Designer fashion remains in turmoil.
According to Fashion Business Daily, the British fashion industry accelerator Tomorrow Group has recently sold the ownership of the London-based buyer’s store Machine-A to a private investor. The founder of Machine-A, Stavros Karelis, will return to the buyer’s store and participate in its daily operations. Its long-term partner, Steven Ma, will serve as the company director and be responsible for the future business development of the buyer’s store.
In July this year, Machine-A closed its flagship store in Shanghai, which is also its first global branch. The store opened on Yuyao Road, Jing’an District, Shanghai two years ago. It once collaborated with Mugler to hold a pop-up store and attracted widespread attention in the industry for its expansion against the trend under the influence of the epidemic.
However, Machine-A was ultimately unable to withstand the decline in the fashion retail industry. After two years, the lease expired and was not renewed. It is reported that the decoration cost of Machine-A’s flagship store in Shanghai was as high as 2 million RMB.
Machine-A was founded in the Soho area of London in 2013 and has been renowned for its small yet exquisite avant-garde selections for a decade. Despite the store being only around 70 square meters in size, with its experimental buying strategy and unique vision for designer brands, Machine-A has established a very high industry status among fashion culture enthusiasts.
In 2020, Tomorrow Group acquired a majority stake in Machine-A. The Chief Digital Officer of Tomorrow was appointed as the CEO of Machine-A. Their job responsibilities include closely collaborating with Machine-A to jointly develop its direct-to-consumer business model and long-term business expansion strategy. After this transaction, the shareholding ratio of Machine-A co-founder Stavros Karelis also increased, and his scope of work expanded to more creative projects and brand planning in Tomorrow’s business territory.
The expansion of Machine-A in the Chinese market was also accomplished with the support of Tomorrow Group, which is responsible for the operation of the Machine-A store in Shanghai.
After operating for two years, the Machine-A flagship store in Shanghai closed in July this year
Tomorrow Group’s business is extensive, including five major business segments: D2C distribution, showroom and distribution, production, investment, licensing and production, and consulting. In the links involving the development of designer brands such as production, distribution, logistics, operation, and licensing, Tomorrow is also responsible for providing professional services and resource matching.
Therefore, the transaction between Machine-A and the Tomorrow Group was once regarded as an important resource integration in the field of designer brands.
However, in the past four years, the global designer fashion market has been experiencing difficult and painful times, making Tomorrow, which should have been a protective umbrella and accelerator, also begin to feel powerless.
This time, Tomorrow Group sold Machine-A, which is the second time it has sold its assets within just one month.
Last month, Tomorrow announced the sale of the trendy brand A-Cold-Wall to Four Marketing, a multi-brand distributor under the British retail giant Frasers Group. Four Marketing was founded in 1997 and represents brands including Stone Island, Kappa, and Evisu. Frasers Group acquired a 25% stake in Four Marketing in 2015 and increased its stake to 49% in 2019.
A-Cold-Wall was founded by British designer Samuel Ross
In 2018, Tomorrow Group acquired a minority stake in A-Cold-Wall. In February this year, it acquired the remaining shares to achieve full control of A-Cold-Wall.
However, just nine months later, the Tomorrow Group decided to sell A-Cold-Wall again. It can be seen that the group may be experiencing turmoil this year.
It is reported that after experiencing rapid expansion, the group is rethinking its strategy of direct investment in emerging brands beyond its distribution business. Currently, the company still holds shares in Charles Jeffrey Loverboy, Martine Rose, and Coperni, but it is not clear whether it plans to sell these brands.
From buyer’s shops to designer brands, and then to showroom, exhibition or accelerator platforms like Tomorrow Group that help designer brands with wholesale business, the crisis of designer fashion is transmitted to every link. In a period of optimistic market, such a circle ecosystem based on culture and community can thrive together, while in the current market environment, the crisis is also contagious.
The business model of designer fashion is extremely fragile. The downfall of a sales partner may result in insufficient orders for a group of independent designer brands in the next season, which in turn relates to the survival of the brands.
