This week, Rebecca Minkoff leans into its tech savvy by expanding its on-demand business. Plus, get ready to embrace transparency-facilitating product passports.
On-demand manufacturing is on the rise.
Increasingly automated and customer-driven, thanks to emerging technologies, on-demand manufacturing requires a new way of working that puts established brands at a disadvantage. But Rebecca Minkoff, which knows the value of braving uncharted territory, is jumping in headfirst.
“It isn’t an incremental step,” said Uri Minkoff, CEO and co-founder of Rebecca Minkoff, of the company shifting an increasing portion of its production to NYC-based on-demand manufacturing platform Resonance. The companies first worked together on Minkoff Kids, launched in 2020. Now, Resonance is behind 20-25% of its products. It will make 30-35% by early 2022.
Minkoff compared the move to Facebook’s transition to Meta, centering “a whole different universe that none of us have ever thought about.”
“This isn’t just, ‘We’re going to give you sustainable bags that use different materials,’” he said. “This is a whole change to a perfect ecosystem and to the next [era] of how things are going to be done. For anyone set in their old ways, it’s not going to work.”
For its 30 brand partners, six-year-old Resonance eliminates the need for production teams and patternmakers. And their designers must learn to create “perfect digital samples” of styles that can be made from digitally printed organic materials. Nothing is made until an order is placed — Rebecca Minkoff’s Shopify site feeds into Resonance’s systems, with orders typically reaching a customer’s doorstep in 7-10 days. And both brands and their end consumer can view an item’s creation-to-closet path, down to the amount of water used and carbon emitted at each step, on a blockchain accessible via a QR code.
According to Lawrence Lenihan, chairman and co-founder of Resonance, the company has brand partners that do $4 million in sales per year and are run by just one person. Its current partners include Pyer Moss, contemporary brand Tucker NYC, and flannels-focused JCRT, helmed by veteran fashion designers Jeffrey Costello and Robert Tagliapietra. The latter partnered with Rebecca Minkoff on a plaid collection, produced by Resonance, in mid-November.
Typically, Resonance holds equity ownership in its partner brands. Per Minkoff, the cost to manufacture at Resonance is “a bit higher,” compared to its other partner factories. But the overall margin is also higher.
“I don’t have to mark down items. I don’t have to clear [inventory]. I don’t have the normal cadence of: I’ve got 500 items, and a certain percent are going to go at a wholesale margin, some will go to retail margin, some will go to off-price, some will be discounted wholesale, some will be discounted retail,” he said. “And I’m not paying for storage space in my warehouse.”
He added, “Too much inventory is the death of a fashion brand.”
In the first year of the partnership, Rebecca Minkoff did six figures in sales of Resonance-produced styles. The goal is to wrap year two within the seven figures.
With the digital age offering new transparency to the resources and technologies available to fashion companies, consumers are upping their demands and heightening their standards for the brands they support. In turn, businesses are strategizing to clean up their processes. They’re also working to provide easy access to their sustainability-driven efforts and treatment of workers. As they reevaluate established systems to accommodate these goals, they’re increasingly finding solutions in sophisticated on-demand manufacturing partners.
Resonance aims to sign on 100 additional brands by the end of 2022. And other like-minded companies are sprouting up throughout the U.S. They include Evolution St. Louis that specializes in on-demand knitwear.
While Resonance’s brand expansion, to date, has primarily been through word-of-mouth — Minkoff and Lenihan met on a panel at Columbia University — it plans to launch a marketing campaign in January. It will target big, small and legacy companies, as well as individual creators. And the messaging will focus on educating prospective clients on the P&L its platform enables. “Our point is that brands should be [seeing] a 20% pre-tax margin,” said Lenihan. “And if they’re not — no brand is — they should talk to us.”
But just as there’s a learning curve for brands when onboarding with Resonance, Resonance has realized the need to make big changes as it scales. Minkoff mentioned “educating” Resonance on customer quality standards. And Lenihan stressed that the company is investing in automating currently manual processes. Expanding beyond its factories in the Dominican Republic, it opened its first domestic sewing factory in NYC in September. Experienced sewers, to start, are being trained on the company’s proprietary tech platform, thereby eliminating the “artisanry” part of sewing. Paying them a living wage required a “complicated re-architecting of the entire value chain” to maintain brands’ profitability, Lenihan said.
