When the Recession Walks the Runway


Miguel Wright, 30, quit his job just before the economy took a nosedive. He had worked as a sales rep at Bloomingdales, but decided to go it alone and create his own menswear company called Miguel Antoinne.

Starting a business is hard enough. Less than half of all start-ups survive two years, according to  the U.S. Small Business Administration. But starting a successful fashion business during a recession is nearly impossible because department stores are less likely to splurge on new designers. “The stars have to be aligned,” Wright said. “It must be good timing.”

In Wright’s case, the timing was clearly unfortunate as the bad economy rapidly chipped away at the high-end fashion industry. Every piece of good news Wright heard was accompanied by something bad. He pitched his product line to major department stores and was repeatedly turned down. “These stores were unable to take on the risk of investing in new brands at the time,” he said. “But the feedback was very good.”

So Wright made a key strategy change: rather than go after big companies, he targeted customers. “Distribution is paramount in this business. We needed a way to take our product directly to the customer,” he said.” To do so, he turned to the Internet, creating a carefully designed Web site and starting an e-commerce site. This allows him to reach and ship to an international audience.

Wright is one of several people to quit their job and start a fashion business in this tough economy. Rachel Dooley left her position as an attorney on the cusp of the recession to pursue her hobby making necklaces. But she had one special card up her sleeve: a connection to Gossip Girl star Blake Lively. Lively wore some of Dooley’s pieces on set and her jewelry line, Gemma Redux, has since attracted more celebrities and is selling well.

“In the past, a fashion designer would first need to get featured in Women’s Wear Daily or some other big glossy magazine, and then they’d get a ton of orders,” said Beth Schoenfeldt, a small business expert. “But that’s not happening now.”

According to Schoenfeldt, Wright’s model is indicative of the direction small fashion businesses are moving in. “It really needs to be online; that’s where the opportunities are,” she said.

On or offline, success is hard to come by right now. According to Schoenfeldt, the credit crisis has severely injured the retail market and nearly destroyed the specialty boutique industry. “It’s definitely a struggle,” she said.  “You can’t get financing to get started, and there’s no distribution. The system is paralyzed.”

By taking their business online, recessionistas like Miguel Antoinne are able to avoid these obstacles and drastically reduce overhead costs. Wright runs a small operation with just three employees in the office and two interns. He contracts out PR work and manufacturing. Other lines save even more money by joining communities like Collective-E.com, which Schoenfeldt founded last year. This site builds Web sites for young entrepreneurs and handles all  the PR work. “We do the networking and collaborating for you,” Schoenfeldt said.

Yet, you can do everything right and still risk losing it all. “As an entrepreneur, you always have a healthy dose of fear,” she said. Wright echoed that sentiment. “If you don’t sell a season, you might not have income for another 8 months. You need to be prepared to deal with that financially.”

But on the positive side, “If you can hang in there, a lot of other people have already quit,” Schoenfeldt notes.

Wright has managed to keep the business afloat by partnering with several bigger companies in the fashion industry. He was also able to secure private investors when he started up. But in the future, he says the bread and butter of his company will be through e-commerce.

Despite all the trouble he and his fellow designers face in this tough economy, Wright believes there’s always a way to entice a consumer to make a purchase. “You can’t blame the economy any more than you can blame the weather,” he said. “The bottom line is that consumers want a better price without losing the quality of the product. They will hold onto this lower price point even as the recession eases.”

—For a comprehensive credit report, visit the BankingMyWay.com Credit Center.

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