How To Navigate the Risky Business of Fashion

Working in the industry as a back office team for over 10 years, we’ve unfortunately seen the rise and fall of department stores, online retailers, and small boutiques alike. When this happens, it is usually the small brands that get hit the hardest, and depending on the size of the order, or the invoice, it can be debilitating to these brands, and hard to recover. 

There’s many things brands can do to lower their risk in the wholesale fashion market. One of the biggest risks we’ve seen is a risk of getting paid. Sometimes smaller brands are forced to extend Net terms to some of the bigger accounts in order to get the orders, but then they end up chasing for payment and putting themselves in a vulnerable position. One solution to this issue is working with a factor. The factor will check the credit of the retailer and either approve or deny terms. If the account is approved, the factor will guarantee the full payment of the invoice, for a fee. This way the brand can ship without the stress of collecting.

Another way to lower your exposure as a brand is to request payment terms with your supplier. This can greatly help with cash flow. Not all suppliers will do this, but some may offer a small percentage on terms to start, and increase as business grows and a trust is built.

Diversification is the most important way of decreasing risk as a company. It is important to not rely on a small number of retailers to cover a large volume of your orders. The ideal situation is to have many different stores, so that if 1 store was to cancel, it isn’t as hard of a hit. 

Pre-selling is also a great way to guarantee orders, and only produce for those specific stores. This way you are not carrying a lot of inventory which also increases expenses all around. Having smaller monthly deliveries can also help a brand, as well as reducing production time. Stores are now in a position where they want goods quickly, and they want to sell and reorder, as opposed to waiting months for an order to come in.

Finally, another great way to reduce risk, is to lower overhead by outsourcing your operations/warehousing- which is where we come in!