“We’re evolving, but our goals are the same: to enable successful brands,” he said. “They [need to] generate economic, environmental and social value. And those have got to be measurable, otherwise it’s fictional.”
For now, Rebecca Minkoff’s on-demand business is primarily a DTC play, focused on dresses. However, its wholesale partners have shown interest in the offering, Minkoff said. He added that selling on-demand allows the company to feature a large variety of options on its e-commerce site, risk-free. “The customer votes, and then you move on to the next thing.”
Getting in front of the industry’s direction has long been Rebecca Minkoff’s M.O. For example, the company was a pioneer in offering a see-now, buy-now collection, in 2016. It later jumped on fitting room technology and, in September, it released a collection of NFTs.
For Rebecca Minkoff, though its processes are more streamlined, Resonance hasn’t worked to totally eliminate current, rampant supply chain hurdles. Due to raw materials shortages, customers have seen orders land in 2-3 weeks, which is about double the normal lag time. But as Minkoff explained, it could be much worse.
“It’s not like my handbag factory [in Vietnam], which shut down from July 15 to November 1,” he said. “We have much more redundancy and diversification now.”
Digital ‘product passports’ providing transparency to brand supply chains are catching on
Achim Berg, McKinsey & Company’s senior partner and head of its global apparel, fashion and luxury group, broke down why “product passports” were called out as a top-10 2022 trend in McKinsey’s State of Fashion report, released on Thursday.
Why product passports are timely
“We are moving into a phase where individual products can tell a story and where technology can support that story — in particular, when it comes to traceability. And we know this is crucially important for sustainability and that younger consumers are demanding more information… Technology allows all of us to do something more than just produce everything in bulk very anonymously.”
The (complicated) path to passport
“The technology is not yet where it should be, but [brands] need to get started. But, in order to provide the [expected] information, you need to have the information for that individual product. And that becomes pretty damn difficult: You need to know exactly which batch it is from, which kind of yarn and fabric were used for that batch, where the yarn and fabric came from, and so on. If you do not have a very organized, streamlined, super transparent process all along [the way], you cannot provide the security and the information that you would like to provide in a passport. It needs to be more information than a neck label would provide. If you provide the technology, the customer will be much more demanding about understanding the details: What’s the factory name? What’s the worker’s name? When was it produced? If you expose yourself by providing that information, people will check it. And if you’re proven wrong, you’re gonna get a shitstorm, and rightfully so.”
Why luxury brands should care
“When we discussed sustainability with luxury companies 10 years ago, their response was, ‘Our customers trust us, and they expect that we have superior products that are of superior quality, and that we use superior craftsmanship. The world has changed. Today, because you’re luxury, you need to provide even more information. Because, if I’m shopping at that price point, I expect that the product is sustainable. I also expect that [the brand will] prove that to me, and that is where we’re heading … The hope is that [the product passport] will bring the customer back — because they like the transparency, they appreciate the additional information. It helps [a brand] to differentiate from others because they provide that information.”
What consumers can expect
“We’ve only seen startups and smaller companies [take full advantage of this technology] because their supply chain is easier to oversee and they’ve built it in a new way. [They include Pangaia and Reformation, according to the report.] They’re able to do the different steps that are required. We’re still waiting for the really big brands to do this for the larger parts of their assortments. The most natural [move] is to start with smaller parts of [the business] and a manageable set of information. Brands will test the waters and see whether the customer really responds to it. We’re still in the piloting phase.
For brands, it’s all about touchpoints with the customer. So of course, they’ll [take the opportunity] to put [QR code] users on a distribution list. And nobody is filling out a postcard anymore to register a product and to get an extended warranty — all of that will happen through product passports in the future. In the beginning, a very large number of QR codes will never be used. But it’s worthwhile to do it for the 10-20% that are.”
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