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Step-by-step guide to write a business plan

A business plan is a roadmap that outlines goals, plans and how to achieve those goals. With a thorough business plan, you can think critically about your idea and discover if your model is valuable, actionable and achievable.

About your business plan

Keep in mind that your business plan is never finished, it's a living document.

The market and the needs of your potential customers will change over time. If you acknowledge this fact, you will have a clear mind on your business.

Be critical and adapt your business plan if necessary. Stay focused and know that not everything will go as you expected. Eventually, the growth of your brand will be positive if you keep your business plan flexible.

A business plan of a clothing line is a key document with information about the description of the market, your brand story, your products with the pricing, your marketing strategy and financial information.

1. Market analysis

A market analysis is research about the business market you're in: the fashion industry.

The analysis is necessary because you have to know your market and if you can build a sustainable brand in it.

You can do a market analysis by following these steps:

Investigate the targeted fashion segment

Describe your segment and ideal customer*

Find out the latest fashion trends

Which brands are popular

*Don't know how to find your ideal customer? Buy the Customer Blueprint

Find out your potential competitors

How many direct competitors do you have?

Are these competitors doing good financially?

Write down your Unique Selling Proposition

What is your unique value to compete between other fashion labels

2. Brand story

The best brands are built on great stories

Every great brand tells a great story, let's talk about your story.

A brand story goes beyond what's printed on your t-shirt. Your brand story is what people believe about your brand based on t he facts, feelings and interpretations evoked by your clothing.

Your brand is just another commodity if you don't have a true brand story. Building a story is about building something that people care about and want to buy into.

You can write out your brand story with the follow key aspects:

The name of your clothing brand

The tagline

Values of your brand

The reason why you want to launch your own clothing brand

Vision: what is your brand in this world?

Mission: what purpose has your clothing label?

A brand story has to be clear and understandable. Here's an example of a known british brand that tells a simple but powerful story: Paul Smith.

Paul Smith - Brand story

Paul Smith is one of the great English fashion designers who developed his own 'classic with a twist' style.

The Paul Smith brand story is simple: the thwarted athlete who still wants to become a world beater. When he was 17 years old, he wanted to become a professional racing cyclist.

Paul Smith had a serious accident and stayed in the hospital for months. There, he met interesting people who told him stories about the Bauhaus and contemporary design. From that moment, he wanted to tell his story through an own clothing line.

The brand story is about an outsider who makes high-quality clothes and accessories. It's a story that reflects simplicity with elegant twists. Eventually, the Paul Smith brand has become known in the international market.

Another great example of a successful brand story is the famous Jack Daniels Whiskey. Read more about the story in this inspiring post.

3. Product

You can't start your clothing line without knowing exactly what you want to sell and who will want to buy it.

First comes first: create your own product. You can start with a small collection.

After your first release, you will find out which products are trending the most.
Follow these steps to create your own product:
What is your idea? What do you want to create? If people will see your design, what should they think about it?

Draw your design digitally, and focus on every detail. Don't have a clue on how to design clothing? We can help you out with our design service.

Choose the style of your clothes

Which colours of textile do you want? Which style of clothes fits your brand strategy?

Find a good partner that can produce your clothes.

This is a very important step, don't choose the most easy or cheapest producer. Find a reliable partner that works on long-term.

Make sure that this partner is doing quality control. Your brand has to be made from high-quality materials. That's a must for the image of your brand, and will certainly lead to success.

The price of your clothes has to be right. Prices that are too low or too high will attain in bad results. Look at your competitors, how much do they ask for a sweater?

4. Marketing strategy

The marketing strategy is the phase where you decide how you will sell your clothes.

How will you sell your clothes? Online, offline, or both?

E-commerce is booming for years, so a webshop is certainly a good idea. You're basically open 24/07, worldwide.

Also offline selling (in retail shops) is necessary. Find out which stores fit your style and ask them if they want to sell your clothes.

Thereby, you have to find out how you'll communicate with your audience. Choose the most effective communication channels (social media, website, blogs...) and communicate on a regular basis.

You can organize giveaways on Facebook to have more likes for example.

We recommend you to read the post about 17 successful marketing strategies to take your clothing brand to the next level. You will be surprised about all the possibilities to boost your clothing label.

5. Financial situation

The purpose of the financial part of your business plan is two-fold.

First, you will have to find out if you need investors or partners. They will have to see the financial numbers of course. The second reason, and that's the most important, is to calculate your own benefit.

How do you write the financial part of the business plan? These 6 items are absolutely necessary:
1. Sales Forecast
Start with a sales forecast. For every month for the first year, you can set up different lines of sales. This can be measured on the results of the past year(s). If you're starting a clothing brand, you can make an educated guess.
2. Create an expenses budget
How much is it going to cost if you actually make the sales you have forecast? Take into account the fixed costs and the variable costs.
3. Cash-flow statement
Let's move to the third step: develop a cash-flow statement. The cash flow measures the total amount of money that goes in and out of your business per month. This is very important, as you have to measure your cash reserves.
4. Income projections
A projection statement makes you look ahead and helps you to make some estimates about the financial status of your business. Shortly said, these are the profits that the company will have in the future. In other words: the profit and loss statement.
5. Assets and liabilities
Next, you have to deal with assets and liabilities that are not in the profits and loss statement. Let's explain it easy: an asset is anything that puts money in your pocket, and a liability is anything that takes money from your pocket.
6. Break-even analysis
Last step: set up your breakeven analysis. The break-even point is when your business's expenses match your sales or service volume. Your business is viable when your overall revenue will exceed your overall expenses.

Information overload?

In this post, we went in detail about important parts of your business plan. We could write books about the perfect business plan, but that would be too much, right?

Based on the experience of world-known fashion labels, we created a 1-page template of a business plan. The template is easy to implement and will give you a clear overview of all the steps that are needed to start a clothing brand.

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How to write a business plan for your clothing brand

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A business plan is a roadmap that outlines goals, plans and how to achieve those goals. With a thorough business plan, you can think critically about your idea and discover if your model is valuable, actionable and achievable. Keep in mind that your business plan is never finished, it's a living document.

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Join us on June 17 for a half-day of online events exploring fashion's responsibility to people and the planet as the world grapples with a climate emergency, racial injustices and a once-in-a-lifetime economic and public health crisis. Space is limited. Register now to reserve your spot.
NEW YORK, United States - Over the past few years, fashion companies have shifted from championing apolitical causes like ending hunger to engaging with more divisive issues, from climate change to racism.

Now, between an unprecedented pandemic and the biggest wave of mass demonstrations in the US in decades, they're discovering just what sort of bargain they've struck with their customers.

Early last week, corporate social media accounts were filled with supportive messages for the protestors, much like they were during the Australian wildfires and at the start of the pandemic. Only this time, the intended targets of that support pushed back.

