A series of serendipitous events through Q1 2017 has seen the modest fashion e-commerce sector emerge with more sophisticated financial and corporate modelling in response to investors and market needs
The modest fashion industry acquired an increased patina of professionalism in the first three months of 2017 with the launch of new web and social platforms and structured financing increasing in the sector.
Turkey-based modest fashion major Modanisa won its fourth round of funding from Dubai-based Wamda Capital in March while modest fashion e-tailer Haute Elan opened a limited subscription bridge funding round before launching a Series A transaction, promising preferential equity to investors.
The Modist, an e-tailer for luxury modest fashion, went live, and Salt, a fashion and lifestyle company based in Dubai and London, announced the launch of its social platform.
The activity was clustered around two modest fashion shows in London, the first in February as part of London Modest Fashion Week hosted by Haute Elan and the second organised by Modanisa and Think Fashion in April.
Having ensured visibility, the focus areas for many modest fashion e-commerce sites now include consolidating a fragmented market that cuts across geographies and cultures, setting up manufacturing to match demand, providing a world-class customer experience via technology, and ensuring global reach.
“Scaling is not just about the countries that you ship to." - Ghizlan Guenez, CEO, The Modist
INCREASING GLOBAL MARKET SHARE
Modanisa, for instance, said it will use its newly-won funding, an undisclosed amount from Wamda Capital, to “further expand in the Middle East and North Africa, Europe and the U.S.”.
Modanisa Founder and CEO Kerim Türe’s plans, like Haute Elan’s, seem to include modest fashion runway shows in the race for increasing global market share. Last year, Modanisa sponsored Istanbul’s first International Modest Fashion Week. In April, his company was the title sponsor for London Modest Fashion Week held as part of London Muslim Lifestyle Show. The brand set up in 2012 already reaches more than 100 million customers a year in 105 countries, according to a statement.
Haute Elan’s Founder and CEO Romanna Bint Abubaker told Salaam Gateway from India, where the company’s investors are based: “We are looking at $2 million for bridge funding. We are at 60 percent commitment and we would like to close at 60 percent. We have launched the bridge round before we launch our Series A round.”
Clearly, a strategic approach to global reach is not just about couriering packages to multiple locations. The Modist Founder and CEO Ghizlan Guenez told Salaam Gateway: “Scaling is not just about the countries that you ship to. You may scale in terms of warehouses in different regions to ensure deeper reach into certain markets. You may need an office in that market. Growing is not just about shipping.”
While The Modist is entirely self-funded since inception, Guenez does not rule out fund-raising at a later stage.
Salt, which has been in business via a couple of its verticals for two years, envisages reaching local talent in all the countries it will have workshops in and ship to. Also self-funded in the first phase, the company is now seeking investors.
“The concept was born in Dubai. It has moved to London to become more global. We are more accessible to Europe, which is our Phase II,” founder Asil Attar told Salaam Gateway.
"Everyone and their son are launching a brand." - Romanna Bint Abubaker, CEO, Haute Elan
While the Muslim consumer market is estimated at its population size (calculated at 1.6 billion in 2010), these consumers form a majority in about 50 countries, each with its own local preferences, which makes it difficult to create a one-size-fits-all business model, or to demonstrate market size to potential investors.
Haute Elan aims to follow “the LVMH model” – the luxury group comprises 70 brands cutting across sectors such as wines, fashion, perfumes, cosmetics, watches and jewellery. “We become the marketing and technology lead and allow start-ups to focus on creativity. We take care of business, administration and growth,” Abubaker said.
However, valuation becomes difficult due to the nature of the market. “Valuation depends on demonstrable size of market based on the amount of revenue transacted through the platform. The modest fashion market is fragmented. The Muslim market is spread globally, including in places such as India, China, the UK, Germany and America. In order for us to achieve a good valuation, we need to see the numbers go up.
“Everyone and their son are launching a brand. We try to explain to them we need to come together and transact all that revenue in one place so it benefits everyone,” added Abubaker.
While modest fashion is growing every year, across the world, sizing the market is a difficulty that crops up for most start-ups looking to scale. Abubaker said: “We are a curated Amazon-style platform. We need to demonstrate transactions. Many of these platforms have their own e-commerce site, with some of the transactions taking place across borders. We’re a UK-based modest fashion company and we are not able to demonstrate their true sales volume. This is needed to calculate the revenue of modest fashion. We don’t know the size of the market.”
NURTURE TALENT – CREATE PRODUCTION LINES
Selling products online is just one part of the story. For Haute Elan, also on the cards is an India-based platform in the next couple of months, along with setting up manufacturing facilities in Asia.
Nurturing talent to showcase on their e-commerce site is part of the strategy for Salt as well. Attar said: “Salt as a business is split into four verticals. One of the verticals is Salt-e [e-commerce], which we hope to launch in 12 months. Another is Salt Social, with interviews and inspirational stories. Salt Talks is the educational arm, which will have workshops for all creatives, allowing designers to commercialise their creativity – how to set up and build a brand – via coaching and mentoring to help them kick-start their business. Via the social responsibility arm we support and work with charities in different ways. We focus on heritage and artisanal work with Syrian and Iraqi refugees.”
Attar says Salt aims to “support all local talent” wherever it maybe, and has plans that include specific local strategies.
“Local to us is whoever we are reaching directly. We are heavily focussed on the Middle East. They are our local talent. And we have an arm in Europe. As we become more global, we would do Salt Asia or Salt Indonesia, for instance. If we do Salt India, we will be promoting Indian designers and cultural tastes. Initially, e-commerce was about a generic approach, but the more global we are, the more we have to take this into account.”
Haute Elan plans to use at least 40 percent of the funding it receives on manufacturing. “The most important for us is to scale so there are more products and more sales. These are our two core areas. If we build the demand and the products do not suffice [we have a problem]. We need to pre-fund designer collections,” Abubaker said.
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