of festive collection (also mainly in women’s fashion) -Start of winter sales around Christmas

Sources:

• Interview with Marion and John Mulder, owners of women’s and men’s fashion store Mulder Mode, November 30, 2022, in Waddinxveen.
  -TMO Fashion Business School study that the undersigned of this piece followed, and specifically the book ‘Mode Adviseur’ by Mirjam van den Bosch, Astrid Hanou and Hans van Otegem, publisher Stichting Detex Opleidingen, 2003, second edition.
• RTL News article ‘Corona is destroying family business. Wim permanently closes his parents’ clothing store after 58 years’, by Malini Witlox, February 17, 2021.
• RTL news article ‘New noose for clothing stores in the making due to cold weather’, by Paul le Clercq, May 8, 2021
• Publications from the FashionUnited archive, including ‘Netherlands in lockdown: Non-essential shops closed, yes click & collect’.

This article was originally published on FashionUnited.NL, translated and edited to English.

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