L'Oreal Paris' "speaking out is worth it" post, which included an unspecified "commitment" to the NAACP, prompted model Munroe Bergdorf to recount how the brand had cancelled her contract in 2017 after she spoke out against racism following a neo-Nazi rally.

On May 31, the clothing brand Reformation posted that it would donate an unspecified amount to various organisations, and used the Black Lives Matter hashtag. Comments on the post accused the brand of performative activism. Former employee Elle Santiago, who is black, detailed her experiences with racism within the company and called on Chief Executive Yael Aflalo to step down.

Aflalo apologised in an Instagram post captioned "I've failed," and announced a diversity and inclusion board, a personal donation of $500,000 and an independent investigation into the company's workplace culture.

What changed? Some consumers, trained to expect brands to share their values on everything from sustainability to workers' rights to racial justice, have started probing whether that solidarity applies to how the companies operate. Often, they find the views expressed on Instagram don't match the reality inside stores, factories and offices.

"People are looking at companies almost as they would look at individuals to be contributors to a better world," said Enshalla Anderson, chief strategy officer of FutureBrand North America.

Big companies are powerful, they shape politics in the US.

But corporate activism was always going to be an awkward fit for companies that are mainly in the business of selling clothes, shoes and cosmetics, and rarely do they offer a solution beyond their product offering. Activists are pushing a new standard for how brands approach social issues, advocating that a company's public-facing messaging has to reflect its internal culture.

Examples include designer Aurora James' 15 percent pledge, where retailers dedicated shelf space to black-owned businesses. Pull Up for Change asks followers not to buy products from companies unless they disclose how many black employees they employ. Sunday Riley, Ulta, Glossier and others have shared their numbers, and stated they are working to do better.

Nike won plaudits last week for pledging $40 million to help the black community. Its Jordan brand, along with Michael Jordan, donated an additional $100 million. Glossier donated $1 million to various organisations promoting racial justice and black-owned beauty brands.

In the past, companies saw such demands - or speaking out on controversial topics at all - as antithetical to running a business. Increasingly, the opposite is true.

"It's not that they just sell shoes," said Tulin , marketing professor at New York University's Stern School of Business. "Big companies are powerful, they shape politics in the US...they [the younger generation] want them to do something."

Consumers looking for moral leadership or a larger set of responsibilities from fashion brands is relatively new. Erdem points to the rise of commercial influence in personal life and younger generations' growing sense that the current economic system doesn't hold their interests. As younger generations lose faith in the power of larger social and political institutions, companies are filling the void.

It's a progressive echo of the corporate activism of the 1970s, when energy and telecommunications firms stepped up their use of marketing campaigns to advocate their interests, said Peggy Simcic Brønn, a professor emeritus of communication and culture at the Norwegian Business School in Oslo who studies social responsibility marketing.

"[Companies] were trying to get the public to believe that they could regulate themselves; that the government didn't need to do this, and they could create their own good in working environments," she said.

That sort of marketing hasn't gone away, though in recent decades, brands have begun embracing causes that at first glance have little to do with their own balance sheets. The ice cream maker Ben & Jerry's, for instance, went on a nationwide campaign in 2004 against the George W. Bush administration.

Direct-to-consumer start-ups have taken activism a step further. , Reformation and Everlane found success by portraying themselves as aligned with the values of their consumers and employees, from creating spaces for women to sustainable manufacturing.

Some see this as just another marketing tactic.

"I think very few brands are actually listening to consumers right now. They're just doing what they have to do," said Brian Salzman, founder and chief executive of marketing agency RQ. "But are they making a commitment? The word authentic is so overused and pathetic but it's so important."

Others see an evolution toward "stakeholder capitalism," where companies factor customers, suppliers, employees and local communities into their business models, rather than focusing solely on maximising profits for shareholders.

The pandemic and the protests have raised questions about whether that dual mission is even possible.

Brands that have embraced a wider set of values find it has made them vulnerable to criticism if consumers find they come up short. Everlane's mission of radical transparency was undermined after it was accused of retaliating against employees attempting to unionise; The Wing's brand of feminism took a hit when employees accused the women's club of harmful work practises, particularly towards employees of colour.

The bonds between consumers, employees and companies has never been more tenuous, especially for companies that target younger customers, who are likely to see their spending power reduced over the next few years as a global recession takes hold.

It's always been a dangerous kind of branding.

"It doesn't take a whole lot of research for us to look up these brands and see what they're really about," said Kimberly Jenkins, assistant professor of Fashion Studies at Ryerson University. "You can tell a lot by looking up leaders on their Instagram accounts and social media and see their lifestyles. What kind of political messages do they tend to circulate? Are they doing this work 365 days a year?"

Companies should be open and honest about missteps and shortcomings before entering larger discussions surrounding social and political issues.

"Just be honest and say 'Look, we're figuring this out with you or we've committed to this but we don't know what that looks like now,'" said Salzman.

Some, Erdem argues, may be better off avoiding statements or social media posts entirely until making larger internal efforts that consumers can see for themselves.

In a recession, many brands are hoping that the pledges and commitments they've made will secure consumer confidence, and spending in the future. If they don't get it right, consumers will redirect their dollars elsewhere.

"It's always been a dangerous kind of branding. It's just taken on a whole new life in the last couple of years," said Brønn. "If you're not perceived as being authentic it will come back and bite you in the ass."
Related Articles: Will Fashion Ever Be Good for the World? Its Future May Depend on It. When It Comes to Social and Environmental Transparency, Fashion Continues to Fall Short

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Join us on June 17 for a half-day of online events exploring fashion's responsibility to people and the planet as the world grapples with a climate emergency, racial injustices and a once-in-a-lifetime economic and public health crisis. Space is limited. Register now to reserve your spot.

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When starting a clothing brand, writing a business plan can be a hugely useful exercise, pushing you to think thoroughly about every aspect of your start-up.

Even if you're just running your brand on a part-time basis, it's worth having a detailed blueprint down on paper so you have clear goals to work to and measure your success against - but remember that you don't have to stick to it rigidly, and it can be altered as your brand progresses.

It'll need to include:

A description of your business' concept

An analysis of the market and your competition

A SWOT analysis

The marketing strategies you'll use

Any plans you have for hiring employees

Detailed financial forecasts

For detailed instructions on writing a business plan, visit our business plan advice guide, where you can download a free business plan template developed by the government-backed Start Up Loans Company.

In order to create as thorough and accurate a business plan as possible, you will first need to...

Find your target market

First thing's first - any successful brand will have a clear idea of its target market (that is, the customers it's trying to sell to) and will ensure everything it does, including branding, remains tailored to their tastes and interests.

Matt Bird, founder of men's clothing brand We Are Gntlmen, highlights the importance of this:

"You need to be relatable to your customer or demographic, and the easier you can make that, the better. Your branding tells your story and it's the story that resonates with the future customer."

