1.4 Choose a business model

After finalising your brand and studying the market, the next step is to select a business model.

 

From setting up your logistics to identifying your source of revenue, a business model is your plan of operation – a blueprint for your entire business. Having a structure from the very beginning is crucial, as it is the framework for your next course of action.

 

These are a few main business models you can choose:

  • Reseller
  • Dropship
  • Pre-order
  • Private label

 

Though keep in mind, there are plenty more business models in fashion, such as multi-label retailers and wholesalers. For now, we’re just going to focus on four popular models.

Four Main Business Models in Fashion

Reseller

As the name suggests, a reseller purchases stocks and resells them for a higher profit.

 

How do you know if it’s for you?

  1. You have moderate space in your home or elsewhere. Besides sourcing for stocks, you’re also in charge of handling the inventory – including storage.
  2. You need time on your hands since you’ll be packing and handling delivery for each order.
  3. In most cases, you must pay for stocks upfront, which means you need sufficient capital to start.

Pros?

  1. You do not require knowledge in fashion design or manufacturing.
  2. It is quick to set up.
  3. With good curation of products, a strong brand identity can be developed.

Cons?

  1. You are highly dependent on your supplier(s) for stocks.
  2. This model is open to the risk of deadstock, which could lead to a loss.
  3. Cash flow management is tricky as stocks must be purchased upfront.

 

Dropship

The dropship model bridges the gap between the third-party supplier and the customer. In other words, you’ll act as the middleman.

 

How do you know if it’s for you?

  1. You don’t have a lot of time on your hands – maybe you have a job that still requires your attention, or you simply have other obligations.
  2. Since you only purchase only when there’s an order, you do not need to prepare a large capital fund.

Pros?

  1. You do not require knowledge in fashion design or manufacturing.
  2. It is quick to set up.
  3. There is a lower time/effort input as you do not need to handle delivery or packaging.

Cons?

  1. You are highly dependent on your supplier(s) for stocks.
  2. Quality control is difficult to enforce as orders are sent directly from your third-party supplier.

However, it is possible to dropship for your own designs. Some business owners create t-shirt designs and get a supplier partner that does printing, such as TeeLaunch, Printify and Customcat. But the information above still stands, since stocks, shipping and logistics are handled by the supplier.

 

Pre-order

The business model is similar to a reseller’s, but instead of purchasing stocks upfront, you only purchase when there’s an order. In other words, your customers place their orders in advance.

 

How do you know if it’s for you?

  1. While you need to have moderate space to store your stocks, they won’t stay long, since all of the stocks that arrive are already confirmed.
  2. Similar to a reseller, you’ll need to free up some time in your schedule as you’ll be in charge of packing and shipping.  

Pros? 

  1. The risk of stock overload is mitigated as you’ll only purchase what customers have ordered.
  2. Cash flow management is easier as your customers pay upfront.

Cons?

  1. You are highly dependent on your supplier(s) for stocks.
  2. There are limited sales channels. Most marketplaces require a quick turnaround and typically do not allow pre-order business models.

Private label

This business model is the only one where you have some form of creativity – depending on which you choose. There are three types:

  • Print-on-demand
  • Wholesale
  • Custom cut and sew

All three requires you to source for a manufacturer or fulfilment centres, though they have their own individual sets of requirements and challenges.

 

Print-on-demand

This option is similar to the Dropshipping business model, but instead of selling products from a supplier, you’re selling your own designs.

 

After you’ve designed a logo or a visual, all you have to do is look for a print-on-demand fulfilment centre. Once you’ve secured one, the fulfilment centre will digitally print your design when there’s an order and ship it for you. Some popular choices are:

 

How do you know if it’s for you?

  1. You don’t have much time on your hands, but you don’t want to compromise creativity.
  2. The product is only created when there’s an order, so you don’t need to have a large budget to set-up the business.
  3. You’re not ready to take a huge risk with your designs – yet.

Pros?

  1. There is minimal set-up cost.
  2. There is lower time and capital input since you only need to handle the designing aspect.
  3. Cash flow management is easier as the fulfilment centre only prints when there’s an order.
  4. There is a wide range of products to choose from.

Cons?

  1. You have less control over your products as you do not manufacture and ship them to customers.
  2. Because of the low-risk nature, the barrier of entry is low – which means there’s higher competition.

 

Wholesale

The wholesale model is similar to the reselling model, but unlike reselling, purchasing from wholesalers allows you to customise and personalise the apparel and clothing products. This is why most brand owners opt for this method, as adding tags and custom labels add perceived brand value. In some cases, screen printing is possible too.

 

The downside to this is that you have to purchase stocks upfront, which affects cash flow management. You would also handle warehousing, shipping and logistics from your end.

 

How do you know if it’s for you?

  1. You want your brand label to be on every item you sell – as well as personal customisations.
  2. You have greater time on your hands, as you’ll have to fulfil every order from your customers.
  3. You have storage or access to a warehouse to store all of the stocks.

Pros?

  1. There is an increased perceived brand value for this model.
  2. It is easier to set yourself apart from your competitors with a brand label or custom tagging

Cons?

  1. You require higher capital input as you need to purchase stocks upfront. 
  2. There is a greater time/effort input as you will be responsible for shipping and deliveries.

 

Custom cut and sew

From sourcing fabrics and textiles to the designing process, you’re in charge of the entire production journey. An upside to this is that whatever you produce is 100% by you, giving you greater control and creative freedom.

 

However, the drawback is that this method requires both high capital input, effort and time. You would need to pay for the materials, samples (these can cost a fortune), manufacturing and logistics.

 

 

How do you know if it’s for you?

  1. You want creative control in the clothing you sell. The other business models do not allow this since the stocks are mostly ready-made.
  2. You have greater time on your hands, as you’ll be overseeing every aspect of your business.
  3. Since you’re creating from scratch, this business model requires a much higher capital input.

 

Pros?

  1. From designs to the materials, you have full creative control.
  2. It is easier to set yourself apart from your competitors by employing a unique style.
  3. There is a greater potential for developing brand loyalty.

Cons?

  1. You require a higher capital input, as you’ll need to purchase materials, hire a manufacturer and handle logistics.
  2. There is a greater time/effort input as you’ll oversee manufacturing processes and ensure quality output.

 


This is an important decision, one that requires careful consideration. Take your time, weigh your options, and once you’re ready, you can go to the next step.