Entireworld went from success story to shutdown in less than five years. Why has fashion been so volatile, and what can brands do to improve their odds?
Entireworld announced last week that it was ending operations. This sent shockwaves through my corner of the internet, which is filled with fashion journalists and DTC retail fans.
If you were following this brand or the career of its founder Scott Sternberg, the closure may feel like a sudden reversal of fortune. And it may leave you wondering “if this brand can’t make it, who can?”
There have been many reversals of fortune in the fashion space over the past five years. Centuries-old brands have gone bankrupt, as have contemporary powerhouses and iconic luxury retailers. A brand’s size and public narrative are no longer an indicator of near-term stability or long-term success.
If you want the TL;DR answer to the question “Why do so many fashion brands suddenly fail, even the “successful” ones?”, here it is: this industry is uniquely bad at recognizing and acting on macro factors.
Fashion became a cultural phenomenon by riding a wave that has long since crested and crashed on the shores of irrelevance. But many in the space, especially those who were around in the boom times, are still playing the game as if it were 2006.
What Is A Cultural Wave?
If you want to understand the evolution of the fashion industry over the past two decades, you need to understand cultural waves. Cultural waves are a series of related cultural moments that snowball into a larger cultural fascination about a topic.
A recent example is the popularity of Korean pop culture in America. This may have started with the rise in popularity of K-Beauty. And the growth of American fandoms for K-Pop groups like BTS certainly helped push Korean pop culture into the mainstream.
Most recently, Squid Game became the most popular show in Netflix history, despite requiring subtitles or a dub for English-speaking audiences. That kind of success for a foreign language program would have been unheard of 20 years ago.
What does this mean? Generally, consumers who enjoy one part of the wave are going to be more likely to sample others. If you liked Squid Game, why not give Parasite a second look? If you’re a brand that fits into this narrative, it now becomes easier to get press coverage. “Loved Squid Game? Here are 5 more Korean series to binge.”
Increased baseline consumer interest plus increased press interest equals lower customer acquisition costs. Existing brands might find a sudden surge in attention and sales that seems to come from nowhere…if they’re not paying attention to macro factors.
Fashion’s Cultural Wave
Project Runway premiered on December 1, 2004. It took the reality show contest format and applied it to a new domain: fashion design. The success of the show was the touchstone that transformed fashion from a niche industry into a part of mainstream pop culture.
If you think I’m making this up, the show had an almost immediate, measurable impact on applications to fashion design programs.
Some of the other factors that amplified the fashion wave: the rise of fashion bloggers, The Devil Wears Prada (2006), Zoolander (2001), Gossip Girl (2007), What Not To Wear (2003) and the launch of Euro fast fashion brands like Zara and H+M in America.
Mass retailers were getting in on the wave too. Target and H+M both launched affordable collaborations with luxury designers (Rodarte and Karl Lagerfeld, respectively). If you study Macys’ 10-K statements from 2008-2015, you can see that women’s apparel becomes a larger percent of sales each year, and the retailer becomes larger and more profitable.
More people–across a range of demographic profiles and income levels–cared about fashion than any other time in history. This increased interest created an increased demand for clothing. And not just any clothing–for the first time, mainstream consumers were more willing to experiment with runway-inspired looks. For a brief moment, the “blue sweater” scene in The Devil Wears Prada rang true.
The Old Model For Success
This demand for merchandise enabled more fashion brands to launch successfully. At the top of the pricing pyramid were new brand launches by young designers: Proenza Schouler, Alexander Wang, Philip Lim, Thakoon, Rodarte, Zac Posen, Jason Wu and others.
The demand for fashion was also fed by a surge in new or reinvented contemporary brands including Theory, Vince, Tibi, Tory Burch, Alice and Olivia and others. The contemporary price point was basically invented during this era.
All of these brands followed a similar playbook to scale and achieve profitability:
- Publicize the brand’s aesthetic and legitimacy with a NYFW runway show.
- Get department or specialty store pickup in the first season due to strong pre-existing relationships, either with buyers or the fashion press.
- Launch an “it” handbag or shoe on the designer side, or identify a popular replenishment category on the contemporary side (like denim).
- Scale wholesale presence into more stores, more doors, and more square footage.
- Rinse and repeat each year on an upward trajectory until the brand received outside investment or goes public.
Many of the brands listed above ran this playbook successfully for many years and became large and relatively well-known in the process. Perhaps the biggest success story to emerge from this period was Michael Kors, who scaled his designer brand into a multi-category lifestyle house and went on to IPO in 2012.
But his timing was really good; he IPO’ed and cashed out during the peak of the fashion wave. For the other brands listed, there were more failures than successes. Because the fashion wave didn’t just fade away, it crashed in a spectacular fashion.
Headwinds That Wrecked The Old Fashion Model
If fashion was the consumer fascination of the mid 2000’s, then “wellness” took up the mantle of trend du jour starting in the mid 2010’s. This is normal; nothing lasts forever. Many of the brands that rose to prominence during the fashion wave should have been big enough to continue trucking along with moderate growth.