- Matt Bird, We Are Gntlmen

Come up with a clear definition of your target customer by considering the following:

Are your clothes gender-specific?

Will they appeal to a particular age range?

What do you believe your customers' income level will be?

What interests and personality traits do you expect lovers of your clothing to have?

What type of person buys clothes from similar brands to yours?

Find a detailed guide to calculating the size of your target market here.

Conduct market research

Legendary fashion designer Coco Chanel once said: "In order to be irreplaceable one must always be different."

In fashion, imitation isn't a form of flattery, it's a sign of unoriginality. When it comes to avoiding it - and gaining a bit of inspiration and industry understanding along the way - market research is invaluable.

Market research should help you to understand:

Who your competitors are

How in demand your clothing will be

How much customers will be prepared to pay for your clothes, and whether you can make a good profit from it

To get started, compile a list of clothing designers and brands that are similar to yours. Research into the size of each business, their geographic reach, their products and prices, and discern what their USPs are.

Google will help you to find out who the fashion businesses in your local area are, but the ONS, the Federation of Small Businesses and the British Chambers of Commerce also hold publicly accessible information.

Next - and here's where your creativity comes in - consider the ways in which your brand can be better than each of these competitors. What can you bring to the table that's truly new? What can you offer that they haven't?

Testing your ideas

Before committing to a concept, it's a good idea to test the water with people from your target market. To do this, you can try:

Running an online survey - Inexpensive to set up, you can use online surveys to ask potential customers what they would expect from your events planning service, the money they would expect to spend on your clothes, how often they'd buy your clothes, what would make them want to buy them, and anything else you want to know.

Holding focus groups - Talking to target customers face to face gives you a great opportunity to gain in-depth insight into what they think about your business concept, branding and more. It also enables these customers to share their ideas about what would make your brand amazing with you.

Come up with a pricing strategy

In broad terms, the way you price your clothing line will depend on the type of brand you want to be, and how much it costs to produce your clothes.

As Bird says: "You have to make sure that the quality of your product matches with your price point." If you'd like to be a premium brand, use high-quality materials and top notch production techniques that cost you more - meaning you can give your products higher prices to make a good margin on them.

On the flipside, if you'd rather be more affordable to the consumer, you can make your products with cheaper materials and methods, giving them lower prices and still making a good profit.

Sean Hammon, founder of muscle-fit clothing range Oxcloth, cautions you to always think of your audience: "Your demographic will have its price that is it willing to pay for what you're selling - it can be easy to price yourself out so don't get greedy."

As a basic rule of thumb, you can start to work out the pricing for a particular item of clothing using the following calculation:

The amount it has cost you to produce the item x 2 = wholesale price

Wholesale price x 2 = retail price

Remember, your wholesale price is what you'll charge retailers to buy an item and sell it on in their store, while your retail price is what consumers will pay to buy the item online or in a shop.

You don't have to stick to this rigidly - simply use it as a foundation from which to calculate the best prices for you. After all, you'll need to make sure they cover your business overheads, production costs and any returns you may receive while leaving room for profit.

According to Hammon, "there are so many small costs you need to keep an eye on to make sure you're actually generating profit.

"Your cost per sale includes the cost of goods, postage, average cost of returns, packaging cost, and your conversion rates - how much is it costing you to advertise to a customer who is converting to a sale."

- Sean Hammon, Oxcloth

You'll also need to take your competitors' prices into account, and perhaps put yourself in a similar price bracket. Bird explains:

"Being cheaper doesn't always work. When I started We Are Gntlmen, we priced ourselves 20-25% cheaper than our competition to try and gain an advantage. Customers don't necessarily see it like that. If the price is cheaper, the first impressions of your brand are that it's not quite as good as the business you're trying to compete with."
To learn all the ins and outs of starting your own clothing line, read our comprehensive step-by-step guide here.

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How to write a clothing line business plan | Startups.co.uk

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When starting a clothing brand, writing a business plan can be a hugely useful exercise, pushing you to think thoroughly about every aspect of your start-up.

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TIPS ON WRITING A FASHION BUSINESS PLAN

Project Description

Fashion businesses have a high failure rate, partly due to the fact that many start up without a strategy, and often the business side doesn't come naturally to creative people.

'Failing to plan is planning to fail'

Many people think you only need a business plan if you are approaching banks for a loan or are looking for investment. Whilst this is true, a good plan is also your personal roadmap, as it will be central to your business development; outlining your goals, visions and objectives. As time goes on, you will use it to measure your actual progress against your projections.

Writing a business plan could easily take you out of your comfort zone, but it doesn't have to be tackled all at once - most plans take a few weeks, or even months, to build. As you go through the process you will undoubtedly come across some problems you hadn't thought of - but by planning in advance you have the opportunity to think of solutions.

Much of the information going into the plan will be in your head so really it's just a matter of articulating your thoughts and getting them down on paper.

Tips on Writing a Business Plan

Start by dividing your plan into the sections below and try to answer the points within each section. (There isn't a hard and fast rule as to how long a business plan should be, but aim for one to two pages for each section.)
Executive summary
* Summarise each section of your plan in a couple of sentences. This is easiest to do at the end, once you've completed the main body.

Background
* An overview of the market segment you are moving into

* The legal status of your business

The Concept
* Describe your business - what are you going to design or make?

* Mission statement - in one or two sentences, state your personal vision for the business.

* Who is your target market?

* Have you identified a niche?

* What is your Unique Selling Point (USP), i.e. what differentiates your product from what's already available?

Sales and Marketing
* What is the size of the market that you are selling in to? Is it a growing market?

* Who are your competitors? What is your competitive advantage?

* How will you get wholesale buyers or retail customers to find out about you?

* How will you build brand awareness and attract press coverage?

Operations
* What's your background and your role in the business?

* Is there anyone else involved in the business, and if so what are their roles?

* What additional staff or expertise may you need to operate successfully?

* Where will you run your business from?

* Are you going to need to invest in any special equipment?

Production and Sourcing
* How and where will you get your product made?

* Can it be produced at a competitive price point, suitable for your target market?

* Where will you source your raw materials from, e.g. materials, trimmings, fittings?

Finance
* What will your start-up costs be? You will need to include sales, profit and loss projections and a cash flow forecast.

The financial section is absolutely critical to your plan as it will identify your projections for how the business will grow - in terms of both profits and income - and what financing you will need to make that happen.

Remember: This is not a static document; it needs to be amended as your business develops and changes so it's worth reviewing at least every three months or so. Once you have completed your plan you'll feel a great sense of achievement and be better placed to make your business a success.
If you'd like some help with your business plan, one of our expert mentors can give you guidance with our 1-2-1 business mentoring packages. Fashion Angel Business Club members also get access to downloadable templates tailored for the fashion industry.
By Alison Lewy

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Fashion businesses have a high failure rate, partly due to the fact that many start up without a strategy, and often the business side doesn't come naturally to creative people.

