It is the dream of many fashion brands, but not it is easier said than done. The USA and Canada always have been major markets for many fashion brands for decades. The market size makes it very attractive for a European brand to entering the land of opportunity. However, there are many risks when doing this unprepared.
Table of Contents
7 best practices for the North American Fashion Market
- Market research: Visit USA and Canada to understand the market.
- Start in Canada and then roll out in the USA.
- Get a wholesaler who is willing to invest in you.
- Be prepared to invest for 1-2 years.
- Set up a solid logistics structure.
- Have a customer service department.
- Do not underestimate the North American market.
Tip 1: Understanding the North American Fashion market
The North America is a large market with nearly 380 million citizens (Source: macrotrends). The North American continent is diverse in culture, climate, and demographic, which make it a highly attractive marketplace for many fashion brands.
We always advise brands to visit Canada and the USA to fully understand their culture and its market complexity. For example, in the South of the United States, many resort or swimwear brands would sell great, while in Illinois and New York, winter is a strong selling season, and the Midwest is great for outdoor brands. A brand can only understand the geographic variety when visiting.
The retail landscape is different than in Europe as well, and of course, there are the major department stores where most brands dream to be presented. There are local “mum and pop” stores, but unknown to most fashion brands, many strong multi-door retailers that do amazing business and who can help fashion brands with a solid annual turnover.
Retail markup in North America is lower; it is anything between 2.2 to 2.5. The sole reason is that the retail prices in the USA and Canada are presented without the VAT (called HST in North America).
Tradeshows in North America are of much more importance to writing orders than the general fashion tradeshow in Europe. The average retailer does not have the time to travel far for only a few brands. It is well-known that fashion agencies write big orders during tradeshows. In the past couple of years, we have seen that regional tradeshows are getting more popular for buyers and brands. As a result, fashion agencies in North America often attend more than two trade shows per season.
Tip 2: Start selling in Canada first
The United States is a market with much potential for every fashion brand, but it is not a forgiving market. When you make a mistake in the USA, the consequences can be truly painful – while Canada is slightly more tolerant of errors.
Canada is geographically very big, and most citizens live near the border with the United States. The country is diverse, providing great insight for brands who want to roll out into the southern neighborhood later. Quebec is known to be European-minded and has a major influence from France. Toronto, Ontario, is a melting pot of all different cultures and can be compared to any major city in the USA. The province of Calgary is an oil territory and is often compared to the oil states down south. While, British Colombia is focused outdoors and has an extensive Asian community.
When starting in Canada first, you can enter the North American fashion market with lower risk, and this market will tell you where you will have the most success in the United States.
Tip 3: Partner with a wholesaler that believes in your brand
Going to a new market often means that your brand is unknown there and that you must build brand awareness to have a long-term presence in that market. Your new wholesale partner in North America should put a lot of energy and resources into creating brand awareness. For most agencies it is a financial risk and shows they are willing to bet on your brand.
Take your new wholesale partner on a path to the future of your brand, explain your vision, and make clear commitments you are willing to take and what you expect from them. An agent or a distributor is not interested in only your current collection, they are willing to invest in your future collections.
Tip 4: Prepare to invest in growth
Because North American Fashion is such a vast market, certain expenses come with it. For an agency in the United States, it is very common to ask for a commission-based fee (anything between 12-15%) and a monthly retainer. The amount of the retainer is depending on the services the agency offers, the location of the showroom, and the territories it covers. The amount can be anything between 2000 USD till 4.000 USD per month on average.
For fashion brands, it is of utmost importance to have a clear what the agency will do in the first year and to have received a business plan for how the agency will grow the brand’s business in the new market.
In Canada, it is not standard for an agency to have a commission-based fee and monthly retainer, although after the pandemic, we see more agencies asking for it. But due to the smaller size of the market, it is not always workable for fashion brands.
Tip 5: Have a strong logistic setup
Last year, many brands have lost sales and market share because they were unable to deliver on time or at all. Many fashion agencies are now more focused on new brands that have set up their logistics well, because only when a brand can deliver and the client pays the invoice, then the agency gets its commission-based fee.
To cover the basics of logistics, any fashion brand should work with a forwarder, customs broker, 3PL warehouse, and local transport company. At FNAD, we always advise our clients to contact our partner Greenway Logistics, the expert who navigates brands through the complex system of logistics.
Tip 6: Custom service department
When growing in a new market, many retailers will have several questions. All brands know they will get requests, questions, or remarks. Your new sales agent or distributor cannot answer them all, as their main job is to generate sales. Due to the time difference, it is often impossible to give an answer within a short time period, impacting your service level and might even impact your sales.
Discuss with your agency if there are any solutions they can offer for customer service, make clear guidelines, manage the client expectations, and setup strict rules for payments and payment methods.
Tip 7: Take the North American Fashion Market seriously
The United States and Canada are an amazing market with enormous potential in sales for fashion brands. The risk is there as well when not being well-prepared or when underestimating the business culture of these countries. It is essential to do research, learn as much as possible about the market requirements, calculate your brand potential realistically, be aware of the risks, and surround yourself with experts that believe in you. When doing this right, North American Fashion could be your winning market.
If you dream of expanding your fashion brand into North America, FNAD can help you to navigate your through towards success.