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The road to profitability


By Leon Bailey-Green, Director, Upper Clash

Concerns on letting investors in, growing at the expense of profit, and appreciating the difference between retail and tech businesses formed the bulk of the conversation on profitability.

One of our guests kicked off the discussion explaining how they had worked in two fashion businesses with very different attitudes to profitability; one owned by a large billion dollar company needed only not to lose money, the other had investors who needed a return and demonstrable growth.

We heard from another business who said profitability was important at an early stage to show prudence to banks and boutique lenders who would one day help to fund growth.

Many of the brands in the room were conflicted on the benefits of venture capital and private equity. By the nature of such investors’ strategies, growth at any expense is the way forward, but for many fashion and beauty founders today sustainable growth is a more desirable path.

Funding itself isn’t out of the question, these founders do want cash for growth, but not at the expense of damaging profitability. Private investors, it was said, better understand a founder’s vision and respect the rate of growth they envisage. Yet, VC and PE funders are seeking short term fast revenue growth – profit can come later – which can take companies off track.

Over the past few years I’ve seen the fashion and beauty brands that take off being those with a founder who is passionate about the niche they are serving. This compares to founders who were building concepts because they had worked in other territories mainly the US. They were actively set up for venture capital and fast growth with profitability an issue for an acquirer to sort later down the line.

When discussing this attention turned towards the industry tendency to mistakenly compare fashion and beauty brands to technology businesses. This is becoming much more of a realisation in the industry. No longer can founders cite Amazon, Ocado and the like when explaining why profits are nowhere near.

It was mentioned that founders need to be honest with themselves about what they need from the business. Does every brand need to be a multi-million pound business? What’s wrong with a brand that gives a founder a comfortable living? If a brand evolves to fulfil a customer purpose it does not need to have a ‘market grab’ attitude, spending lavishly for growth in an attempt to corner a market.

During a presentation by More2, we saw data modelling methods to identify likely customers – helping brands who consider paid social advertising out of their reach to see they can actually compete. A cost per click should only be considered high in relation to the likelihood of a purchase.

Seko shared models of warehousing and fulfilment used by fashion and beauty brands, and revealed six areas these businesses need to watch to improve profitability. One that stood out was the storage of dead stock. Single items unlikely to sell, taken off sale but still costing money in storage fees. Separately to this roundtable I spoke with a senior consultant to retailers who told me this was prevalent across the industry.

We also discussed cross border trading, looking at how to understand the regions to invest in that are likely to be most profitable.


Refining fulfilment operations to maximise profitability

Seko Logistics are an award winning logistics provider. They’ve worked with retail and consumer brands such as Reiss, Cath Kidston and Birchbox. Commercial Director Claire Muir will be unveiling the main fulfilment pricing models used by fashion and beauty businesses and quick wins which brands can implement with their current warehousing set up to improve profitability.

Tried and tested strategies to improve customer profitability

more2’s strategy team are trusted by brands such as Boden, Hotel Chocolat, Hush, Farrow & Ball and Desmond & Dempsey to help grow their sales and profit. Using their experience of working with over a hundred retail and ecommerce brands, Director of Digital Chris Simpson will show how you can drive performance and profitability by structuring your customer base and investing according to potential.


By Leon Bailey-Green, Director, Upper Clash

The road to profitability – and the strategy for staying there – is unique to every fashion and beauty brand. Other than early stage losses, there is no profitability normal.

A brand’s urgency in relation to reaching, maximising and maintaining profitability may be determined by various factors not limited to age, ambitions, access to cash and ethics.

Decade old luxury label Victoria Beckham reported a loss of £10.2m, in its most recent accounts, on a revenue of £42.5m (a rise of 17%). The company isn’t aiming to turn this around immediately, instead expecting to reach break even in the medium term. Their eye, seemingly, is on the long term prize of building a brand that lasts generations.

Elvis & Kresse, a sustainable luxury accessories brand, puts ethics above making money. Whilst most businesses encourage customers to make multiple purchases, Elvis & Kresse wants customers to be more to why, and how much, they buy, putting sustainability before sales. 50% of profits from its fire hose range is donated to the Fire Fighters Charity. Kresse Wesling, the brand’s co-founder recently spoke at an Upper Clash event.

Although every brand is on its own journey, it is important for leaders of growing fashion and beauty brands to understand how similar businesses are approaching profitability at their current stage.

The breakfast gathering will take place on March 5th 2019, from 08.30am, in a private dining room at a central London location. To request an invitation use the form below.

As well as taking time to hear from some of the leaders in the room about their path to profit, we will also discuss market and operational challenges that impact making a return.

Should you only enter international markets where profitability in the medium term is in sight? Or is it important to forgo profit to establish one’s brand? Particularly important considerations for the many premium and luxury brands who see the potential of targeting Chinese customers.

How does direct-to-consumer vs working with retail partners compare for short, medium and long term profitability?

Is it even right to look at profitability by channel? As Angela Ahrendts, Senior Vice President of Retail at Apple told Vogue BusinessYou can’t just look at the profitability of one store or the profitability of one app or the online business. You have to put it all together: one customer, one brand.”

What are the signs of growing the team too quickly? And, too slowly?