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'Future Consumer 2022 by WGSN-' by futureconsumer2022

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Built with Readymag-a tool to design anything on the web.

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Selfridges London will host Vestiaire Collective's first permanent concession for customers to buy and sell luxury goods.

Secondhand luxury is growing four times faster than the primary luxury market, with expected global revenues of $36 billion by 2021.

Luxury brands and retailers, including Burberry and Farfetch, are beginning to test how partnerships with secondhand marketplaces can benefit their businesses.

Young shoppers want limited-edition or sold-out items, millennials want sustainability-minded brands, and secondhand consignors want to buy more new products: these are among the findings of a Boston Consulting Group report on the resale market - and Selfridges got the message.

Starting 30 October, customers visiting the high-end department store in London will be able to buy rare vintage pieces and sell pre-owned luxury goods through resale platform Vestiaire Collective.

That Vestiaire would open its first permanent location in a 111-year-old department store demonstrates how much the resale market has changed since the French e-tailer was founded 10 years ago. Secondhand luxury is growing four times faster than the primary luxury market, with expected global revenues of $36 billion by 2021, according to BCG. Meanwhile, online platforms, which have added technology and scale to the equation, now account for 25 per cent of these sales.

Luxury players have begun testing how they might benefit. Earlier this month, Farfetch partnered with clothing donation service Thrift+ and Burberry with resale platform The RealReal on programmes that incentivise customers to give up old pieces in exchange for credit, or to receive styling sessions, so that they can buy new products. In September, Harvey Nichols began selling services from The Restory that help customers preserve luxury accessories that they can later resell; earlier this year, Neiman Marcus took a minority stake in luxury reseller Fashionphile.

"It is a huge opportunity to innovate, both in terms of design and product but also from a business model perspective," says Selfridges sustainability consultant Alex McIntosh. "We see our role as giving our luxury brand partners a space to experiment and explore how circular business models might work for them and to see how our customers respond."

Responding to customer behaviour

In 2018, Selfridges hosted two two-week-long Vestiaire pop-ups, one for men and one for women. "We learned that resale can be part of a luxury experience, that it is something our customers want and that it has significant commercial potential for our business," McIntosh says.

Vestiaire Collective CEO Max Bittner says that sales were "good". He also observed that customers treat secondhand shopping as a "treasure hunt", and was surprised at the level of historical fashion knowledge among customers.

To cater to those customers, the Selfridges Vestiaire boutique will open with 200 accessories and ready-to-wear womenswear pieces that are exclusive to the boutique, including a Mugler rainbow jacket from Spring/Summer 1990 (£2,650), an Azzedine Alaïa "Mon Coeur est à Papa" dress (£3,685) and an Yves Saint Laurent Rive Gauche cape (£495).

The partnership is a permanent concession, suggesting that Vestiaire pays for the retail space, but neither would share financial details.

The boutique helps customers sell pieces, either through a drop-off concierge service, where pieces are evaluated and processed by Vestiaire, or by listing the item directly through the app using a white photo backdrop available on-site.

Secondhand sales benefit primary sales

Luxury brands have largely refrained from taking part in secondhand sales, partly out of concern that it would cannibalise primary sales and risk entry from counterfeit goods. But the contrary is true, says BCG managing director and partner Olivier Abtan.

"As is the case with cars and video games, the secondhand market helps or supports the development of the firsthand market," Abtan says. "There are many ways to participate, and each brand is going to find a way that fits its DNA." In the case of Selfridges, he says, the Vestiaire boutique is a way to recruit new customers, extend the lifetime value of existing clients and to encourage customers to buy more expensive pieces.

BCG found that 71 per cent of pre-owned buyers bought items they could not afford firsthand, suggesting that these customers are not stealing market share from the primary market. But they might turn in to primary market customers; 62 per cent said they bought a brand for the first time on Vestiaire and would consider buying that brand again. More than half of those said they would consider buying the item firsthand.

"Maybe they will buy luxury goods at your store, but six months later, if you don't offer the opportunity to consign it, they will go somewhere else," Abtan says, pointing out that 32 per cent of those who consign items are doing it because they want money to buy new goods, and 44 per cent say they buy more expensive items than they would if they couldn't resell it. Bittner says this increases the likelihood that customers will buy more adventuresome pieces, rather than buying "safe" items.

Bittner says partnerships between luxury brands and resale companies - which stand to help fight counterfeits and can provide data on purchasing patterns to luxury brands - will become the new normal. Abtan adds, "It's a new world we are living in. It's moving very fast. You have to test, and sometimes it doesn't work - but sometimes it's a success."
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Comments, questions or feedback? Email us at feedback@voguebusiness.com.
More on this topic: Burberry's partnership with The RealReal signifies a real shift Who are luxury resellers stealing market share from? Kardashian Kloset takes on the resale market

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Selfridges becomes latest luxury player to endorse resale

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Selfridges London will host Vestiaire Collective's first permanent concession for customers to buy and sell luxury goods. Secondhand luxury is growing four times faster than the primary luxury market, with expected global revenues of $36 billion by 2021. Luxury brands and retailers, including Burberry and Farfetch, are beginning to test how partnerships with secondhand marketplaces can benefit their businesses.

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LONDON, United Kingdom - Last year, the global fashion industry produced 114 billion pieces of clothing. Americans consume more than 20 billion garments per year, or 64 items per person every year. These are mostly cheap, disposable clothes, manufactured in enormous quantities, using a vast amount of natural resources, often by workers toiling away in unconscionable conditions at a huge social and environmental cost.

This fundamentally extractive model, decades in the making, is now being put to the ultimate test by the coronavirus crisis, which has crushed consumer demand and already put millions of workers out of work, from the factory floor to retail stores, making plain their longstanding suffering, all against the looming threat of a climate emergency rendered so vivid in catastrophic wildfires in California and Australia just a few months ago.

Fashion is now one of the world's most destructive business sectors, alongside energy and transportation. No longer able to hide behind aspirational marketing campaigns, its secret is out in the open, catching the attention of government regulators, consumers and a growing group of stakeholders who are holding the industry to account.

While the pandemic didn't create the current crisis in fashion, it most definitely accelerated it. Plenty of fashion companies and retailers will not see the other side. But for those planning for long-term survival, they must take greater responsibility in overhauling a business model that is fundamentally rooted in the exploitation of both people and our planet.
A People Business, a Finite Planet
Fashion is one of the largest employers in the world, with more than 100 million people working in factories, creative studios, boardrooms and shop floors. The majority of these workers are women and girls, many of whom are working as artisans, garment workers and textile weavers in the Global South. The Global Slavery Index estimates that 40 million people are living in modern slavery and many of these work in the supply chains of international fashion brands.