Last year, the Frasers Group, which took over A-Cold-Wall from the Tomorrow Group, acquired the luxury e-commerce platform Matchesfashion for £52 million to enhance the group’s position in the luxury market and invested £33 million to maintain the operation of the e-commerce platform.
Matchesfashion closed at the beginning of this year, and the Frasers Group bought back its intellectual property rights
However, just three months later, the group announced that it would shut down Matchesfashion, laying off hundreds of people. The reason given is that the Matchesfashion management team failed to find a way to stabilize the business, and the capital requirements far exceeded the group’s expectations.
Despite the investment from the Frasers Group, Matchesfashion is still unable to repay debts of over 210 million pounds. According to the report from the consulting firm Teneo, the Swedish brand Toteme is the brand with the highest debt, with nearly 1 million pounds in debt. Burberry, Gucci, and Max Mara are each owed approximately 500,000 pounds, and designer brands such as Paul Smith are owed more than 100,000 pounds. In addition, approximately 190 suppliers claim to have nearly 23 million pounds worth of its stocks, but so far Matchefashion has only returned 3.4 million pounds.
The development history of Matchesfashion can be traced back to 1987. It started as an offline store and opened an online store in 2007. At its peak, it distributed more than 500 luxury brands.
A 37-year-old fashion business collapsed suddenly. And Matchesfashion is not even an isolated case. Another British luxury e-commerce platform, Farfetch, fell into a financial crisis at the end of last year and was later acquired by the South Korean e-commerce giant Coupang, which helped it go private and delist.
As one of the ripple effects of the bursting of the Farfetch bubble, Richemont withdrew the deal to sell the luxury e-commerce Yoox Net-a-Porter to Farfetch and finally sold Yoox Net-a-Porter to the German luxury e-commerce Mytheresa this year, and Mytheresa has become a survivor in this round of the collective collapse of luxury e-commerce.
As the second collateral event of the Farfetch bubble burst, earlier this month, the report “The Trendy Business Is Becoming Increasingly Difficult” pointed out that the Italian brand management company New Guards Group, which once incubated Off-White, filed for bankruptcy, attracting widespread attention.
The company, founded in 2016 by Claudio Antonioli, the founder of the high-end boutique Antonioli in Milan, Davide de Giglio, a fashion industry insider, and Marcelo Burlon, a designer, was regarded as a new industry species when it emerged four years ago. It has gathered well-known trendy brands such as Palm Angels and Heron Preston, aiming to build an Italian trendy brand empire.
New Guards Group once painted an inspiring blueprint for designer fashion and became the umbrella for many designer brands. There were once rumors that LVMH was interested in acquiring New Guards Group, but in the end, Farfetch acquired the group with a huge investment of 675 million US dollars in 2019. Since then, New Guards Group has continued to expand by acquiring a majority stake in Ambush and the intellectual property of Opening Ceremony.
However, the expansion strategy during the expansion period is actually extremely risky, gambling on all the original accumulations of the platform before.
In February 2022, New Guards Group continued to expand its brand portfolio by reaching a long-term strategic partnership with Reebok, the sports brand under the American brand management company ABG. It became Reebok’s core operating partner in Europe, taking over the brand’s retail stores and e-commerce.
But the Reebok collaboration, as a final desperate leap, brought down New Guards Group. Eventually, the group filed for bankruptcy protection proceedings for reorganization due to the loss of the Reebok European distribution license and the failure to pay a $300 million copyright fee.
It is not difficult to see that Tomorrow Group previously also wanted to replicate the path of New Guards Group, gathering many popular independent designer brands, attempting to build a designer fashion and trend brand group.
But ultimately what is worth deliberating is what kind of core advantages brand incubators and accelerators have established. Professional sales capabilities, hardware facilities, and industry partner networks, these nominally aggregated resources are often simply accumulated crudely, and a solid business model has not been sorted out.
Designer brands outsource all the functions they don’t want to undertake to brand incubators, while the incubators provide services in a uniform and undifferentiated manner. This business precisely extinguishes a certain refined attribute that designer fashion should possess.
