Fashion Crowdfunding – The Challenges
Over the last year we’ve seen hundreds of applications from eager independent fashion designers who want to take their brand to the next level, with a little help from crowdfunding. So,what is crowdfunding? Simply put, today, crowdfunding means raising money from different individuals through an online portal.
There are three types of crowdfunding: donation based crowdfunding, when the project owner gets “donations” for his or her cause; reward based crowdfunding, when the project owner provides different rewards to backers for their monetary support; and there is equity based crowdfunding, when the project owner gives away equity in return for money.
Luevo’s crowdfunding platform is product-based, very similar to the reward based crowdfunding model. On our platform, fashion designers use their product as a reward, so those interested in supporting a brand they can do it by pre-purchasing a product. It is the basis of pretail and the future of fashion.
With so many choices and success stories, crowdfunding is an easy way of raising money, right? Wrong. Crowdfunding like any other type of fund raising has its challenges. More so, studies show that fashion based projects have a lower than average success rate (for example, on Kickstarter – the largest crowdfunding platform the average success rate is about 40%, however fashion projects have success rate of approximately 25%)
I feel it is my duty to give you some insights into the challenges of creating a successful fashion crowdfunding campaign, and in a future article I’ll go over best practices and hacks you can use as a fashion project owner.
1. Time.
Project owners underestimate the amount of time they need to put into building a successful campaign. I sometimes get the very eager fashion designer asking me “I want to use your platform, how soon can I login and use it?” Well, like with any other platform, designers can use our system any time. However, my answer always includes a reminder that they should spend at least 2 months preparing for the campaign.
And this is the first challenge: taking time away from your day-to-day business in order to plan, create and monitor your crowdfunding campaign. And once the campaign is over, you are not done yet! Hopefully you’ve been successful and now it’s time to prepare those rewards for your backers.
2. Money.
Funny enough, you need money to make more money. You will need money for marketing, PR, and even for creating the rewards, packaging and shipping. Most often, packaging seems to be an overlooked expense that you will encounter. You will also need to set aside a budget for the campaign itself: you will need good photography (especially if you are using your products as rewards), a video and you even might need help from a copy writer. All of these cost money.
3. Rewards
Creating the actual rewards can be a challenge, especially for fashion designers. The most successful campaigns on Kickstarter are those that have”affordable” reward levels, like gaming projects. Gaming project owners can ask for small amounts in return for early access to the game or other features. This is easily achievable for digital projects but not as much for physical product companies, like fashion brands.
So the challenge to overcome here is to find the right suppliers and manufacturers, lower your production costs, and give discounts to your initial buyers in a crowdfunding campaigns.
I know this last point will not sit well with most designers. But you have to think of a crowdfunding campaign like any other marketing campaign. The highest cost to pay is to gain a new customer, but once you do gain them, your goal is to sell them again, and again (cheaper to retain than acquire customers).
With a crowdfunding campaign, you not only gain new customers, but you gain PR, advocacy, word of mouth marketing and support and so much more. You will gain brand ambassadors that will advocate for you and support you in your venture’s future. So yes, while there are challenges, the rewards are much greater, and a crowdfunding campaign should be seen as only a part of your ongoing branding and marketing efforts.
If you enjoyed this article, check out our crowdfunding e-book, 77 pages full of templates, workbooks and step by step instructions on how to build a successful crowdfunding campaign on any platform.
This article was written by our co-founder Ana Caracaleanu.