But the problem doesn't stop there. For years, fashion companies have relied on outmoded business models with a linear "take-make-dispose" approach, where value creation is maximised by producing and selling as many products as possible. And this model applies at all ends of the fashion spectrum, from luxury to fast fashion.

Continuing to produce this many garments, and then throwing them away, is beyond what finite planetary boundaries will allow. More than 70 percent of clothes still end up in a landfill. According to the Ellen MacArthur Foundation, "an estimated $500 billion value is lost every year due to clothing being barely worn and rarely recycled. If nothing changes, by 2050 the fashion industry will use up a quarter of the world's carbon budget."
How to Build a Responsible Fashion Business
They say it is during a crisis that our values are really tested. Over the past few months, scores of international fast fashion brands have cancelled orders and frozen payments to sub-contracted factories in India, Bangladesh and Vietnam, leaving millions of people destitute. Brands including Arcadia (Topshop), , JC Penney, Primark and Urban Outfitters are being tracked by the Workers Rights Consortium, which says they have not committed to pay in full for orders completed and already in production.

The ensuing economic and social crisis is breaking open stark inequalities in the fashion system, one in which huge global corporations are placing the burden of a once-in-a-lifetime crisis on those who are least able to afford it. As the Financial Times' Tim Harford argues, we must find solutions to "reduce emissions, restore natural ecosystems and sustain human flourishing and freedoms."

Part of the answer may lie in what some business leaders call " stakeholder capitalism," the idea that responsible businesses should serve the interests of a wider set of stakeholders. They invest in their employees, protect the environment and deal fairly and ethically with their suppliers.

The Business Roundtable of almost 200 CEOs of publicly-traded US companies recently redefined the purpose of a corporation. "Many Americans are struggling. Too often hard work is not rewarded, and not enough is being done for workers to adjust to the rapid pace of change in the economy. If companies fail to recognise that the success of our system is dependent on inclusive long-term growth, many will raise legitimate questions about the role of large employers in our society," they wrote in a statement released last August.

Only one American fashion or retail executive, Macy's Inc CEO Jeff Gennette, has signed on to the letter, but apparel companies like Patagonia have pioneered this approach in fashion, demonstrating that this stakeholder-focused model can work. Not only does it create economic value, it lowers costs, spurs innovation and drives employee engagement and retention.

I hope you enjoy our new BoF Professional special edition, Can Fashion Clean Up Its Act?, which in these unprecedented times, comes in place of our regular Spring print issue.

Over the coming month, follow our series of in-depth analyses, podcasts and digital events laying out the scale of the challenge ahead of us.

It will take visionary leadership, imagination and collaboration to create a more just, inclusive and sustainable fashion industry. This will require allocating investments even now, when budgets are tight. We also need effective government policy, alignment from fashion educators, concerted commitments and actions by fashion companies to address carbon impact and workers' rights across the entire value chain, and a new lexicon for engaging with customers in an honest way that excites them about a more responsible fashion industry. Nothing will be easy or straightforward, but we need it now more than ever.

Imran Amed, Founder and Editor-in-Chief

BoF Professional Special Edition: Can Fashion Clean Up Its Act? As the world grapples with an unprecedented public health and economic crisis, exposing deep-rooted social inequality as a climate emergency looms, the fashion industry must learn to respect both people and the planet. It's time for fashion to build a more responsible business model. Explore the full special edition here.
1. Can Fashion Clean Up Its Act?
2. Will Fashion Ever Be Good for the World? Its Future May Depend on It
3. How to Avoid the Greenwashing Trap
4. Luxury Brands Have a 'Respect Deficit' with Indian Artisans
5. Investing in the Sustainability Sisterhood
6. Why Luxury Came to the Rescue
7. The BoF Podcast | Jochen Zeitz on the Power of Fashion to Drive Sustainable Change
and more.
The BoF Professional Summit: How To Build a Responsible Fashion Business
On June 17 2020, we will gather leading global experts, entrepreneurs and activists in sustainability, ethical supply chains and workers' rights for a half-day programme of interactive conversations, panel discussions and workshops on building a responsible business, led by BoF's expert editors and correspondents. Space is limited. Register now to reserve your spot.

If you are not a member, you can take advantage of our 30-day trial to experience all of the benefits of a BoF Professional membership.

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Special Edition: Can Fashion Clean Up Its Act?

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As the world grapples with an unprecedented public health and economic crisis, exposing deep-rooted social inequality as a climate emergency looms, the fashion industry must learn to respect both people and the planet. It's time for fashion to build a more responsible business model.

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Rush asked the industry to reflect on why it has taken the murder of George Floyd and sweeping global Black Lives Matter Protests to galvanise fashion into action.

"These events make us focus on what matters and how we can emerge with a better industry that is more sustainable, equal and just," she said.

Rush was speaking ahead of the first gender-neutral London Fashion Week, which starts today (12 June).

More than 100 menswear and womenswear designers will show on the BFC's digital platform.

Amid Covid-19 coronavirus restrictions, catwalk shows have been replaced by digital events, including films, webinars, interviews, digital showrooms, and podcasts.

Key events will include an interactive virtual gallery space from Ahluwalia, which will unveil its new book, Jalebi; a live-streamed party from Charles Jeffrey Loverboy; and a documentary presenting a capsule collection from Marques Almeida.

Chalayan will present behind-the-scenes footage of the making of his spring/summer 20 collection. Menswear designer Daniel W Fletcher is launching a "see now, buy now" collection, which he will discuss in an interview with journalist Naomi Pike.

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Caroline Rush: 'Fashion must double efforts to tackle racism'

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Rush asked the industry to reflect on why it has taken the murder of George Floyd and sweeping global Black Lives Matter Protests to galvanise fashion into action. "These events make us focus on what matters and how we can emerge with a better industry that is more sustainable, equal and just," she said.

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Protests over systemic racism and police brutality are ongoing in many US cities

Brands are facing escalating pressure to support protestors in a more substantive way, and to change internal practices to be more inclusive

The demonstrations and looting have complicated retailers' reopening plans; New York City will allow stores to reopen starting June 8 but some major chains have opted not to do so

In the fashion industry, the anger over systemic racism that sparked protests in dozens of US cities has quickly coalesced into specific demands for change at major brands and media. The backlash to the initial wave of Instagram posts has forced companies to make more concrete showings of support for Black Lives Matter, and to examine how they operate. On Friday, Nike said it would donate $40 million to helping the black community, likely kicking off a series of more robust actions from the corporate world this week. Several nascent movements are slowly gaining industry support as well, including #PullUpOrShutUp, which asks companies to disclose their percentage of employees who are black, and designer Aurora James' 15 percent pledge, where retailers would commit to stocking more products from black-owned businesses.

