To see significant increase in revenues, sooner or later a business has to look at expanding its product portfolio, number of sites, or territories it operates in.
But expansion is a tricky thing to get right. Too cautious and you run the risk of being beaten by a competitor. But expand too quickly and you might find investment stretched too far. It’s a challenge that Jimmy Collins and Fraser Moss, co-founders of fashion label You Must Create (YMC), know only too well.
Jimmy and Fraser founded YMC in 1995, creating design-led, unisex apparel for wholesale. But their early success was nearly wiped out after opening a retail store for their designs on Conduit Street, London. “People are quite excited about new brands and very often you run before you can walk,” Jimmy says. Problems with the company’s Italian manufacturers, combined with rising production costs, large overheads on the store and poor sales meant that YMC was in financial difficulty.
“When I started the business, manufacturing wasn't something I had any experience with. Production is a very difficult part of what we do. Let's assume that your designs are good; but the price of the product, the quality, delivering on time are all very key points. And if you get any of those wrong today, you're finished.”
Facing insolvency, Jimmy approached a family friend with experience in the fashion industry, who invested a six-figure sum in YMC and came on board to support with the manufacturing process, allowing Jimmy and Fraser to concentrate on designing and selling the range.
“I think expanding quickly is a pitfall that a lot of people actually fall into. I know that we rushed and made some big mistakes that did virtually take us out of business. And I feel that given that opportunity again I would have spent some time looking very carefully and choosing the right partners.”
To recover, YMC had to scale back; the store on Conduit Street closed and Jimmy and Fraser shifted the focus entirely on getting the brand’s menswear collections absolutely right.
“It took another couple of years before we started to turn things around; the time that it takes to make a decision, design a product, make a sample, put it in store can be up to 12 months, particularly as our business is geared to wholesaling,” Jimmy explains.
But with the right design, manufacturing, logistics and payment partners in place, YMC began to flourish, and in 2010 Jimmy and his team decided it was time to revisit the idea of expanding into bricks-and-mortar retail.
This second time around, they took their time to make sure the store had a robust financial model. Jimmy found a location he was happy with that also offered low rent, and kept down costs of the shop fit by finding second hand pieces on eBay.
“We spent about £20,000 on a shop fit which we spread over the term of the lease,” he explains, which allowed them to turn a profit almost immediately.
Since the expansion rolled out, YMC has been on an upwards trajectory. A second store was opened in Shoreditch, East London, 18 months after the Soho store, on a site large enough to afford Jimmy and Fraser space to run the wholesale showroom and an office of staff managing online retail.
Wholesale is still YMC’s bread and butter, accounting for around 70% of the turnover, with the two London stores and the e-commerce site making up an equal share of the remaining 30%.
“We report separately so we can see clearly how everything is doing,” Jimmy explains. “Our e-commerce really needs to be doing at least three times the turnover that it's currently doing. And that will need some investment.”
Increasing retail presence isn’t the only way that Jimmy has expanded the business; YMC’s product line has diversified over the years as well. One of the major challenges of running a small fashion brand, Jimmy explains, is balancing the need for newness and creativity that the industry demands and with a model that is financially viable.
“You need to allow the designer to own a percentage to show creativity, which is what we're about,” he explains. “But you also need to develop some lifestyle products, core products that might be 70% of your turnover. It's a discipline and you need to have everybody in the business on board.”
Having learnt the importance of working with experienced people the hard way, Jimmy and Fraser have now brought in another designer to work on womenswear. At the moment, womenswear makes up a smaller part of the overall revenues, with menswear accounting for 60%. But looking long term, Jimmy sees it as a growth area for YMC, along with online retail.
In the last 12 months, Jimmy says YMC’s retail turnover has increased 20%, which he puts down in large part to developing the range of accessories, including shoes and sunglasses. Eyewear is an area he’s keen to work on further, as the profit margins involved are high, as are collaboration projects with other brands.
“For the next year we're hoping to maybe have 10 collaborations, with brands outside of just clothes and footwear. That's an area that we're working on and we're going to put our energy into moving forward.”