But that isn’t what happened. Thakoon and Zac Posen shut down. Vince nearly went bankrupt. Many of the other names on the list are selling less than they did a decade ago. That is because a number of additional macro factors chipped away at the foundations of the old model of success:
Death of Department Stores
Department stores were the linchpins of the old model for both designer and contemporary brands. And until the 2008 recession, department stores were a seemingly fail proof business model and foot traffic only ever went up.
But what went up is now consistently down. There are very few (if any) department stores that one could describe as “healthy, growing businesses”. Department stores used to represent an almost infinite upside for brand scale, and now there is most definitely a low upper limit.
Lower Barriers To Entry
You’ll notice that the old model depended on proprietary relationships between brand founders, wholesale buyers, and manufacturers. Back in the early 2000’s you couldn’t Google the email of Nordstrom’s head womenswear buyer. Your favorite fashion writers weren’t on Twitter soliciting open pitches and tips on Signal. And it was hard to find a manufacturer willing to take a chance on a new brand without a prior relationship.
That has all changed. You can Google “clothing manufacturers nyc” and find multiple companies willing to work with small brands. Department stores, in their weakened position, are hungry for new blood. And as for the press…
Changing Media Landscape
For most of the 20th century and part of the 21st, fashion media was heavily controlled by a small group of gatekeepers. But the growth in internet adoption, and especially in social media use, changed all of that. As internet adoption increased, advertisers followed eyeballs online. Many of fashion’s legacy gatekeepers shuttered or went digital only.
The internet also provided a venue for individuals to accrue more eyeballs and enthusiasm than institutions. Consumers flocked to relatable “influencers” and started to reject haughty gatekeepers. Brands who understood the system could become their own influencers.
The result of all of this change? Many of the “best practices” that applied to the old model became liabilities overnight.
Department stores had been the fashion industry’s primary sales channel for decades. Brands designed their business models to align with what “worked” in the channel. Even as the viability of the channel declined, fashion brands were hesitant to do anything that would alienate their wholesale relationships. And that made it harder to identify and succeed in new, more sustainable sales channels.
What Happened To Entireworld?
That brings us to Entireworld, a brand that purposely avoided a lot of these legacy issues. The founder, Scott Sternberg, built his first brand (Band of Outsiders) by following the old model. This time around, he threw it away completely and borrowed tactics from the DTC playbook.
In a 2018 interview he described Entireworld’s positioning as personable, humble, and inclusive–the polar opposite of gatekeeper-driven fashion. The brand launched online with no wholesale partners. The merchandise was designed to be timeless, but with the extra attention to detail that makes fashion product so compelling. That strategy seemed to work.
Entireworld’s goodbye post described the business as a “massive undertaking” that “would require significant capital to be able to compete with the countless brands out there”. The post goes on to say that the brand had seen a fundraising deal fall through, resulting in a lack of sufficient funds to continue operations.
The founder was either unwilling or unable to scale down costs and run Entireworld as a bootstrapped brand. Could Entireworld have survived with a more focused assortment and lower overhead? Maybe. But it’s hard to make that pivot, especially when inventory has already been purchased based on the best case scenario.
Even if fashion brands modernize their approach to marketing and distribution they can still wind up in a financial pickle.
So, How Can Fashion Brands Increase Their Odds For Success?
How do you succeed as a fashion brand in today’s environment? Here are a few lessons from the past decade of disruption:
Start with the end in mind. You need to define your brand’s long term financial goal before you sell your first unit. Is that goal to IPO? Sell to a PE firm or luxury group? Own the brand independently until you retire?
Your goal guides your operational model, the types of funding you will need to pursue, and the narrative you’ll shape to successfully close that funding. Without having the end in mind, it’s impossible to make good strategic decisions for your brand.
Test into product/market/channel fit before you go all-in. The wholesale system was a product/market/channel fit ecosystem. The channel was department stores. The market was their foot traffic. And the product was whatever the buyers chose to order from each collection. The buyers ensured the product aligned with the desires of the customers who shopped their channel.
There are more product/market/channel loops than ever before, thanks to the internet. But you have to pick one and validate that your product works within it before investing a lot of capital in marketing and inventory.
Quickly identify and nurture your cash cow(s). These are products you can sell season after season, iterate on, and (hopefully) build into some sort of cultural moment. Examples: Telfar’s “Bushwick Birkin”, Entireworld’s sweatsuits, the Nap Dress.
Managing your initial success well provides resources to scale production, invest in marketing and develop new successful products. Don’t kill your cash cow after six months because you’re bored of it.
Don’t ignore finance. Fashion is an industry with some of the most wacky timing around product development, inventory production, and actually selling the goods. The bigger a brand gets, the harder it gets to end the month with cash in hand. Having someone on board who can manage these issues and look at the bigger picture is essential to staying in business.
The irony is that advice for fashion brands isn’t much different than advice for any consumer brand operating in today’s environment. The product/market/channel ecosystem supporting fashion used to be unique, but today the same set of tactics is open to everyone.
Fashion is a uniquely creative industry, and preserving that space for creativity can make a customer feel alive in ways that toothpaste or yogurt just can’t. But that doesn’t mean the fundamentals don’t apply.