cotton yarn waste In recent years, the sweater business has been driven by simpledesign, high prices ($300 and up) and expensive yarns likecashmere. LiaMolly, which launched its first 11-piece collection inFebruary, is different. The company's clothes feature cotton andwool blends and retail for $100 to $300. Though they are intricateand look hand-knit, they are not. Instead, LiaMolly's sweaters areproduced primarily in Chinese factories. The company's debut linewas a hit. It landed rack space in Anthropologie -- where founderSeema Sudan used to work -- as well as Bloomingdale's and 40specialty boutiques.
The founder:
Sudan, 38, honed her technical know-how at Anthropologie, whereshe helped set up the company's sweater line. "She played acritical role in creating our sweater DNA," says Glen Senk, CEO ofUrban Outfitters (NASDAQ:URBN), the chain's parent company. Shealso charmed the people at the Asian factories at which the clotheswere made. "I loved my technicians," she says. "I liked talkingshop with them."
Then, in 2005, Hurricane Katrina hit New Orleans. Sudan's husband,Sidney Bertheaud, had grown up near the city, and soon the coupledecided to move there from Philadelphia. "Some people wanted to goaway, but we had the opposite reaction," she says. "We wanted to bepart of the rebirth."
When Sudan announced she was leaving Anthropologie to start her ownline, her friends in China offered to help her make prototypes. Shetook them up on their offer and named the business after her kids,Liam, 4, and Molly, 10.
The numbers:
Sudan has invested $75,000 in the company and has one full-timeemployee who sells the line to boutiques. Her first collectionbrought in $518,000 in revenue and gross profit of $209,000, whichis good for a new fashion company. Sudan projects revenue of $1.8million in 2008, $2.3 million in 2009, and $3 million in 2010.
The market:
Sales of women's sweaters were flat at $5 billion in 2007,according to Marshal Cohen, an analyst with the NPD Group whostudies the apparel industry. But Cohen predicts that next yearwill be good for the category, because sweater sales go up whenfuel prices rise.
Of course, the field is crowded. "She'll be competing against theAnn Taylors (NYSE:ANN) and Ralph Laurens (NYSE:RL) of the world andthe private labels of every major department store," says Cohen."But it doesn't mean she can't beat them." Larger lines tend toplay it safe during a downturn, which translates into plain styles.That creates an opening for a gifted designer. And amid sluggishretail sales, LiaMolly's average price point ($156) is covetedamong store buyers these days.
Challenges and opportunities:
Managing cash flow will only get tougher. Designers must pay fornext season's prototypes long before they have been paid for thecurrent line. Factories (including LiaMolly's) typically require aletter of credit before starting work. Like many labels, LiaMollyuses a factor to borrow against its accounts receivable at 1percent interest.
Sudan is focusing her sales efforts on boutiques in the South andalong the Gulf Coast, a region she believes the mainstream fashionworld sometimes overlooks. She has hired a PR firm to get her nameout. And she has set retail prices that afford boutiques a 2.5percent markup, even though 2.2 percent is standard. Sudan, whoowned an ill-fated boutique years ago, says she wanted to giveretailers more margin to engender their loyalty.
Sudan also has become interested in lean manufacturing. LiaMollyplans to introduce a capsule collection of six pieces made onseamless knitting machines. The ecofriendly process uses computerimaging to reduce wool and dye waste. As much as 25 percent of theline's future collections will be made this way.
Advice From Liz Lange
Lange is the founder of a line of upscale maternity clothing basedin New York City.
"I love that LiaMolly is focusing on sweaters. Knits fit so well,and they're comfortable. People love them. For a long time,Benetton was almost exclusively knitwear, and it was huge. It's amistake when brands try to do everything right off the bat.
"Though she's set up the business as exclusively wholesale, I thinkSeema should consider going into retail, too. I actually had aretail presence before I did wholesale, and what I liked abouthaving a store was the ability to tell my story within a cohesiveretail environment. That's hard to do in department stores orboutiques that might only buy a sweater or two.
"I'd suggest that she open up a tiny space on some side street inNew Orleans. A store needn't be a big capital investment. It can bethe kind of place you'd have to be 'in the know' to know about.Women love discovering brands by word of mouth.
"The biggest thing Seema has to watch out for is knockoffs. Itwouldn't be hard for someone to copy LiaMolly's designs and makethem for a whole lot less money. The Zaras and Forever 21s movevery fast. That's why she needs to do what she can to make surethat every item she sells is not just a sweater but a LiaMollysweater.
"How do you do that? When I was starting out, I did the PR bymyself -- a little bit out of necessity, but looking back on it,there was nobody better than me, nobody more passionate than me.Seema has a PR agency, but she should also focus on this herself.She should be sending LiaMolly's pieces to celebrities with a note,the more personal the better. It's easy enough to find the names oftheir assistants or publicists online. She might get lucky and seeher clothes in
People
or
Us Weekly
. I'd also try to get in touch with costume designers for hot TVshows, like
Gossip Girl
. That kind of exposure can do wonders for an apparel company. Inthe end, that's kind of the way you protect your brand."
Final Thoughts From Seema Sudan
"I agree with Liz that our next step should be to have a littleshop. We plan to move the business to a building that Sid owns, andwe can run a shop out of that space with little overhead. As forknockoffs, I'm not so worried about them, because this kind ofsweater is hard to make -- that's why there's not a lot ofcompetition. Of course, people will still try. I expect that, andI've seen bad knockoffs of my Anthropologie stuff.
"But Liz is right. We must make sure that people recognize aknockoff as a LiaMolly knockoff -- that's what I think she's tryingto tell me. I think being in New Orleans will help us establishthat. From the sense of community to the city's vintage style tothe color of the houses here, it's such a special place for ourbrand to feed off of."
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