Sourcing Products - The Stages of Supply in the Fashion Industry

Posted by Michael Watt on

 

Welcome back to another Style Centre Wholesale blog post,  we hope that our previous posts have helped you to start or expand your business. We understand that one of the biggest challenges at any stage of your business is constantly sourcing new, high-end, high-demand products for a good price. Within the fashion industry, a large part of your time will be spent sourcing and buying the products that your customers want. In this blog we will look at the different stages of supply within the fashion industry. It will be honest and not just a sales pitch for our website, hopefully it can help you grow your vision of where you want to be. 

 

Starting Out - (£0-£100K Turnover)

When deciding to start a online fashion business, many individuals may worry about how their business name sounds, whether their logo is the perfect colour or how many followers they have. In reality, one of the most important things that you should be focused on is having strong, consistent source of products. 

When new to selling branded clothing, many might buy from large retailers who have online or in-store sales. Maybe something clicked on a Black Friday sale and you realised, "wait a minute, I could make some money here".  There certainly is money to be made, but it will be relatively smaller margins when starting. Large retailers who have in-store or online sales can be a great way to start, but in reality it is not a constant source and the products will most likely have limited quantity in un-popular sizes that will sell quickly. 

Another very popular way to start is by buying from Outlets. if you are lucky enough to live close to designer outlets or if you are happy to travel then there is an opportunity to buy and sell these products. Thousands of people are already doing it all over the world. I'm pretty confident you could make a full-time living from simply just buying and selling from outlets, but it would be hard work and you would have to have good product / brand knowledge. Bicester, Chesire and other outlet villages are a regular haunt for bulk-buyers and re-sellers doing it on a smaller scale. Again, a great way to start out and probably sustain a business doing 0-£100k per year but how are you going to scale? Many of the outlets have rules on how many items you can have, some don't allow bulk-buying / re-selling at all. 

 

Lifestyle --> Serious Business - (£100k - £1m)

Many businesses struggle to get to this level for a number of reasons. Some are: 

1. VAT kicks in at £83k and people don't want to register so stay under this threshold by choice. 

2. Cash flow problems can become real and serious at this point - you really have to learn how to manage money and many people get found out. Its not just a few thousand on a credit card anymore. 

3. At this point you must definitely be registered as some type of business entity such as sole trader, partnership, limited company etc. This will require an accountant, registering to pay tax through self-assessment etc. This can scare many people and many get caught up with HMRC with a big tax bill, killing their business. 

I don't mention the above points to scare anyone, I just want to be realistic about what it takes to operate a business at this level. I would suggest that 100k - 1m is definitely the hardest part of growing a business. Starting out can be relatively easy but as you reach this stage everything becomes real, VAT kicks in, tax must be paid, you will need new systems and processes, possibly a staff member and premises. All the overheads add up and now theres pressure to pay these bills. If your up for this challenge and can push through this stage you will see great rewards, but don't expect it to be rainbows and sunshine. 

Anyway, back to sourcing products! At this stage you may struggle solely relying on outlets or large retail sales and discounts. You really need solid suppliers, and thats when you may look to find a wholesaler. You've got some access to capital and maybe some business finance and can afford to place a 5k, 10k or 20k order. These wholesale businesses are more than likely large businesses who are one or two links in the chain away from the brand. They will provide you with lists for their stock and the way business is done starts to change. It does become a bit more brutal and slightly riskier but you can start to see really great offers for large quantities of items for a much prettier price. 

These suppliers will have minimum order quantities and if your ordering below 5k-10k then their probably going to charge you their full-whack wholesale price. Once you start to build a relationship with them and place larger orders, proving yourself as a good, easy to deal-with customer, then they may start introducing further discounts. 

Remember that all of these wholesale companies will not show the VAT element in their pricing, so if you are not VAT-Registered and cannot claim the VAT back then you will be paying VAT of 20% on top of the price. This is the case with our wholesale website, many people say  "your prices are amazing, how are they that low!?" but they have failed to read the terms and conditions and understand that the VAT element is added at checkout. 

Another factor in the supply chain at this level is having a physical store. If the business has a physical store then that would open itself up to possibly getting an account directly with the brand! Now this seems pretty exciting, right! Well it really depends on what your going for. Most of the accounts will be for new season items only and that will come at a premium, meaning the profit margins will be pretty tight! Maybe your business model is selling cheaper, past-season items that have alot higher profit margins. This means that using a large authorised supplier who deals with a brands clearance stock may be more fitting than paying full whack for a brand new season £450 Givenchy tee that your only going to make £40 on. It really depends on how you are marketing yourself. You also should keep in mind that brands don't hand out accounts willy nilly and would want to see a lovely shop fit, in a good location which is not too close from another store that has an account and selling the same items!

Becoming a Big Dog (£1m +)

Very few fashion businesses will reach the £1m mark. There are very few "overnight success" stories and most of the businesses at this level have been around for a good amount of time and built their business over a number of years. Those who do reach this level will have had time to create good relationships with their suppliers. 

At this stage, the business will more than likely have multiple sales channels, from social media, online marketplaces such as eBay, amazon etc, their own website and probably a physical store. They are able to buy large amounts of products at once from large suppliers or the brands themselves and will receive serious discounts from the run-of-the-mill wholesale prices that are on offer to the small businesses. They will employ multiple staff members to run the business and will be spending serious amounts on their overheads to keep the business running. 

Once the £1m ceiling has been burst through, then it may seem to become a little easier getting to £2m compared to £0-£1m. Access to large amounts of business finance would be available should your accounts be in a good state. Possible investors could be looking into providing capital to help take your business to the next level. You would have proved that you can build something, manage it well and continue to grow it. At that point the problem may not be sourcing the products, it would be having good enough suppliers, it would be picking the best deals from the plethora of offers that you would be receiving from suppliers. The suppliers will be happy for you to buy and will constantly offer you all of their best deals, giving you great prices to "take all". This may give you the opportunity to wholesale items to other businesses who are at the "Starting Out" stage, giving them more options other than just outlets or online retail sales. 

 

Where are you at?

Many of our customers are either at the Starting Out or Lifestyle-> Serious Business stage. In truth, our target market is smaller businesses who are doing around £0-£500k. There has been and continues to be a huge increase in individuals building businesses on Instagram, Depop, their own website etc recently. There is a real opportunity to make money and build something within the high-end fashion market as so many consumers are getting more and more into their fashion - especially those aged between 15-25 at the moment. Image is a huge part of their life and they only want the best of gear. 

 

How can we help?

We offer an alternate solution to the outlets, retail sales and other suppliers that are currently being used by the businesses doing £0-£500k. We know that we are only one of many suppliers but we have specifically lowered our minimum order quantity to £250 and 3 Items so that basically anyone can get started with us. We have also now launched our Dropshipping program which is now totally FREE! This means that you can order items 1 by 1 at no minimum order quantity and we will send the item directly to your customer - Read our latest dropshipping blog post HERE. 

If you are currently planning to start an online business selling high end fashion or are already selling high end products, then we want to hear from you! Please Contact Us to see how we can help you! 


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