Crowdfunding Startups Are Looking To Refashion The Business Of Fashion

Editor’s note: Dennis Mitzner lives in Tel Aviv and is the Chief Editor of Inside3DP. He writes about startups, technology trends and politics.

Crowdfunding is enabling new fashion startups to fight against the industry norm of manufacturing in Asia, bringing production closer to home thanks to lower minimum orders, willing local manufacturers and the trend of unique, customized clothing.

Fashion startups such as Before the Label, I Am La Mode and Out of X use the crowd to provide an alternative to mass manufacturing for the masses. Small startups online are not looking to produce quantities comparable to big retailers, but instead respond to a growing demand of personalized and unique clothing.

The concept of these new fashion crowdfunding startups is simple and similar to Kickstarter and Indiegogo.

Each item has its own campaign with a minimum threshold to make the final cut. After the item gets the minimum amount of backers, the piece of clothing or accessory goes into production. The power is solely in the hands of the crowd that decides whether a dress gets made.

Tel Aviv-based OutOfX wants to break the manufacturing norm by incorporating two funnels: one between the business (individual designer) and the buyer of the end-product, and one between the designer and local manufacturers.

“Designers who submit the designs decide where to manufacture, but prefer to do it locally for obvious logistical reasons. After submitting and pricing the design, we put them in contact with a local manufacturer,” Shany Elkin, the creative director of OutOfX said.

Even though Elkin doesn’t rule out that in the future some designers might opt to produce in Asia, most do not.

“Manufacturing in Asia is only meaningful if you make huge amounts. We are currently collecting a database of manufacturers in the countries where our designers are based.”

As part of the website, the company plans to launch a service that rates local manufacturers to give designers more choice and create competition between local players to push down the prices.

OutOf X’s business model is based on revenue share with a flat fee of 12 percent from the purchasing price. It’s optimistic about the future as it expects its turnover to reach $10 million by 2016 and see the number of designers on the site rise to 5,000.

The main differences between the crowdsourced and retail models lie in the accuracy of determining the real cost of an item. Instead of first designing the summer collection, then estimating demand and finally manufacturing thousands of different styles in China or Indonesia, fashion startups use crowdfunding to turn the whole cycle upside down to let desginers and the crowd have a conversation about the demand.

Moreover, retailers suffer from a weak bargaining power which allows the manufacturers to demand large minimum quantities, along with the uncertainty regarding demand. This easily causes a massive surplus, which then leads to overloaded inventories. Such factors inflate the price tag, since the retailer is forced to compensate on the high risk and the anticipated losses.

The many fashion crowdfunding startups give the designers an ability to set up shop on a number of competing websites and choose between local manufacturers.

“Independent fashion designers know that they operate in a highly competitive industry and need to come up with their own fresh and unique advantages to stay relevant. Manufacturing methods such as 3D printing provide real tools to help indie designers make low quantities at low cost,” Nir Laznik, the co-founder of OutOfX, said.

Fashion through crowdsourcing seems to be a concept for the times due to a global trend that prefers customization and uniqueness to the grayness of the masses. However, whether Made by My Cousin Lisa replaces Nike and Armani is entirely up to the crowd.