We just got back from Las Vegas where MAGIC–the biggest apparel convention show in the world–was held last week. More than $200 million of orders were done on the trade show floor every day of the convention. The premier fashion event there was PROJECT, which hosted a variety of men’s and women’s advanced contemporary, premium denim, and designer collections.
We also attended AGENDA–a more diverse and creative lifestyle convention and with a more “edgy” or “urban” tone to that of PROJECT.
Our recent funding transaction with Active Ride Shop demonstrates that there remains numerous opportunities for both small and large funds to invest in the consumer brands space. In fact, post the 2007-08 financial crisis, the consumer brands industry has been undergoing a transformation. This means certain brands (yes, this means PSUN, ARO, and ANF) will die; while others will survive or even thrive.
This also means that the playing field for consumer brands is now more even than ever. Smaller, upcoming brands who resonate with younger consumers (i.e. Millennials or Gen-Zs) now have a marketing edge over the traditional behemoths such as PSUN, ARO, and ANF–who, in our opinion, have turned into mere retail distributors only somewhat conveniently located in dying American suburban malls. Combined with the increasing adoption of social media as a marketing medium–as well as more efficient e-commerce and payment platforms–it is obvious to us and up-and-coming brands that the consumer brands industry is now wide open for smaller brands to gain market share.
In our March 4, 2014 commentary (“Building a Specialty Brand in the 21st Century“), we asserted that: 1) traditional segmentation and marketing methods based on socio-demographics no longer works, and 2) the 21st century consumer mentality is no longer based on the mentality of purchasing “expensive brands” (although this mentality still exists in China and India today, e.g. Abercrombie’s success in China) but on actively engaging with and subsequently purchasing premium brands based on the concepts of self-identification and a sense of belonging to a group of like-minded, but distinct individuals with similar life philosophies.
Our discussions with PROJECT’s organizers and participants suggest this trend is only accelerating; brands who have been losing resonance with their core customers will continue to lose market share.
Finally, we should keep in mind that most global consumer discretionary dollars today are still being spent on non-branded goods. In 1950, brands made up less than 10% of all global consumer spending (believe it or not, most handbags back then were unbranded and sold in department stores); today, brand spending still only accounts for around 30%. As such, brands who are able to maintain resonance with their core customers will enjoy a long runway of growth ahead of them. We thus advocate funds to seriously consider investing in the consumer apparel and the consumer brands industry in general.