Hawkins & Shepherd Turns 5 Years Old | The Mistakes I Made

The critical mass will tell you it takes 3 years before you generate any profit from your online store. With Hawkins & Shepherd we sold on our first day of trading and I'm pleased to say have enjoyed a healthy trajectory. However, it could take another 10-20 years before it reaches a level that I would be happy with.

Today Hawkins & Shepherd celebrates its 5th year in business and in this article I will tell you all about the mistakes I've made and what you need to be mindful of should you be looking to start an e-commerce store. 

 

SINGLE POINT FAILURE

AW17-SS18 has been the most challenging year for me. I've suffered great losses through supply issues.

With Hawkins & Shepherd the shirts are all handmade so it is extremely hard to find a factory that has skilled workers who will deal with the relatively small orders that I'm placing.

We have always used the same supplier for 5 years and there lies a problem. Looking back to my IT Networking days, that would be classed as a 'single point of failure' which needs to be avoided at all costs.

 

HOT-STANDBY

The same applies with fashion/clothing, by having one factory making your goods is bad business. You always need a 2nd option which will take over if one factory experiences issues. In the world of IT we call this a hot-standby. (I know it sounds like a rolodex of page 3 girls' phone numbers that Charlie Sheen would have on his night stand). 

Alternatively, you could place your orders between two factories known as Load Balance. 

 

£10,000 DOWN THE TUBE? 

For around 9 months I had ZERO shirts being made and I thought my investment of around £10,000 in cotton fabric was going to be lost.

I run out of my most popular shirts around the AW17 season which is my biggest profit turner and also SS18 which is wedding season.

It hurt, it hurt bad. Not just on the business but on my confidence in people and my ability to continue to run Hawkins & Shepherd.

Over the last month, I've got all of the shirts made and I've also found a second supplier who are currently making samples for me and are in the state of approval to move forward with either taking over production or sharing it with my current supplier.

 

TURNED THE CORNER

Looking back this lesson has been hard but it has taught me valuable lessons and in the long run made the business more robust. At the same time, we've been working on a complete website redesign to showcase our products and services better.

We've been developing new shirts and searching the world for the best fabric to use in a new premium shirt range...we'll be using Alumo fabrics, renowned throughout Savile Row and the world for being the best (*expensive though!).

We've gone live with our first outdoor advertising campaign in the form of two black taxis fully wrapped and branded with Hawkins & Shepherd promoting our Shirt Subscription Service 'The Collar Club'.

For anyone thinking of getting into clothing and an e-commerce business there are so many challenges and things to overcome but taking advice from someone that has been there done is is crucial.

 

KNOW YOUR MARGINS

In fact, the other week I was discussing this with a friend who wishes to start something up. In short, he was going to make a product for say £25 and sell for £50. This just doesn't work; your margins are way too low.

For someone starting a business who has no experience may think that is good, you are making 100% on everything. Incorrect!

If you cost in every single penny, your profit will actually be a lot lower. For example what about the costs for, start-up, designs, pattern-cutting, warehousing, packaging and depreciation of stock value over time (the latter being the most important). Don't even get me started on wholesale! 

 

BUSINESS 101

I'm starting a new Business series on YouTube which will take you on my journey of creating Hawkins & Shepherd, how I got into blogging and crammed with my tips to be successful. So subscribe below to make sure you don't miss it.

 

Why it's so Hard to Run a Successful Wholesale Clothing Business | SME Business Advice

This weekend just gone I was at the MODA event which is a fashion trade show where clothing brands (menswear, womenswear, footwear, accessories) showcase their new AW18 collections to prospective buyers from independent stores and large department stores. I've been visiting MODA for a couple of years as representative/founder of the brand Hawkins & Shepherd, this visit I was doing a panel discussion on the Dandy Dapper Trend (but thats for another post). Last year I decided to concentrate on building a successful online business rather than a wholesale business model which wasn't as successful as I first thought it might have been for a number of reasons.

