Why founders of some small luxury brands are eyeing exits

• Independent luxury brands face pressure to sell or seek investment amid the market downturn.
• Even the biggest and most successful independent brands with cult followings are under pressure.
• Experts say we will likely see more brands consolidate as the industry slows.

Sell up or get out.

It's a decision some independent luxury brands are confronting amid an industry-wide downturn.

With smaller budgets and fewer resources than counterparts owned by conglomerates like LVMH, indie brands are feeling the heat of an increasingly challenging retail landscape.

Even the biggest and most successful independent brands with cult followings are under pressure.

Mere weeks after the grand opening of its first boutique in Soho, New York City, drew large crowds, the French-born indie luxury label Jacquemus announced it's seeking outside investment.

"I value my independence," French designer Simon Porte Jacquemus told French outlet Le Figaro in October. "I want to pass down this company to my children, but I have to break through the glass ceiling by finding the right partner, who would only have a minority."

Founded by the French designer in 2009, his eponymous label has experienced a meteoric period of growth. The Business of Fashion reports its sales hit 270 million euros ($290 million) in 2023. Jacqumeus did not immediately respond to requests for comment.

But as 2025 nears, the luxury landscape is proving to be more difficult to navigate, even for LVMH and Kering, both of which reported weaker-than-expected third-quarter earnings in October.

"If all of these brands that are giant brands with gigantic budgets behind them are suffering this economic climate and this luxury downturn," Blanca Zugaza Escribano, a fashion and luxury consultant at Metyis, told Business Insider, "Imagine smaller brands that have way smaller resources."

Seize the moment or risk failure

Escribano said there's been an uptick of independent brands seeking investors as a survival strategy.

Earlier this year, a series of independent brands, including Vampire's Wife, a luxury British retailer beloved by Kate Middleton, Dion Lee, an Australian luxury brand that Taylor Swift has worn, and NYC-founded Mara Hoffman, found themselves on the chopping block.

A combination of the slowing luxury market and the closure or decline of third-party retailers that these brands heavily rely on, took its toll.

Others managed to survive by selling out, including Roksanda, the eponymous label of Serbian designer Roksanda Ilinčić, which was bought by The Brand Group in May.

For independent brands, Escribano said, the thought process is "either we make it today or we're not here tomorrow."

"It's just a very, very competitive category," Milton Pedraza, CEO of the Luxury Institute, said, adding that independent brands often don't have the resources to scale their business by themselves.

"The margins are very low, and it takes a long time to achieve critical mass to have success," he said. "It's almost like a salmon swimming upstream in a very turbulent river."

Successful marketing tactics, like Jacquemus's buzzy food-inspired beauty campaigns or its mini Chiquito bags, which the internet couldn't get enough of in 2019, can fuel brand momentum, but it takes more to make it last and compete against heavyweights.

In his interview with Le Figaro, Jaquemus offered an example, saying its store in Paris' Avenue Montaigne saw a drop in visitors over the summer as some shoppers avoided the city during the Olympics Games, although he said they weathered it.

"In reality, we are doing quite well considering we're the smallest house on the avenue," he said.

Nevertheless, being the smallest on the avenue means a drop in shoppers can hurt more if you don't have the resources in place.

"You have to feed this monster of growth to scale to achieve this critical mass," Pedraza said.

It's no surprise that Jacquemus is seeking an investor as "they need fast money to capitalize on this momentum," Escribano added.

But finding an investor post-COVID-19 is no walk in the park either, as many feel as though they "got burned" by brands "that were just asking for money and burning through it, not really achieving sales, not achieving results, and not having great products," Pedraza said.

"The consumers and the investors have so many choices out there that they can afford to be very picky," he added.

Safety in numbers

Jaquemus may be relatively small, but its decision to seek an investor has some foreshadowing with bigger stand-alone brands.

In the summer of 2023, Kering acquired a 30% stake in Valentino, a historically independent brand.

Rumors have been squashed of a Moncler acquistion of Burberry, the beleaguered stand-alone British brand.

Burberry, which reported a 22% sales decline in the six months ending in September, faces an uphill battle to regain a competitive position in the luxury market.

Nonetheless, Pedraza believes that consolidation between brands and independent brands seeking outside investment will likely persist as they confront industry-wide issues, including the rise of artificial intelligence.

"It's going to be harder for new brands to penetrate into the life of the consumer, to get the attention, to get the eyeballs, to get the awareness," he said.

But going the safety-in-numbers route and doing so by being acquired by a conglomerate is a decision with consequences.

Brands have historically feared certain acquisitions, Escribano said, as it can fundamentally impact brand identity and creativity.

For Jacquemus to sell out, it could still lose what Escribano said its magic, which in her view, is its head designer's ability to do "whatever he wants without having to explain his decisions or his creative choices to a board of investors which, at the end of the day, is going to limit so much of his creativity because he's going to have to think purely about business."

Read the original article on Business Insider

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