LONDON — It’s not an easy time for British brands, and it’s about to get even harder with a fresh round of business taxes here and potential tariffs on European goods shipped to the U.S.
Justin Lilja believes it’s also a moment of opportunity, especially for brands that want to build their businesses in the U.S. Lilja is founder of the Texas-based Runway Brands Group, which offers strategic and operational support to founder-led, creative businesses based in Britain.
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Runway Brands bills itself as a one-stop shop for small, mainly direct-to-consumer labels looking to break into the U.S. market, which has long been graveyard for British businesses large and small. In the past, British brands have tried to move too quickly and cover too much ground without proper marketing or research into their customer base.
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Lilja wants to rewrite that narrative and argues that British brands can make it big in the U.S., but only with patience and a targeted approach. He believes there is enormous opportunity both for the brands, and for the department and specialty stores that stock them.
“Brands come to the U.S. to scale. The country is so large, you could match your U.K. revenue by focusing on New York and California alone,” said Lilja who, before launching Runway, helped the British accessories brand Radley build a $50 million-plus business in the U.S. after an initial, failed attempt to crack the market.
Even with the frenetic consolidation among the big U.S. department stores, the size of the U.S. market is staggeringly large compared with the U.K., where so many big chains have shut their brick-and-mortar stores, or become online-only operators.
The big chains such as Nordstrom and Dillard’s have hundreds of stores between them, while Saks’ purchase of Neiman Marcus last year created a super-group with a total sales volume of about $10 billion.
Compare that with the U.K., where John Lewis has 36 stores, Fenwick has eight and Harvey Nichols has seven. Selfridges has four units while Harrods is one giant store with more than 1.1 million square feet of retail space.
According to Lilja, the key to success in the U.S. for the Brits is to “make that big market small,” so he advises his brands, which include Navygrey, Hush and Otiumberg, to focus on specific regions and channels.
Lilja’s approach is hands-on and no-nonsense.
“We offer the advice on what we would do in the first 18 to 24 months, and we want them to move slowly and carefully with as little risk and cost as possible. These brands are small, they don’t have deep pockets or operational capability. It takes a few years and you have to stay the course,” he said.
Lilja also tells his clients that “boutiques don’t pay the bills. They’re often hard to reach, and [scattered] all over the U.S. Often, they require hand-holding.” Instead, he advises some of them to start with an order from a department store, bank the cash and build from there.
“Right now, the two biggest challenges that our brands face are awareness and cash. So the best place in the world to go is a big retailer because they place the biggest orders and have the most customers,” he said.
“We call ourselves brand stewards because we feel we’ve been entrusted to look after these founder-led brands. I treat them as if they were my own,” he added.
Wholesale isn’t always the way forward. Lilja said Runway is channel-agnostic and also advises clients on when and where to open retail stores and how to speak “American” on an e-commerce site, for example using “pajamas” rather than the British “pyjamas.”
He has also guided companies after they made some terrible decisions.
One company recently made the mistake of opening stores in trendy locations in New York and California. “Only 10 percent of that brand’s direct-to-consumer customers were from the U.S.,” Lilja said. “That’s not enough people to fund stores in those locations.”
Rachel Carvell-Spedding, founder of the luxury knitwear label Navygrey, said Lilja is strategic, but he’s also an ace marketeer.
“He has an appreciation and an understanding of the founder’s journey, the product, and the quality. He genuinely believes in your wares, and that is really crucial because we are not on the ground, and he is representing us,” she said.
Lilja is also helping her understand “where the customer is, and what they’re buying. Do they like that thickness of wool? Do they prefer cotton?” she said, adding that her ultimate plan is to continue wholesaling in the U.S.
Once she’s able to build a crystal clear picture of the customer, she’ll then decide whether to open a standalone store in New York, Boston or elsewhere.
On the flip side, Lilja said department stores are keen to stock British brands because there’s a founder and a story behind them, and often a craftsmanship element, too. Also, they’re not licensed products, or made-up brands mass-produced for the stores.
“They’re genuine, and they offer something new. Plus, they’re not American,” Lilja said. “If we get the messaging right,” the stores respond with gusto despite the fact that prices are around 1.5 times higher than in the U.K. due to exchange rates and duties.
He said Navygrey, which makes sweaters and tops from British wool, cotton and linen, caught buyers’ attention from the get-go despite the price tag of around $450.
“The U.S. is dominated by cashmere, but a lot of people don’t necessarily like the drape and fit, so when we brought Navygrey to appointments the buyers said, ‘No one’s really doing this,’” said Lilja, adding that the brand is thriving in its first season at Nordstrom.
Lilja and his brands plan to persist, despite the threat of U.S. import tariffs.
As of today, DTC goods shipping from the U.K. with a value less than $800 are not subject to import tax. British goods made in China that exceed that value have already been hit with U.S. tariffs.
In anticipation of further tariffs on European goods, Lilja said he’s been working with his stable of brands on pricing, sourcing and keeping the supply chain flexible. Many brands are already shifting sourcing to countries that will be unaffected by increased tariffs, he said.
Lilja has also been advising brands to run their numbers regularly, and be prepared for cash margin impacts on their exports to the U.S.
Brands also have to be careful about raising prices because they need to remain competitive. “Longer term I would take this opportunity to also increase value. Don’t just raise price because costs have gone up, but give the customer more,” said Lilja, who is confident that his brands will succeed in the U.S. with or without tariffs.