A white label apparel business requires much more planning than you'd probably think
A few years ago we experimented with a white label apparel venture.
Our goal was to ascertain feasibility.
We imported wholesale quantities of premium branded workwear into the UK from a large distributor in America.
Suffice to say, our venture was a flop.
The idea seemed simple enough, but the glossing over the finer detail tripped us up.
Anyway, we chalked it up to experience.
It was an experiment anyway. Nothing lost.
So, what did we learn (gain)?
Let's show you...
- 1 Some invaluable experience gained from running a failed white label apparel operation
- 1.1 Issue No.1: Gross Profit (Gross Loss!)
- 1.2 Issue No.2: Inventory & supplier communications
- 1.3 Issue 3: Niche demand
- 1.4 Issue 4: Relatively small order interest
- 1.5 Issue 5: Price (consistency & competitiveness against customer importing themselves)
- 1.6 Issue 6: Size accuracy & equivalence
- 1.7 Issue 7: Clothing range
- 1.8 Issue 8: VAT registration
- 1.9 Issue 9: Merchandising
- 1.10 Issue 10: Collateral
Some invaluable experience gained from running a failed white label apparel operation
Was it the wrong product?
Not at all.
It was a great product.
In high demand.
Fetched a high price.
Almost no competition.
We had a good enough pipeline of prospective customers.
Zero start-up cost.
We held no stock.
"So, what was the problem?" - we hear you say!
Well after only 2 purchases - we folded.
Issue No.1: Gross Profit (Gross Loss!)
This is the stumbling block upon which the whole endeavour fell.
The first hurdle which knocked us out of stride for all other hurdles.
The critical hurdle to clear - gross profit.
Because of our low risk, no stock approach, the prices available to us were not far off retail.
There were less popular items, like accessories which offered larger margins proportionally, but in actual money terms this amounted to only a few pounds of gross profit.
When you then take into account: international shipping, customs tax, repackaging costs & courier service to deliver to customer - we were at breakeven at the end.
Think then about our fixed costs, plus time of course, now we're at quite a net loss.
The most popular items within the product range were the ones which carried the lowest margins for resale.
If I worked well at cross-selling a few accessories, I could smooth out the tighter margins on popular items with some profit elsewhere in the shipment sold.
Issue No.2: Inventory & supplier communications
Another key failure in all of this was inventory and supplier communications.
My supplier was a distributor. A big one distributor.
I was a tiny buyer by comparison to his typical retail buyers in rural America.
He told me his opinion is that our relationship would not last long.
He said he'd tried it before and it didn't work.
I was keen to prove that experience wrong...but didn't manage to.
Suffice to say, due to previous bad experiences, our suppliers' enthusiasm for the project was a little deflated.
That said, there were some practical issues faced also that impacted timeliness of service & product delivery.
The first issue was the time difference.
Our supplier being in America, meant a 24 hr delay on inventory requests following UK customer enquiries.
I didn't encourage phone contact with my enquiring customers in the UK because I carried no stock and could not reliably tell what our supplier had at his disposal.
My enquiries were email only, which bought me enough time to fetch a lead time estimate from my supplier.
Because I was a lower priority in the pecking order of buyers, I would often find that whilst I was waiting for stock, others higher up had gotten in there and hoovered up.
This often left my customers with excessively long waits.
The only positive is that because of the general lack of availability of that particular brand of workwear in the UK, my customers didn't find it too much if they had a long wait.
There simply was no other choice.
Issue 3: Niche demand
In actual fact, niche demand was a great plus point!
Without it, this kind of venture wouldn't have left the drawing board.
However, there were some draw backs.
The first was at sometimes when I approached some outlets which sold other brands they failed to recognise the one I offered.
To those who knew it however, it was equivalent to gold dust.
All in all, the demand was big helper in this.
Issue 4: Relatively small order interest
Again, I was running with a zero stock model from the off.
I had no capital to hand and therefore needed customer deposits to place orders with my supplier.
I was a very small buyer in relative terms and from a market which my supplier was sceptical of, so opening a credit account was not feasible.
With economies of scale from large order interest, I could have amassed enough profit to invest in holding stock perhaps.
But without bigger order interest, I was scraping the barrel of ROI on this.
Issue 5: Price (consistency & competitiveness against customer importing themselves)
My pricing was affected by so many variables.
- Cost of goods.
- Weight of shipment.
- Combination of items shipped.
- Exchange rate (GBP/USD).
These variables are underlying price determinants which kept pushing around my prices.
I couldn't maintain a pricelist or use eCommerce at all in this respect.
This made for a very evasive sales stance with customers, as I really couldn't set anything firm until I'd spoke with the supplier & done my calculations and received deposit.
It also meant I couldn't offer the same price twice to the same customer.
This uncertainty price-wise meant that the alternative of the customer buying an import themselves was actually quite attractive.
They question: "...what advantage are you giving me?" would often come up. I added very little genuine benefit, aside from perhaps time saving.
Issue 6: Size accuracy & equivalence
There were two problems here.
American sizing had to be converted into European equivalent.
Whilst this is simple enough to perform with a sizing chart, there was also the issue of the brand itself "...coming up big."
American brands typically are larger in size than European brands.
Also the brand which I got involved with was particularly baggy and was held in reputation for this.
This had two implications.
Those who were familiar with the fit, knew exactly what they wanted.
Whereas those who were new, had no idea.
With this zero stock model, I was flat out of profit by the time the shipment got to my customer.
Also, I was a lower priority buyer to my supplier and without a credit line/account.
Returned goods would flatten my venture. I just couldn't afford them.
Issue 7: Clothing range
The clothing range is classic.
Very few changes to the line-up.
This made for a select choice for customers and favourite categories which were the usual requests.
Whilst broad, the practical scope for customer orders was fact quite narrow.
This helped with anticipation of demand. I typically knew what the most likely goods to be sold would be, however, again, the most popular products had the least margin.
Issue 8: VAT registration
As a sole trader and not expecting to breach the threshold for mandatory VAT registration, I opted not to register.
Many prospective trade buyers simply would not do business with me due to an absence of VAT number.
They explained that they were not able to pass on the VAT bill of purchase to customers on resale because I wasn't participating in the tax scheme.
This disadvantaged my chance of getting consistent trade purchase requests.
Issue 9: Merchandising
Our main customer was the owner of a hardware store.
When he purchased the box of workwear from us, he intimated that he would want to stock our products in his shop, but would want branded merchandising.
Branded railings, posters, boards etc. - he wanted to use such merchandise on the shop floor to promote the availability of these workwear products to his customers.
However I was unable to acquire such custom branded kit. Only the manufacturer held such items and I didn't have a direct account.
When I declared to the customer my inability to source branded merchandising, they got entirely disinterested.
Failure to supply genuine merchandising lost me valuable customer interest.
Issue 10: Collateral
Brochures were requested from prospective buyers.
Not being able to produce original manufacturer collateral introduced doubt in one way or another with prospects.
Should I have had collateral, I might well have garnered more trade interest.
More trade interest would equal an ability to access larger wholesale order volumes with my supplier and therefore better pricing.
Better pricing would increase my margins.
Better margins makes for a more viable venture.
A venture that would survive beyond one or two sales.
Are you planning a white label clothing business and would like help getting it right?
...get in touch.
Any experience worth sharing?