Wholesaling is basically where brands such as Hawkins & Shepherd design a collection and sell 'bulk' to retailers at a wholesale price. This wholesale price is negotiable between the brand, agent and buyer but a general rule of thumb would be, for example you sell a shirt for £90 direct to customers, you will have to wholesale it at approx £30-35 (a 2.7 or 3.0 ratio). Therefore to make enough margin to run a profitable wholesale business you'll need to design, build, brand and land the shirt for £15. 

For me the buyers were driving down the price that they offered for your goods, for many reasons but mainly due to rent increases on bricks & mortar stores, risk management and also greed. When a clothing brand offers a wholesale price to retailers it is based on a large order promise. So therefore the brand can take these accumulated large orders and pass it on to their factories to get a preferential rate per piece. Furthermore the brands use the leverage of large orders to get bulk discount on textiles which is the justification to be able to offer the high discounts that a brand gives retailers. However on top of the retailers driving down prices they are also taking less volume of stock, which is a double hit for the brands wholesale margins making it really tough to operate as a small business owner in this wholesale space.

Trade shows such as MODA give an opportunity for brands to get in front of powerful buyers who have the ability to potentially make a brand mainstream and to build a brands value, appearance and popularity. Although these trade shows can be expensive, especially for a start-up SME business. For a smallish 12-15 metre squared pitch you are looking at around £3,000 although I've heard brands being charged up to £6,000. Then there are a number of added extras such as extra lighting, power sockets, decorating your stand, transportation, printed marketing material, cost of sample stock, staff etc. So you can see how to show at a trade show for SME's is difficult financially. 

My first two trade shows with Hawkins & Shepherd were great, the orders came in and on-paper it seemed successful. Although that's where my problems started. The retailers that I dealt with refused to pay for stock up-front or even 50% now 50% on delivery. They would ask for small adjustments on the designs, yet in tiny quantities making it impossible to make any money as a brand. They would demand 'replenishment' of stock where they would order 1, 2 or 5 shirts per week/month depending on sales, yet still demanding the same bulk wholesale rate. They always paid late and on 3 occasions not paid at all leaving me around £4,000 being owed for goods that I have already delivered (and that was 2 years ago!) It is ridiculous and quite soul destroying. Yes you could say, well why did you deliver the goods without payment? But at some stage you need to have faith and trust people. The investment has already been made in terms of making the goods, so you just want to get the product into store as quickly as possible. All of my time was taken up managing these accounts, chasing payments, asking for sales reports and trying to manage a system of replenishment. I think it is clear that for a small business owner, wholesaling is difficult. Everyone will have a different experience, positive or negative, but my goal here is to offer my personal experience so that any new fashion brand thinking about wholesaling can streamline their processes or think about the alternatives before commitment.

There is another option which is selling online e-commerce and digital marketing. This is where I've driven Hawkins & Shepherd towards, focusing on building a digital audience through social media and using trackable digital advertisements such as google ads. Focusing on a pure online model means that your brand can take all of the profit without having the large operating costs of owning a store. It opens up a global marketplace that you can target. At Hawkins & Shepherd we have grown our American sales from 3% in 2015 to 29% in 2017 whilst also growing in Europe and other continents. Operating online you can really lean down your outgoings to a point where you are just spending money of Direct Expenses, Payment Gateway Costs, Accounting and Marketing.

Talking about marketing, traditionally the fashion industry has been led by print press publications being the highlight of how a brand is doing. It was always the goal to be in a major editorial for a large targeted magazine. Well now we have a digital footprint, we have bloggers, influencers and many other ways that can offer a greater return on investment for SME businesses and everything is tracked. Its the same with the wholesale model in fashion. Is this something that potentially will be phased out over time? I think not, but I certainly think more brands will try the lean costs for greater profit and therefore consider whether wholesaling is the way to go. So as marketing moves towards a more digital model of accountability and traceability will we see the wholesale model of brands move towards an singular online presence or online drop-ship model - but thats another discussion!

 

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