Over the last year, I've been consulting a vertically integrated handbag startup.  The results of my work have increased sales by a factor of 15, bolstered margins by 20%, saved 15K+ in unnecessary expenditures, and much more (see slide 8).  Below I discuss some of the learnings from my experience in the bag business.

In Fashion and Luxury renowned French fashion school, l’Institut Français de La Mode (IMF) recounts the strategic shift of the accessories market in the mid 90s. “Bags went from being objects to be used, to objects to be shown” when leather goods were placed in artistic directors’ purview for the very first time. That’s when a young Tom Ford at Gucci and Marc Jacobs at Louis Vuitton expanded leather goods into the largest portion of the business, representing 40-60% of total sales for the major fashion houses as of latest.

Today, a quarter of a century later, it seems everyone is launching their own bag line. The barriers to entry have been partly swept away by the wave of direct selling platforms. It’s never been easier than now to have an online store or distribute content. But, building a viable accessories business takes a lot more than a website and pretty pictures.

What would it take to go from being a contract manufacturer to having your own successful handbag line?

This is the challenge that was presented to me last year when I was introduced to crème de la crème of the local contract sewing business.  I knew it would be difficult but was intrigued by the founder’s determination to build a new business from scratch.

The first order of business was to assess the current situation. The founders had a website, a few products, but no sales.  I suggested a strategic marketing project to evaluate product market fit, but the founders were already headed down a road and just wanted some results. So, I built the startup’s web channels and planned and produced collateral for marketing to jump-start sales.    

There were obvious wins – first sales, traffic growth, more followers, a couple of mentions, store accounts but nothing pointed to a clear path to growth.

Filtering through the Noise

One of the hardest things about being an entrepreneur is learning to filter feedback. I find this especially difficult for makers who spend a great deal of time and money on product development. Seek out the opinions that support your beliefs and you’ll slip into confirmation bias. Languish too long in cognitive dissonance and you’ll lose confidence in your abilities.

Serial entrepreneur and founder of the Customer Development Methodology, Steven Blake provides these words of wisdom, “when you’re getting a lot of resistance within an existing market, perhaps you could learn from what others have to say.”

Designing for a Customer Segment

The traditional perspective on product development is make something, then sell it. “This view doesn’t work in economies where consumers face abundant choices,” asserts leading management consulting firm, McKinsey & Company. 

In today’s economy, it’s the upfront work in customer segmentation, market selection, and value positioning that’s most important – all the more true for a saturated market like women’s. 

Of course the research slows you down in the beginning, but going to market with a clear value proposition to test will save you oodles of time down the road. 

Determining What’s Critical for Success 

The maker movement sweeping the nation is generating a lot of buzz about U.S. made. Is locally made a key selling point for women’s handbags? “No, I mean it’s not like you’ve been making bags [in the U.S.] for centuries like in France or Italy. Sure there’s the social angle which is a nice to have, but that can’t be it,” elaborated a subject from our target market.

It’s no secret that the bulk of fashion-related manufacturing shifted overseas in the latter part of the 1900s. Apart from lowering costs, outsourcing production allowed creators to hone in on design and marketing. There are industry exceptions, such as Hermès, which is mostly vertically integrated and touts tradition, craftsmanship, and quality as part of its luxury image. But, even at the Saddle Maker’s core, you’ll find the commercial side of the business.

“People just want authenticity these days; they’ll buy if they know your personal story,” goes the altruist refrain. Building a brand through a personal connection with the maker might work if you’re relatable. But, if the goal is to form a sizable and sustainable business, there’s the scalability issue of the maker persona.

Understanding It Takes Time

There are no shortcuts on this long and arduous road to success. What’s needed for the journey is about $300K in investment to cover the critical first three years mostly figuring out the line’s aesthetic and niche. You’ll also need to a strong team with expertise in the core functions of the business and a surplus of tenacity to boot.

Looking back on this project, it’s been an incredible learning experience about the realities and challenges of entering the fashion market and constructing a consumer brand from the ground up. I certainly don’t have all the answers, but I know more about the business now than I ever did before.

As for furuKawa, we finally got to that research and sketched out some better paths to success.