Ron Poisson, the founder and designer of Cult of Individuality, began planning the launch of the men’s denim brand in April 2008. In August, he showed his first collection to buyers at the Project Las Vegas trade show. The next month, Lehman Brothers filed for bankruptcy, marking the start of the economic meltdown. “Was it the most opportune time to launch a new brand? No,” Poisson said. “We probably couldn’t have picked a worse time to start a new business. But we didn’t know how things were going to turn out when we started.” Like Cult of Individuality, companies that were launched during better times in early 2008 all ran headlong into the recession. Those brands face difficult obstacles with cautious retail buyers wary of taking bets on unfamiliar names, as well as tightfisted consumers, a constricted credit market and minimal name recognition. However, for companies that have the funding and savvy to ride out the economic turbulence, the retail climate also provides some silver linings — such as fewer new brands clamoring for attention and stores shifting their merchandising and pricing strategies in ways that could benefit a start-up.
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Cult of Individuality, for example, has found some early success despite the headwinds, and is now sold in about 100 leading specialty stores like E Street Denim, Atrium, Bill Hallman and Caruso Caruso. That’s been on the strength of trend-right, high-quality product and sharp pricing, with its jeans retailing for $135 to $185. “We always saw a niche for something priced at the lower end of the premium price scale,” Poisson said. “Fortunately, that strategy dovetailed with the economy, just as we were launching.” In addition, many high-end specialty retailers have tweaked their buying strategies and have brought in some lower-priced merchandise to cater to budget-conscious shoppers. “The silver lining in all this is that some stores who might not have been interested in a brand like ours are taking a second look,” Poisson said. “A lot of the top-end retailers only had jeans selling for $200 and up. I go in and show them the opportunity for a brand like ours, which has all the quality and style of a higherpriced product, but for a more accessible price.”
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In fact, the biggest challenge for Cult of Individuality has been getting seen by buyers, who may not be eager to consider an untested brand. “But once we can get into a store and buyers can see and feel the product and the value in the price, then the biggest obstacle is gone,” Poisson said. Another major hurdle is many stores who do order product are not being approved by factors in the tight credit market. “We use three factors, and when one doesn’t work, then we try the next one,” said Poisson, who added that many stores have turned to credit cards to finance orders. Up to 50 percent of Cult of Individuality’s orders are now paid via credit cards.
In riding out the recession, Cult of Individuality has the luxury of a deep-pocketed owner, a large apparel manufacturing company based in Guangzhou. Poisson declined to name the company, as it is a vertical operation that does denim manufacturing for many other brands.
With shallower pockets to rely on, New York-based Commonwealth Utilities has found the recession a challenging environment in which to find funding to help take it to the next level. The company launched its first collection during New York Fashion Week in February, and received positive feedback from retailers
and press for its spot-on take on chic-but-wearable men’s wear — but investors have been scarce. The company has been privately funded by founders Richard Christensen, who runs a boutique advertising agency called Chandelier Creative, and Anthony Keegan, a former men’s design director at Donna Karan. “Our business plan has changed a hundred times,” said Keegan, who cashed out his 401(k) to help finance the company.
“In the beginning, it was just about making something fabulous. But now we’re really thinking about how to create a proper business. It makes you pull up your socks and grow up really fast.”
Keegan quit his job at Donna Karan in February 2008, a decision he might not have made then if he knew about the impending recession. “I probably wouldn’t have quit my job, but there is no such thing as the perfect time to start a company,” he said. Keegan could take comfort that many successful consumer brands have been launched during depressions or recessions throughout history, including Fortune magazine (1930), Kraft
Miracle Whip (1933), Gillette Sensor razors (1990) and even the Apple iPod (2001). So far, Commonwealth Utilities has a modest level of commercial success, selling into about 12 doors this fall, including Saks Fifth Avenue, Fred Segal, Odin and Camouflage, in addition to Beams and Isetan in Japan and Matches in London.
The company has tried to conserve resources by partnering with other small companies to barter services. For example, Chandelier Creative worked on the branding for a contemporary milliner named Victor Osborne, who recently opened a store on New York’s Lower East Side, in exchange for hats for the spring season.
Cheaper real estate is a key benefit of the weak economy and Commonwealth Utilities is shopping for a retail space in Manhattan. Keegan noted that a space on Bond Street previously offered for $15,000 a month recently dropped to $8,000, and that some spaces on Orchard Street were available for $3,000. The company plans to take advantage of the low rents by opening a pop-up store for a few months beginning in September. The company also will launch an e-commerce site to reach consumers directly. “I was in fear of doing e-commerce; it seemed so technical,” Keegan said. “But there are sites online that make it very easy. You just have to upload photos, and then we have a pickand-pack facility in New Jersey that does all our fulfillment for us.”
E-commerce is the foundation of another new men’s line called Company of We, which was started by Christopher Crawford, cofounder of the women’s Christopher Deane label. Launched just this month at Companyofwe.com, everything in the collection retails for less than $100, apart from blazers, which are $198.
“I’ve always wanted to do men’s, and I thought that doing something at this price point would be very attractive to consumers in this economy,” Crawford said. “This is for the guy who wants to pay a certain price for a cute outfit, but doesn’t necessarily want to wear Club Monaco.” Crawford’s business plan originally called for the label only to be sold online as that was the only way he could keep prices so low. However, Japanese retailers have approached Crawford about selling the line in Japanese stores, and the parties are in talks to produce the line in larger quantities while keeping its original price points intact.
“One of the good things about this economy is that factories have been losing business as well, so they have become a bit more amenable to discussions about minimum volumes and price,” Crawford said. Another reason Crawford originally planned Company of We as a direct-to-consumer play was because of the deteriorating state of specialty retail. He said his Christopher Deane women’s business has shrunk significantly over the past year, as many of his accounts were delinquent on payments and he stopped shipping them. Not having to worry about declining sales and leftover inventory is one of the advantages of launching a company in a weak economy, said Jonah Smith and Palmer West, the film producers behind the new upscale, outdoor apparel brand Aether. “As a new company, we aren’t held hostage to our inventory yet. It’s not like we planned on a banner year and stockpiled all this inventory, so that gives us some freedom,” West said. “So in that way, if we had started the company in 2007, for example, we might be in a worse position.”
As it was, the duo launched Aether in 2008 and their original business plan called for a three- to five-year window to turn a profit—now closer to the five-year mark, Smith noted, taking into account the slow economy.
The partners expect Aether to be in about 20 stores this fall, with confirmed orders including Louis Boston, American Rag Cie, Douglas Fir, Blue Bee and Sy Devore. Their background as independent film producers — “Religulous,” “Requiem for a Dream” and “A Scanner Darkly” are among their credits — has helped color their approach to building the company. “With independent films, no deal is the same as the next. It’s about being flexible and creative,” Smith said. “That’s how we’re working with retailers. We want to create partnerships. We ask retailers, ‘What will make it work for you?’ If the partnership is right, we’re willing to offer extended terms, for example.” Similarly, as with indie films, they also hope to build the Aether brand through positive word of mouth. “You might not get as many dollars because of the economy, but you get a little more time and attention from retailers,” West said. “If things were booming, they might not have the time of day for you because there are 20 other brands coming at them at once.”