NEW YORK, United States — American fashion star Zac Posen shut down his line on Friday, letting go around 60 employees. He needed a new investor to keep operating, and couldn’t find one, so a “board of managers” voted, after nearly 20 years in business, to end it.
In a melancholy interview with American Vogue, Posen positioned himself as a realist. “I’ve been personally trying to find the right partner for some time,” he said. “But time ran out, and the difficult climate out there … it’s not an easy time in our industry.”
Posen had two decades to make it work. But was he set up for failure from the beginning?
The designer’s enchanting rise and near-predictable fall are emblematic of the last 20 years in American fashion. The first of a new generation of young American designers to come on to the scene in the early aughts, his brisk ascendancy marked a new era. Unlike Donna Karan, Calvin Klein and Ralph Lauren, who were not only born and bred in New York, but also trained there, Posen’s career kicked off in Europe. He studied at Central Saint Martins — and was sometimes compared to Alexander McQueen — at a time when newly formed luxury groups had begun hiring young talents to make like Karl Lagerfeld at Chanel and turn their dusty couture houses into multi-million (and sometimes billion) dollar businesses.
That halo remained when he quit school, returned to Manhattan and opened his brand, doing everything you were “supposed” to do to make it big. He competed in the first CFDA/Vogue Fashion Fund contest and was endorsed and supported by American Vogue and its powerful editor, Anna Wintour. His dresses became a celebrity red carpet mainstay just as the red carpet became a can’t-ignore marketing tool. He was well-known enough to replace Michael Kors on the popular reality show “Project Runway”. He also had the right social profile, with friends like Stella Schnabel — daughter of artist and filmmaker Julian Schnabel — and the late editor Isabella Blow, whose endorsement carried significant weight in fashion’s most judgmental circles.
But none of that really matters if you can’t make money and you’ve promised others that you can. Posen brought on an outside investor quite early on. And a famous one at that: rapper and designer Sean “Diddy” Combs owned half of the business by 2004, just three years after launch. Later on, investor Ron Burkle’s private equity firm Yucaipa Companies — which also held a stake in Barneys New York — would buy Combs out.
Private equity firms expect an exit, usually in three-to-five years. That meant Posen was required to scale up — and fast. So he launched a contemporary line as well as a reasonably priced handbag collection, eventually taking an outside job designing for Brooks Brothers, even if his personal brand — rarefied red carpet glamour — didn’t exactly jibe with the shirting label’s East Coast prep-school aesthetic. He also nabbed that hosting gig on “Project Runway”. After all, it had worked for Michael Kors, who parlayed his celebrity into an initial public offering that made him a billionaire.
But Kors designs sportswear, and was hip to the casualisation of society. What Posen is good at — custom gowns that are painstakingly assembled in an atelier populated with highly skilled workers — does not scale. It is not the sort of business that should be owned by a private equity firm. If you can’t get the money-making components right — the bags and the shoes if you are luxury; the Macy’s line if you are mass — evening wear is not enough to achieve an investor’s desired results.
Posen tried. He took risks. For instance, he was the first designer to appear on flash sale site Gilt Groupe in 2007. This was just as the Great Recession was creeping in — less than a year before the Lehman Brothers bankruptcy — and at the time the choice was viewed by some as gutsy and innovative, not desperate.
In 2010 he showed in Paris, where he thought his clothes would be understood better. (Yohji Yamamoto had suggested it.) At one point, he was attached to Harvey Weinstein’s ill-fated relaunch of the house of Charles James, the highly influential, if barely known, English-American couturier. A 2014 exhibition of James’ work at the Metropolitan Museum of Art’s Costume Institute introduced the designer to the general public, most of whom had never heard his name.
In 1958, James’ business was also forced to shut down. While he charged extraordinary prices for his custom work — the only kind of “real” fashion that existed at the time before the rise of ready-to-wear — the margins were too slim, and he was ridden with debt.
The difference between Posen and James is that fashion is now run by giant companies like LVMH and Kering, ones that make it very hard for independent designers to compete. The conglomerates can price their merchandise more carefully, market more forcefully and open stores more aggressively. It’s nearly impossible to compete.
Posen may be the most well-known designer to close his business in recent years, but he is certainly not the only one. Ralph Rucci, perhaps the most critically admired living American designer, has had an equally tough, if not tougher time: he no longer owns the rights to his name. After years of hopscotching private equity firms, Proenza Schouler designers Jack McCollough and Lazaro Hernandez bought back their label with a new group of investors. Thakoon Panichgul partnered with Silas Chou, who backed Michael Kors and Tommy Hilfiger, to relaunch his label as a direct-to-consumer line, only to close less than a year later. (He is now trying once again.) Derek Lam, known for clean-and-classic American sportswear, is no longer making high-end clothes, focusing on his margin-driving contemporary collection instead. Peter Som is closed. Richard Chai is closed. Even Marc Jacobs’ business, backed by LVMH, is now driven by fragrance and beauty.
None of this diminishes the talent of these designers, nor does it mean that they will never be successful. But that success must look different than it once did, because it’s never been harder to sell expensive clothes at full price. If you want to be big, if you want to get rich, if you want to last, you have to find another way.
The closure of the “House of Z” happened the same day that a bankrupt Barneys New York was sold to a licensing firm planning to rent the luxury retailer’s name out for a profit. Maybe it was a sad coincidence, maybe it was a harbinger of things to come. (An extremely low US unemployment rate aside, the “cooling” global economy is likely to keep everyone on high recession alert.) But it also marked the end of an era in American fashion. Some of these designers will come out the other side, most will fade away. The ones that are triumphant will be those who understand the old way of doing things never really worked in the first place. Fashion is a business now, not a sport.