Out of style: five lessons fashion merchants must learn from the dramatic fall of In The Style
Just two years ago, In The Style was a fashion retailer at the top of its game.
After hitting on a winning influencer marketing strategy that resulted in sell-out collaborations with the likes of TOWIE stars Lauren Pope and Billie Faiers and TV’s Stacey Solomon, the Salford-based women’s clothing brand was floated on the stock market with a valuation of £105 million.
Then everything changed. As the cost-of-living crisis took hold, sales plummeted 22% and the business swung to a loss. Things came to a head when the business revealed it was on the brink of bankruptcy.
The company has just agreed to sell to a private equity firm for just £1.2 million. It’s an extraordinary fall from grace. And there are other worrying signs of trouble in the industry, with major clothes retailers like boohoo and Asos posting losses in their recent results.
So how did In The Style and other fast fashion brands go out of fashion so suddenly? And what can other fashion brands do to avoid a similar fate?
We spoke to some experts who gave us these five lessons…
1. Cut operational complexity and cost
When times are tough, the temptation is to invest in your operation, but this might not always be the right move according to Mark Tweed, Brand Director at loungewear brand CyberJammies: “When your sales are booming the temptation is to build an infrastructure for more and more growth, including larger teams, larger offices, more modern offices, or bigger warehouses.”
“But fast moving businesses suck cash at an increasing rate. The moment revenue tips, businesses that have a large overhead are instantly in trouble.”
Mark Hook, VP of Global Brand Marketing at retail technology firm Brightpearl, agrees with Tweed’s assessment and says that fast growing fashion brands must rethink their approach to operations to avoid the same downfall as In The Style.
He says: “When retail brands grow rapidly, as In the Style certainly did, it can greatly increase their operating costs. When sales slow, it can expose business models, like In the Style, which are reliant on high volume, but low margin.”
“The way to reduce both complexity and cost is simply to automate as much of the operation as possible,” he adds.
“Fashion brands should focus on automating everything from order fulfilment and returns, to inventory management, shipping and accounting. Automation can have a significant impact on overheads, and can make fast growth much more manageable. With so many online brands looking to reduce costs at pace, that’s where they should start.”
2. Swap growth mindset for profit mindset
E-commerce companies tend to have a growth-focussed mindset – after all, seeing an encouraging growth rate is a good confidence booster and it’s attractive to investors.
However, growth can mask major issues behind the scenes – including high operating costs, operational inefficiencies and poor cash flow.
According to Jill Lilliedahl, Global Director of Product Marketing at Inventory Planner by Sage, brands need to switch from a growth mindset to one that’s focussed on what really matters: profit.
She says: “The fall of In The Style proves that rapid growth isn’t always a sign that everything is rosy – especially in the fashion world.”
“It’s important to note that when In The Style first signalled a profit warning, its sales were still soaring.”
“Fashion and apparel merchants need to shift from looking at top-line growth and instead focus on profitability. The best way to do that is by optimising their biggest asset - and potentially their biggest liability - inventory.”
3. Don’t over rely on influencers
In the Style initially skyrocketed to success because it was the first to tap into the potential of influencers, with their collaborations as their unique selling point.
Yet this approach would later become their Achillies’ heel. “The final nail in the In The Style coffin was once its strength and then became its biggest weakness; the use of influencers,” comments retail analyst Andrew Busby, Founder at Retail Reflections.
“As a marketing tool, influencers can be invaluable but only when used in the right way, as the likes of boohoo have found out. Keeping up with the Gen Z zeitgeist has never been more fraught with pitfalls."
Hook notes that: "the influencer market is incredibly dynamic; as one star rises another falls, and so much of In The Style’s collaborations were fleeting and lacked longevity.”
“Moreover, with more retailers using the same strategy, In the Style had a harder time standing out in the market.”
“I think the lesson for fashion firms is that while influencer marketing is still very effective, the greater impact might be found in building long-term relationships with select ambassadors who have greater resonance with your brand and its intended target audience. Consider how Dior works with Charlize Theron, or Nespresso with George Clooney.”
4. Beware low cost, high volume models
The pandemic induced boom for e-commerce retailers was only ever going to be temporary but no-one could possibly have predicted the seismic economic headwinds which the entire retail sector has recently had to face – and it’s left low cost, high volume brands struggling, according to Busby.
He says: “The comedown from 2020 along with double digit inflation leading to soaring costs means online retailers such as In The Style were left badly exposed and overleveraged.”
“The cost-of-living crisis has revealed that the 'non-essential' moniker, whilst something of a peculiarity during the pandemic, is, in truth, a reality. Feeding ourselves and heating our homes are essential but that new top? Well, that can wait.”
“It’s this dramatic and swift shift in consumer behaviour which has laid bare business models which were built on low costs, high volume and thin margins.”
5. Cash is king
Weakened consumer demand and high inflation are eroding profit and cash reserves for retailers.
According to Tweed, that’s an area that needs critical attention for brands that want to avoid the same downfall as In The Style.
He says: “Money comes into many fast-growing businesses on the back of loaned finance but relying on finance means the moment revenue slips, businesses with a large operating costs are instantly in trouble.”
“At CyberJammies we've focused on steady, small changes to infrastructure and we've always been conservative and careful with investment growth decisions.”
“Our board has taken a long-term view and refrained from taking dividends over the last few years which has enabled us to be debt free and cash rich, banking all our profits. This means we can still progress with our expansion plans. Cash is king”
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