The Bottom Line: Much like with the #MeToo movement, fashion brands were slow to realise that consumers and their own employees wanted real change, not supportive slogans. The industry took concrete, if incomplete steps to protect women in 2018. How far is fashion ready to go to address its shortfalls when it comes to race?

LVMH reportedly considered, then decided against renegotiating the price of its $16.2 billion deal to acquire Tiffany & Co.

Tiffany sales took a hit during the lockdown, and LVMH could still revisit the acquisition if the brand's fortunes continue to deteriorate

Tiffany reports quarterly results on June 9

Is the LVMH-Tiffany Deal Still On?
Even a company as big as LVMH has to think twice before spending $16.2 billion on jewellery in the middle of a recession. The American brand is a natural fit for the luxury giant, which can use its global muscle to help lift the it out of its recent rut. But the numbers have changed dramatically since the two companies agreed to a deal in November. The prospect of a severe economic downturn has already scuttled one major deal, the acquisition of a majority stake in Victoria's Secret by Sycamore Partners. The similarities mostly end there. Despite its troubles, Tiffany is a picture of health compared to Victoria's Secret, and LVMH has deeper pockets and different priorities than Sycamore Partners.
The Future of Fashion Week

A combined men's and women's, all-digital fashion week will be held in London June 12-14

Paris and Milan are planning digital fashion shows in July; the format for September is almost certain to change as well

has said it will go seasonless; Dries Van Noten and other designers are also advocating for changes to the fashion calendar

The Bottom Line: LVMH has wanted Tiffany for a long time, and it measures the brand's potential in years and decades, not the next few months. Odds are these two are going to find a way to work it out.

We are going to learn a lot - or at least something - about the future of fashion week from what happens in London at the end of this week. Organisers have said little about what to expect. With traditional runway shows in packed halls off the table, designers are experimenting with a staggering variety of formats. Zegna promises a "phygital" show next month that combines real models and digital elements, while Shanghai Fashion Week's experiment with digital showrooms earlier this year had some fans. London Fashion Week may be geared more for buyers than the general public, coming at the start of the buying season in June and including B2B platform Joor as a sponsor. Though will anyone pay attention, given everything else going on in the world?
Editor's Note: This article was updated on 7 June 2020. A previous version stated that London Fashion Week is sponsored by Ordre. This is incorrect. It is sponsored by Joor. SUNDAY READING Professional Exclusives You May Have Missed: The Week Ahead wants to hear from you! Send tips, suggestions, complaints and compliments to brian.baskin@businessoffashion.com. Was this BoF Professional email forwarded to you? Join BoF Professional to get access to the exclusive insight and analysis that keeps you ahead of the competition. Subscribe to BoF Professional here.
The Bottom Line: London Fashion Week in particular sometimes struggled to generate buzz even before it was forced to go virtual. How will this be different?

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Protests over systemic racism and police brutality are ongoing in many US cities Brands are facing escalating pressure to support protestors in a more substantive way, and to change internal practices to be more inclusive The demonstrations and looting have complicated retailers' reopening plans; New York City will allow stores to reopen starting June 8 but some major chains have opted not to do so In the fashion industry, the anger over systemic racism that sparked protests in dozens of US cities has quickly coalesced into specific demands for change at major brands and media.

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Following the death of George Floyd, yet another senseless killing of a black man at the hands of the police, anti-racism protests have swept across the United States. Chanel, Gucci and other luxury stores in wealthy neighbourhoods from New York's Soho to Rodeo Drive in Beverly Hills have been attacked, not only as targets for opportunistic looters but as symbols of inequality. According to local media reports, alongside "Black Lives Matter" and "I Can't Breathe," another slogan has been chanted in the streets and graffitied on buildings: "Eat the Rich."

The protestors are calling for racial justice. But systemic racism has always been inextricably linked to economic oppression. In 2018, as the spoils of globalisation and technological innovation continued to accrue disproportionately to the top echelons of society, the gap between the richest and poorest American households became larger than it's ever been since the US Census Bureau began tracking income distribution more than fifty years ago, with the Gini Index, a measure of income inequality, hitting 0.485 and black households at the bottom of the rung.

Now, at a time when more than 42 million Americans have lost their jobs to the Covid-19 crisis and its mishandling, with black incomes hit hardest, the resentment reflected in the protests is unmistakably about economic inequality as well as race.

To some degree, the luxury industry benefits from inequality. After all, luxury brands like Gucci and Louis Vuitton sell products most people can't afford. But there's more to the story. Contrary to popular belief, the "old money" rich don't drive the luxury sector. The vast majority of luxury growth comes from "new money" consumers with rising incomes and newfound status to project.

"Income inequality is good for luxury goods development, as long as it is socially and politically sustainable," explained analyst Luca Solca. "This is typically the case when successful people are seen like role models one can imitate, and when societies offer social mobility to the deserving. That was the essence of the American Dream or the Chinese Dream today."

But if inequality becomes so deeply entrenched in society that wealth and status are simply passed from generation to generation with little hope of upward socio-economic mobility, the luxury sector will suffer. With fewer newly minted millionaires, there will simply be less demand for luxury products. And if class barriers continue to harden and resentment continues to rise, the symbolic meaning of luxury brands will change. No longer badges of success, luxury goods could become symbols of oppression.

No longer badges of success, luxury goods could become symbols of oppression.

Make no mistake, as inequality has risen, so have wages. In fact, the same year income inequality hit a record high in the US, so did median household income. But studies have shown that people may instinctively care more about relative status than absolute condition.

Social media has only exacerbated the issue, making the lifestyles of the few visible to the masses like never before, creating envy alongside admiration. The same is true of luxury goods specifically, which millions of people can now covet up close on Instagram but rarely attain.

Back in 2015, Richemont Chairman Johann Rupert was early to the observation that deepening inequality was bad for the luxury sector. Speaking at a Financial Times Business of Luxury Summit in Monaco, he predicted that advanced technology would unleash "abundance" for a small percentage of the population while killing millions of jobs and creating a massive underclass, accelerating economic inequality and leading to "envy, hatred and social warfare."

"I don't know what new social pact we'll have, but we'd better find one," Rupert declared. "Otherwise our clients will be targets. They'll be hated, despised."

"People with money will not wish to show it," he continued. "If your child's best friend's parents go unemployed, you don't want to buy a new car or anything showy. We are destroying the middle classes and it will affect us. And it's unfair. So, that's what keeps me awake at night."

This week, Trevor Noah, popular commentator and host of The Daily Show, described the crisis in America as a collapse of the social contract. "When you boil it down, society is a contract that we sign," he said. "There is no contract if law and people in power don't uphold their end of it."

