Social responsibility in fashion, the underestimated trend
Last week at Fashion Club 70’s headquarters in Antwerp, Oaklins’ Belgian team held their second Board of Inspiration event. Fashion Club 70 is one of the most renowned fashion distributors in Europe, representing more than 70 high-end brands to more than 1,700 boutiques throughout the Benelux area. The stylish premises provided the perfect location to discuss the future of fashion and retail with investors, fashion labels and designers, retailers and distributors.
For our Board of Inspiration, we always choose topics that are top of mind for our clients. With the combined expertise of Oaklins and Fashion Club 70, we were able to host a colorful evening on the future trends in fashion and retail, interesting for all players in the sector.Frederik Vandepitte, Principal, Oaklins, Belgium
The evening, hosted by Tom Simonts, Senior Financial Economist at KBC Group, started off with a presentation on the hottest topics in the fashion industry by Federico Giammarusto and Sergio Pea, both Partners at Oaklins Italy. The duo has an extensive M&A track record in the fashion and retail sector.
Federico Giammarusto describes the fashion business as fast-changing and disruptive. Not only does e-commerce jeopardize the retail business, but there is also a large generational shift. Social media enables challenger brands to reach the market at a fast pace, whereas incumbent players have been slow to adapt. The demand for increasingly socially responsible fashion represents one of the most underestimated trends at the moment.
Contemporary fashion has invaded the global market. We are expecting a return to the basics of design and tradition. This could drive a further wave of M&A. Accessible fashion has put a lot of pressure on the market, and there is a size limit on the expansion of entrepreneurial companies. M&A could be the only way to enlarge a business.FEDERICO GIAMMARUSTO, CONTEMPORARY & ACCESSIBLE FASHION M&A ADVISOR, OAKLINS
Sergio Pea explains: “There are different ways to look at the fashion business and investments. Brands can be divided into three big groups: we have known brands that have to be relaunched and are in need of an enormous CapEx on management, communication and sales channels. Then there are companies with a very limited international presence, where it’s too difficult to convince the owner to adapt to a completely different business structure. Finally, there are what we call hypergrowth companies. They have an immense potential but at a great cost. It is always important to find the right balance between scale and cost.”
Mathieu Develay, Investment Director at the London-based independent private equity fund Bluegem, agrees that fashion and retail remain busy sectors for private equity but adds that there is not one magic key to success. However, over the years, he has identified some clear landmarks and misses: “Appealing brands with a strong heritage, a unique and superior product and a loyal and diverse consumer base, including an innovative, future-proof retail concept, are often the most successful to invest in,” he states.
But how do fashion brands and designers themselves approach the trends in fashion and retail nowadays?
During a lively conversation, Peter Perquy, CEO of the Belgian fashion brand Terre Bleue, and Nicolas Lavigna, co-founder of Norm shoes, agreed on the trends mentioned by the previous speakers. Perquy explained: “The main difficulty for us is to predict our consumers. To remain relevant, we need to be ahead of what the consumer wants in a year or even two years, not tomorrow. Therefore, you need a perfect team.”
As a starting shoe brand, Norm focuses on transparency and sustainability. “We focus on a hybrid model — a concept store and website. These will remain our main operational and financial challenges for the coming years.” Perquy adds: “Internet and social media are crucial. Although we prefer to use different channels, we need to be very wary of channel conflicts. E-commerce is a large opportunity, but it is also a risk as it takes money.”
Finding investment money is a challenge for both companies. “As an established brand, it is difficult to change the investor’s perception of what the brand used to be. You have to invest a lot to reposition an old fashion icon into a new dynamic brand and to convince the investor,” says Perquy. Norm raised €60,000 via crowdfunding just to start the company, but it is now facing the challenge of needing new investments to further develop their brand.” According to Perquy, who has experience in acquisitions, the key pitfall in M&A is to successfully integrate different companies. It is very difficult to make people think in the same way and make them march in the same direction together.”
The evening ended with an exquisite walking dinner by chef Julien Limbach and a networking occasion for the selected invitees. Oaklins intends to build further on this successful formula and is already planning the third Board of Inspiration event in the first quarter of 2020, details of which will be available soon.