One view is that perhaps “small and beautiful” should return to being just that. Designer brands must internalize their capabilities and give up over-reliance on partners. Designer brands like Telfar pay more attention to shaping the ability to directly face consumers and selling on the official website, and recently opened offline stores in the United States. Although Kiko Kostadinov and Jacquemus relied on wholesale channels in the early stage, they eventually developed the ability to sell independently before the window period closed, and also took a step towards opening stores and expanding.
The future of an individual needs to be borne by the individual. Just like Machine-A being operated by its founder again, in a stage where expansion is no longer realistic, it is a wise choice to make one’s own capabilities sound or to choose to give up completely.
Copenhagen-based designer brand Saks Potts recently announced that it will close in the spring of 2025, ending its ten-year journey. The brand was founded by Cathrine Saks and Barbara Potts when they were 19 and 20 years old.
It is worth noting that Saks Potts’ decision is not due to financial pressure. Since the brand was founded in 2014, its average annual sales growth rate has been 25%, and it is expected that 2024 will be its best-performing year. Compared with selling the remaining value of the brand’s intellectual property to a brand management company, Saks Potts’ voluntary closure actually maintains the charm of an independent designer brand.
However, not everyone has lost confidence in the market for designer fashion.
According to Fashion Business Daily, Gianluca Borghi, the CEO of the legendary Italian buyer’s store 10 Corso Como, recently revealed that the company plans to open five to six directly-operated stores globally in the next four to five years. Among them, the first new store will be located in an important area in Asia next year, and its scale will be comparable to the flagship store in Milan. However, 10 Corso Como has not yet shown a signal of re-entering the Chinese market.
10 Corso Como’s new store in Milan cost 10 million euros
In addition to the flagship store in Milan, the brand operates two branches in Seoul and has shop-in-shops in Lodenfrey in Munich and Printemps in Paris.
10 Corso Como was founded by gallery founder and publisher Carla Sozzani in 1991. Later, it was heavily in debt due to excessive expansion and poor management. In 2017, 10 Corso Como closed its store in Beijing SKP, and at the end of May 2019, it ended the business of its store in Shanghai.
10 Corso Como Shanghai store closed in 2019
The reason for the store closure is that the store lease and the agreement between 10 Corso Como and the Chinese partner, the parent company of Ochirly, Trendy Group, have expired.
10 Corso Como was acquired by Italian fashion entrepreneur Tiziana Fausti in 2020, who owns five multi-brand boutiques in Milan.
After taking over, Tiziana Fausti quickly reorganized the 10 Corso Como team and renegotiated the lease contract with the landlord of the building where the Milan flagship store is located. She signed an 18-year long-term contract starting from November 2020. She also acquired the four floors above the entrance to be used as the office of the buyer’s store and the photography studio of the e-commerce department.
In April 2021, 10 Corso Como’s Milan store reopened, and Tiziana Fausti invested more than 10 million euros in the Milan store project.
In May 2023, 10 Corso Como announced that Gianluca Borghi, the former MontBlanc executive, will be the CEO, responsible for the expansion of the brand’s business globally.
Gianluca Borghi was previously the Vice President of North American Retail for Montblanc, a brand under the Richemont Group. He also worked for brands under the Kering Group such as Gucci, Pamellato, and Boucheron, and has extensive relevant experience.
10 Corso Como is highly ambitious this time, but in the currently highly challenging fashion market, not only small designer brands are under pressure, but also the luxury brand customers that 10 Corso Como relies on are actually facing a historic slump.
As a benchmark for global fashion buyer stores, Dover Street Market, the competitor of 10 Corso Como, is relying on collaborating with luxury brands for pop-up stores to generate revenue. However, according to sources, its sales performance is not impressive, and its warehouse management is chaotic. It has held many clearance sales. The proportion of independent designer brands on sale at Dover Street Market is getting lower and lower. It mainly sells brands under Comme des Garcons and mainstream luxury brands, and many of these brands are strategically shrinking their wholesale businesses.
The risky move of 10 Corso Como makes people worried.