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Thirty years ago, clothing existed in two worlds. One of fashion, where opulent designers like Christian Lacroix created crinoline-filled ball gowns covered in ornate tapestries. And one of retail, where practical garments were sold at affordable prices for reasonable people.
Then the ‘90s happened, and fashion became more than a playground for those who could afford couture gowns. French luxury conglomerate LVMH (Moet Hennessy Louis Vuitton) and PPR (which owns Gucci, Balenciaga, Stella McCartney and more) began bringing in billions of dollars in sales a year. The money was made from, yes, clothes but also fragrances, handbags and accessories. The turn of the century brought us fast fashion, in which discount retailers—including H&M, Zara and Topshop—ripped styles right from the runways and sold them at a scandalously low prices.
Now, fashion is a $500 billion-plus industry, with the potential to make a lot more: particularly in emerging Asian markets. Click ahead to see who is currently setting the trends—and cutting the deals.
By Lauren Sherman, Special to CNBC.com
Lauren Sherman is an editor at “Lucky Magazine.”
Posted 16 May 2012
Andrew Rosen is a third generation member of the New York garment industry. So when he launched Theory in 1997, the CEO and his designer partner, Elie Tahari, already knew the ins and outs of manufacturing in the U.S., as well as abroad.
Rosen still runs Theory, the majority of which was bought by Japanese firm Fast Retailing (the owners of Uniqlo) in 2003 for $100 million. (Tahari left that year.) But he is also a personal investor in young American labels, forming what many consider the “mini-LVMH” in the U.S. (The French luxury conglomerate includes Louis Vuitton and Christian Dior, and is owned and operated by billionaire Bernard Arnault.) Along with popular mid-priced American labels Rag & Bone, Alice & Olivia and Helmut Lang, Rosen recently invested in industry favorite Proenza Schouler.
With the incredible success of fashion-tech startups like Gilt Groupe and Rent the Runway, venture capitalists are clamoring to invest in fashion brands like never before. These three VCs are leading the way.
Barnes, a partner at New York-based First Round Capital, is on the board of beauty sample startup Birchbox, which has raised over $12 million since 2010. First Round has also invested in Modcloth, Threadflip and Chloe + Isabel. In Silicon Valley, Accel Partners’ Ranzetta has invested in Birchbox, as well as affordable online jewelry site BaubleBar. Fisher, a managing partner at New York’s High Line Venture Partners, formerly of IAC, works with Fashism, Moda Operandi and Pinterest.
Industry veteran Jeff Rudes founded Los Angeles-based J.Brand in 2004, a pricey denim label that quickly became of favorite among trendy celebrities, including Nicole Richie and Katie Holmes. Known for popularizing the now-ubiquitous “skinny” jean, Rudes and his team have been able to continuously meet consumer demands, while maintaining an edge through collaborations with indie designers like Christopher Kane. The partnership with Kane was the result of a 2010 investment that Los Angeles-based Star Avenue Capital made in J Brand. As Kane is represented by CAA, Star’s relationship with Creative Artists Agency served as the conduit.
Responsible for making pop icons out of the Gap, Banana Republic and of course, J.Crew, Millard “Mickey” Drexler is the unofficial godfather of specialty retail. He also serves on the board of directors at Apple. Through clever television commercials featuring swing dancers in khakis, he turned the staid pant into the office uniform of the ‘90s. And in 2003, he joined J.Crew, assigning designer Jenna Lyons as the preppy label’s creative director and muse. In 2011, J.Crew had $1.722 billion in sales.
“From that rockstar status gained while at Gap, he has morphed into something like the retail godfather. Others look to him for advice on brand development, consumer engagement and design,” said Brian Sozzi, chief equities analyst for NBG.
Drexler and J.Crew are also the subject of a CNBC documentary, “J.Crew & The Man Who Dressed America.”
As owners of mini-chain Opening Ceremony, co-founders Carol Lim and Humberto Leon gained an industry following by stocking difficult-to-find, unknown labels—Suno, Rodarte—and catapulting them into the fashion spotlight. Along with their own eponymous collection, as well as collaborations with traditional American brands like Keds and Pendleton, Lim and Leon were named creative directors of LVMH-owned Kenzo in 2011.
English businessman Green runs Arcadia Group, one of the world’s largest purveyors of affordable fashion. Along with Burton, Dorothy Perkins, Evans, Miss Selfridge and BHS, Green heads up Topshop, the H&M and Zara competitor that brings runway looks to the street. Out of all the “fast fashion” chains, Topshop is the most celebrated within the fashion industry, in part due to unsolicited celebrity endorsements from style setters like Gwyneth Paltrow, as well as its collaborations with on-the-edge designers like Mary Katrantzou and supermodel Kate Moss. Green even wooed longtime British Vogue creative director Kate Phelan to Topshop in early 2012, where she oversees the store’s women’s collections.
While overall profits at Arcadia Group fell 38 percent in the 2010-2011 fiscal year, Green is still one of the richest men in the world, with an estimated worth of £3.3 billion ($5.3 billion), according to British newspaper The Sunday Times.
With investments in glamorous labels like Zac Posen, as well as Sean “Diddy” Combs’ Sean John empire, Yucaipa Companies founder Ron Burkle has varied interests: He started out in supermarkets and is currently a co-owner of the Pittsburgh Penguins. But his latest conquest might be the most unique of them all. After years of pursuit, Burkle’s Yucaipa—alongside New York investment firm Perry Capital—has acquired luxury department store Barneys New York from Dubai-based private equity firm Istithmar World, reducing Barneys debt from $590 million to $50 million.
They might not be traditional fashion industry stalwarts, but L.A.-based stylist Rachel Zoe and investment banker husband Rodger Berman have built a mini empire. Along with her Bravo reality show, a collection for QVC, and multiple celebrity styling gigs with A-listers like Cameron Diaz and Anne Hathaway, the duo launched a mid-priced label in 2011, currently sold at major retailers including Bloomingdale’s and Amazon’s Shopbop. Zoe and Berman also recently announced an investment in Santa Monica-based startup Pose, a photo-sharing app with a fashion and shopping slant.
Industry adviser Robert Burke is “hyper, hyper” connected, according to Jessica Gold, a business consultant and author of the blog Truth Plus.His consulting firm, Robert Burke and Associates, works with clients as varied as Target and Michael Bastian, an upscale menswear label, on brand positioning and licensing deals.
The daughter of LVMH CEO billionaire Bernard Arnault, Delphine Arnault doesn’t need to work. In fact, she’s a billionaire in her own right. Yet she’s making a name for herself as director of LVMH, where she oversees French fashion houses Dior, Louis Vuitton and Céline, among others. (She undoubtedly played a role in designer Raf Simon’s appointment as creative director of Dior, a position left vacant when designer John Galliano’s longtime struggle with addiction resulted in scandal.)
In the first quarter of 2012, LVMH saw sales increase by 25 percent to 6.6 billion euros, or $8.5 billion.