As The Row reportedly seeks investment, why brands turn to funding for growth

It has been a year since reports emerged of New York-based fashion brand The Row seeking external investment. Founded in 2006 by the billionaire Olsen sisters Mary-Kate and Ashley, the quiet luxury fashion brand is reportedly looking for outside funding, and, according to Paris-based fashion news website Miss Tweed, has appointed Goldman Sachs to handle the funding round.

Revenue at The Row is estimated to hover around 100 million dollars, though some industry experts suggest it could be as high as 250 million dollars. Either way, these figures are still too low to attract buyer interest from luxury conglomerates like LVMH or Kering, which typically consider acquisitions of businesses valued at 1 billion dollars or more.

In an interview with the Financial Times last November, the founders emphasised their preference for organic growth: "What we’re doing is as sustainable as possible for us. But most of the time we’re saying no to things so we can be more in control. I think if you grow too quickly and feel pressure to push forward, you risk making more mistakes. It’s a family-owned business and we need to do what we feel is right for us. And that’s what we protect.”

Why fashion brands seek external investment

Fashion brands often pursue outside investment for various strategic reasons, primarily to fuel growth and navigate market challenges. Brands that aim to enter new, high-potential markets will no-doubt face significant barriers such as regulatory challenges, established competitors, or high initial marketing costs. External investment provides the capital needed to overcome these obstacles, allowing brands to establish a presence in lucrative regions.

Product Line Diversification

Launching new product lines or categories can be capital-intensive. Investment allows brands to innovate and expand their offerings, keeping up with consumer trends and increasing market share.

Digital Transformation

In the digital age, building robust e-commerce platforms, enhancing digital marketing efforts, and integrating advanced technologies (like AI and data analytics) are crucial. Investment supports these technological upgrades, improving online presence and customer engagement.

Operational Scaling

To meet growing demand, brands may need to scale operations. This includes investing in manufacturing capabilities, expanding distribution networks, and enhancing supply chain efficiencies. External funding provides the necessary capital for these scaling efforts. Additionally, for brands with physical retail locations, expanding the number of stores or upgrading existing ones requires substantial investment, which is essential for increasing brand visibility and sales.

Financial Stability

Some fashion brands seek investment to strengthen their balance sheets, particularly if they have been affected by economic downturns or market volatility. This includes paying down debt, improving liquidity, or building reserves to ensure financial stability.