The luxury sector must use the power of its influence and pocketbook to lobby government to address the inequality problem and repair the social contract, or they could see their carefully managed brands go up in flames. As protests engulf America, are executives listening?
THE NEWS IN BRIEF FASHION, BUSINESS AND THE ECONOMY
LVMH says it is not considering buying Tiffany shares on the open market. But sources say LVMH Chairman and Chief Executive Bernard Arnault is keen to renegotiate the deal's $16.2 billion price tag due to the state of the US retail sector reeling from coronavirus and widespread civil unrest. How exactly LVMH might achieve a price cut remains unclear, but a renegotiation could take place if Tiffany broke the financial covenants of the deal.

Brands face backlash over Black Lives Matter posts. Gucci, Louis Vuitton, Prada and Valentino have supported Black Lives Matter on social media, but some users have accused them of "virtue signalling" without a track record of positive action. Munroe Bergdorf, a black transgender model who was fired by L'Oréal in 2017 for her comments on white supremacy, accused the company of "gaslighting" after its Black Lives Matter solidarity post. Multiple media companies including Refinery29 and Paper have also come under fire.

Adidas sees rebound in China quicker than expected. The German sportswear brand now expects second-quarter sales for the Greater China region to be around the same level as last year. But with the gradual reopening of stores in the US and Europe, Adidas has stuck with the guidance it gave in April of at least a 40 percent decline in second-quarter sales and a drop in operating profit of more than €100 million ($112.05 million).

Canada Goose expects little revenue in the current quarter. Sales fell nearly 10 percent to C$140.9 million ($104.15 million) in the fourth quarter ended March 29, but beat analysts' estimates of C$128.1 million. As a result, Canada Goose is putting cost-saving measures in place, cutting expenses and investments in the first quarter by about C$90 million. The company also said it had enough cash flow to handle coronavirus-related expenses that could arise in fiscal 2021.
THE BUSINESS OF BEAUTY
Puig acquires a majority stake in Charlotte Tilbury. Founder Tilbury will continue on as chairman, president and chief creative officer of the brand and retain "a significant minority stake." The deal brings Charlotte Tilbury under the same roof as Jean Paul Gaultier, Carolina Herrera and Dries Van Noten, among others. While the financial details of the acquisition were not disclosed, Charlotte Tilbury was valued at over $1 billion in April according to media reports. The deal will also significantly advance Puig's position in the beauty market.

Coty to collaborate with Kim Kardashian for cosmetics line. The cosmetics company announced it's in talks with the reality TV star to produce a beauty line after buying a majority stake in Kylie Cosmetics last year. But Coty has said there is no guarantee that an agreement or partnership would take place. Shares of the company jumped around 7 percent after the possibility of another collaboration with a Kardashian was announced, adding to the 20 percent gains in Coty's stock seen earlier this week.
PEOPLE
Designer Aurora James calls on retailers to source from black-owned businesses. The Brother Vellies owner asked the fashion industry to do more to combat systemic racism. She has laid out a manifesto asking stores including Sephora, Net-a-Porter, Target and Saks Fifth Avenue to commit to buying 15 percent of their products from black-owned businesses.

Frédéric Arnault named CEO of Tag Heuer. The 25-year-old son of LVMH Chairman and Chief Executive Bernard Arnault has been named chief executive of Tag Heuer, effective July 1. Frédéric Arnault initially joined the company in 2017 as the strategy and digital director. Former Tag Heuer Chief Executive Stéphane Bianchi has been appointed chief executive of LVMH's watches and jewellery division, supervising Chaumet, Fred, Tag Heuer, Zenith and Hublot.

Daniel Grieder exits as CEO of Tommy Hilfiger. He has stepped down as chief executive of Tommy Hilfiger Global and PVH Europe after 23 years with the group. Grieder will be succeeded by Martijn Hagman, with whom he has been working closely over the past 12 years. Hagman will report to the president of PVH, Stefan Larsson.

Peter Harf named new Coty CEO. In an unexpected move, Peter Harf, the current chairman of Coty, has been named its fourth chief executive in less than four years, replacing Pierre Laubies. Harf will oversee a newly formed executive committee alongside Chief Financial Officer Pierre-André Terisse and Chief Transformation Officer Gordon von Bretten.
MEDIA AND TECHNOLOGY
Fashion magazines hit as ad spend dwindles. Global fashion houses are slashing their marketing budgets by 30 to 80 percent to weather the economic fallout of the pandemic. This could catalyse a shift to digital marketing by one of the last sectors that still invests large sums of money in print advertising. The losses will hit smaller, independent publications the most. The sector has already had to resort to job cuts and sales amid cash crunches.

Stitch Fix to lay off 1,400 employees. The online retailer known for its personal shopping services will cut stylists in California and rehire them in lower-cost states, according to a report in the Wall Street Journal. The layoffs will mostly happen in September, but affected employees will have the option to relocate and continue in their jobs. Stitch Fix will also hire about 2,000 new stylists in Dallas, Pittsburgh, Cleveland, Minneapolis, Austin and Texas.
Compiled by Daphne Milner. BoF Professional is your competitive advantage in a fast-changing fashion industry. Missed some BoF Professional exclusive features? Click to browse the archive.

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Following the death of George Floyd, yet another senseless killing of a black man at the hands of the police, anti-racism protests have swept across the United States. Chanel, Gucci and other luxury stores in wealthy neighbourhoods from New York's Soho to Rodeo Drive in Beverly Hills have been attacked, not only as targets for opportunistic looters but as symbols of inequality.

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Lipsy is the 123rd most popular fashion & clothing brand and the 126th most famous. Lipsy is described by fans as: Trendy, Stylish, Glamorous, Youthful and Expensive. Explore fans of Lipsy and the popularity of other Fashion & Clothing brands with YouGov Ratings.

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NEW YORK, United States - Early on in the pandemic, Rachel Gannon noticed customers on her off-price website, Cara Cara, were shopping differently.

Rather than pay for their purchases upfront, they were opting to pay in monthly instalments stretching out as far as three years. Gannon had begun to offer a "buy now, pay later" option in November, using , a Swedish payment services firm. But usage doubled during the pandemic. Those customers also tended to spend more.

"People spend more money when they don't have to pay it all upfront," she said.

The pandemic has been a boon for instalment-payment companies. Customers who select this option during checkout are effectively taking out a small loan to finance their purchase, which they pay back over periods ranging from a few weeks to several years.

Even before Covid-19, a growing number of retailers were introducing "buy now, pay later" plans, from fast fashion to luxury. But demand has exploded during the lockdowns when consumers turned to online shopping in record numbers. Brands see instalment plans as a way to keep consumers spending in a bad economy. They hope instalment plans will bring in new customers and increase average order values.

Asos, Drunk Elephant, La Mer and American Eagle are among the brands that signed up with during the pandemic. Sephora, The North Face and Adidas joined Klarna. Signet Jewelers and Oscar de la Renta are among the new clients of , a smaller, San Francisco-based start-up that is eyeing an initial public offering, according to the Wall Street Journal. Sydney-based Afterpay, the biggest of these firms, saw revenue more than double to $3.8 billion in the quarter ending June 30, compared with a year earlier.

Being able to spread purchases out over several weeks without interest might be extra comforting.

"During the quarantine period in 2020 more people may be watching their weekly budgets," said Lucia Perdomo-Ruehlemann, chief marketing officer at skincare brand Drunk Elephant, which added Afterpay after receiving numerous requests from customers. "Being able to spread purchases out over several weeks without interest might be extra comforting."

Most of these lenders were founded after the 2009 recession, and have yet to be tested by a weak economy, which will likely trigger a higher rate of missed payments and add to criticism that instalment plans encourage consumers to spend beyond their means.

And though it's the lenders, not the retailers, that take on the financial risk, consumers may blame brands anyway when interest and late fees start piling up. Customers typically pay no interest on short-term loans, though annual percentage rates can top 20 percent depending on the borrower.

"There is a real fear and concern when you are giving up some control of the customer experience to a system that you don't fully manage," said Jake Makler, head of partnerships at Quantum Metric, which provides data and analytics to fashion brands like Lululemon and Neiman Marcus.
A Meteoric Rise
Instalment plans are only the latest way retailers have extended credit to their customers. Layaway, where customers would put purchases aside until they paid for them in full, became popular in America retail during the Great Depression but faded with the emergence of credit cards. Retailers issued store credit cards starting in the 1980s, but their popularity waned after the 2009 recession when more customers began missing payments.

For fashion, these companies solve an age-old problem: their best customers, young people, also tend to have the least spending power. Young shoppers saw their earning power crimped by the last recession, and are more likely to be saddled with debt from student loans. Many see instalment plans as less intimidating than credit cards. Some 23 percent of Millennials don't have credit cards, according to TD Bank.

"These shopping loans are very appealing to Millennials and Gen Z, especially right now," said Kimberly Palmer, a personal finance expert at consumer finance site NerdWallet. "A lot of young people don't have credit cards, either because they have bad credit ... or because they are making a choice to avoid debt."

A lot of young people don't have credit cards, either because they have bad credit or because they are making a choice to avoid debt.

These lenders target younger shoppers with marketing heavy on Millennial pink and partnerships with brands like Revolve and Kylie Cosmetics. Next week, Klarna will team up with the women's magazine Cosmopolitan to host a virtual "Hauliday" shopping event.

In just a few years, buy now, pay later has gone from a niche offering to e-commerce table stakes. Personal loans in the US have doubled since 2014, topping $161 billion last year, according to consumer credit reporting agency TransUnion. David Sykes, head of Klarna in the US, said he expects buy now, pay later to "achieve Paypal-like levels of ubiquity within the near term."

"Klarna's long term ambition is to sit at the intersection of retail, banking, and payments," he said.
Why Retailers Sign On
Instalment plans aren't cheap for retailers, which typically pay 4 to 6 percent of each transaction, compared with 1 to 3 percent for Visa or Mastercard.

Some retailers say the service attracts new customers and convinces them to spend more.

"Today, you have to give lots of flexibility to shoppers, and this is one of the expectations," said Carl Cunow, co-founder of luxury swimwear brand Onia. Cunow has personally financed purchases with Affirm and offers Klarna for Onia. "Everyone is also kind of watching what everyone else is doing, so you need to keep up."

Today, you have to give lots of flexibility to shoppers, and this is one of the expectations.

Installment-plan providers also promote the brands they work with through their own payment apps as well as advertising campaigns. That's proven a big draw, particularly for smaller brands. These firms also pitch themselves as helping with customer retention; Affirm says 67 percent of its shopping loans are made to repeat customers.

"We think of them as a marketing partner ... they are reaching out to audiences for us that we probably don't reach, or can't afford to reach," said Dan Clifford, chief marketing officer of Mansur Gavriel, which has used Afterpay and now uses Klarna.
Nothing Is Free
Direct-to-consumer jewellery brand Mejuri started using Klarna in November, but the company hasn't seen a meaningful uptick in return customers, said President and Chief Operating Officer Majed Masad.

As the buy now, pay later industry has grown, it has also drawn criticism for pushing younger shoppers into debt. In the UK, Stella Creasy, a member of parliament, has called on regulators to investigate whether these services deceptively market themselves as risk-free to young and uneducated shoppers.

"Most customers don't realise that borrowing money is never free," said Palmer of NerdWallet. "And of course, brands don't want to be associated with people taking on debt and getting into financial hardships."

Brands don't want to be associated with people taking on debt and getting into financial hardships.

Greg Fisher, Affirm's chief marketing officer, said the company is invested in "helping people build their financial wellness," which is why he said the company doesn't charge late fees. Molnar of Afterpay said the company targets a more financially fluent consumer - the average Afterpay user is in their mid-30s - and added that its user's loss rate was about 1 percent, "which is significantly lower than using credit products."

Klarna's Sykes said the company takes "being a responsible lender extraordinarily seriously," and that the $150 average order value through the service is a "manageable amount." Last year, Klarna debuted a campaign, "Mindful Money," to promote responsible spending. Afterpay and Klarna shut off users' accounts if they are late on payments so that customers cannot make additional purchases.

The industry isn't immune to the effects of the pandemic, though.

It's entirely possible that many consumers will end up defaulting on the shopping loans they are taking out now.

"Given the current economic instability and financial fragility of many Americans, it's likely that an increasing number of Americans will struggle to pay their bills," NerdWallet's Palmer said. "It's entirely possible that many consumers will end up defaulting on the shopping loans they are taking out now, which does mean these companies are taking on more of a risk."

Small brands in particular also need to weigh the benefits of offering instalment plans against the expense.

"You have to be mindful of the costs because they do add up when you are running a small business," said Cara Cara's Gannon. "Your margins can be diminished in a minute."

But for some brands, the benefits outweigh the costs, as these services fill a need. Clifford of Mansur Gavriel said the fees can be equivalent, or even sometimes less than acquiring customers via social media. Young consumers also want to keep shopping but might not have access to credit.

"This is a generation who has shifted the way we pay," said Nick Molnar, co-founder and the US chief executive of Afterpay. "They want to be empowered to spend their money."
Related Articles: How Shopify Conquered Fashion Off-Price Retailers Are Now Selling Online. Will Shoppers Follow? How Amazon Could Upend the Luxury Fashion Sector

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How 'Buy Now Pay Later' Became Fashion's Go-To During the Pandemic

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Consumers have flocked to services that allow them to pay for their online orders over a period of weeks, months or even years. Brands hope these plans will encourage customers to spend more - but a looming recession could test the business model.