How To Diversify Into Different Fashion Verticals?
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How To Diversify Into Different Fashion Verticals?

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Fashion is a very broad industry. There are many different categories and each of these categories has many different subcategories. All fashion brands need to plan their business in a way that is profitable in the long term. And one of the ways to do it is vertical diversification.

Vertical diversification is a strategy to expand your business by adding new products, services, or markets to your existing business. It helps you reach more customers and earn more profits.

But how do you do that with your fashion business?

This article will tell you what vertical diversification is, why your fashion business needs it, and how to diversify your fashion business. Plus, the advantages and disadvantages of vertical diversification.

What is vertical diversification in the fashion business?

In simpler words, it is adding different verticals to your existing fashion business. And it could be new products or new services.

For example, if you are a fashion brand specialising in bridal wear, you can add more verticals as casual or kidswear.

You can also add different verticals in services. For example, you are dependent on a supplier to source raw materials or a manufacturer to take care of the production process. Then you can diversify your business by acquiring a supplier or manufacturer and reduce third party involvement.

The main objective of vertical diversification is to reach more customers or reduce dependency on your suppliers. Read the next point if you don’t know why your fashion brand needs vertical diversification.

Reasons to consider vertical diversification

Reasons to consider vertical diversification

As the fashion industry continues to grow and diversify, more and more businesses are being created to fit the needs of consumers. Diversifying into different fashion verticals helps businesses to reach more people by meeting the demands of various consumer types. 

But if you are not sure, if your fashion brand is ready for vertical diversification, the following points will help you evaluate.

  1. You need more customers and increase your revenue.
  2. You are a stable fashion brand and are doing well. But now, you want to experiment with your products or services.
  3. Your current products no longer offer opportunities for further growth.
  4. You need better supply chain services for your fashion brand.
  5. You want to expand your eCommerce business.
  6. You want to cut third party costs.

Now you have the reason for vertical diversification, take a look at the types of vertical diversification in the fashion industry.

Types of vertical diversification in the fashion industry

There are two types of vertical diversification - backward and forward.

1. Backward Diversification

The backward diversification is when you decide to produce raw materials for your fashion business. It will allow you to reduce your dependency on suppliers. And will help you with cost savings, increase revenues, and improve efficiency in the production process. It also gives you better control over the supply chain process.

You can merge with a supplier or acquire one in this diversification strategy. 

2. Forward Diversification

 Forward diversification is when you decide to take charge of the selling and distribution of your final products. It allows you to connect with your customers and gives better control over distribution. It also helps you lower production costs and improves the efficiency of your business. 

You can implement this strategy by opening more physical stores or selling products through your eCommerce portal as a fashion brand.

No matter what type of diversification you choose, the process is the same for both. The following points will give you a broader perspective on how to diversify the fashion business into different verticals.

How To Diversify Into Different Fashion Verticals?

How To Diversify Into Different Fashion Verticals?

Before vertical diversification, you need to consider a few things: evaluating your customer base, resources, and market needs. All the points are elaborated on below.

1. Evaluate your resources

The first thing you must think about is your resources. Consider the following points while evaluating.

  • Do you have the financial capacity to diversify your fashion brand?
  • How are you going to arrange the capital?
  • What is the initial investment in diversification?
  • Do you have any mentors to guide you in diversification?

2. Know your customers

Now that you are sure about your resources, the next obvious thing is to think about customers.

  • Do they need your new products?
  • What are the requirements you can fulfil through diversification?
  • What is your customer profile? (Demographic & Psychographic data)
  • How are you going to reach your customers?

3. Think about verticals that complement your business

Once you have your customer profile think about the verticals that fulfil their needs as well as complement your business. 

  • Is it a new clothing line? Or changes in the existing apparel?
  • Do you need different raw materials to fulfil their needs?
  • Do you need to offer products at lower prices?
  • Do your customers need variety in the products?
  • Do you need more distributors or delivery partners?
  • How can you integrate eCommerce into your existing business?
  • Where do you need to open new stores?

Consider all these points to evaluate your vertical diversification strategy.

4. Have the right people in place

If you don’t have the right people working for you, all the efforts will go to waste. 

How to make sure you are working with the right people?

  • Hire talented people who have previous experience in the same vertical.
  • Train your team before implementing the diversification.
  • Hire different people for each department.
  • If you are expanding in different regions, you must hire a local team.

All of the points mentioned above will help you implement your vertical diversification strategy with a bang. 

But before going ahead with vertical diversification, take a look at the advantages and disadvantages.

Advantages of vertical diversification

  1. It increases your revenue exponentially. If you choose backward diversification, you are cutting third party costs. And if you choose forward diversification, you are cutting distribution costs. Either way, you have the potential to increase your profits.
  2. You can expand geographically by opening new stores in different cities. And this is possible through the forward diversification strategy.
  3. It guarantees garment quality control. If you produce your raw materials and handle the manufacturing, you can easily control the quality of products. It is possible through a backward diversification strategy.
  4. Vertical diversification will allow you to set yourself apart from your competitors.

Disadvantages of vertical diversification

  1. Vertical diversification is a high-risk strategy. It can go wrong because of the lack of experience in the sourcing and manufacturing processes.
  2. Vertical diversification can be expensive. And if you don’t evaluate your finances properly, you are sure to face loss.
  3. It requires a significant expansion of human and financial resources. And if done wrong can put your business at the backfoot.

The bottom line is, vertical diversification is one of the most important strategies for building a solid and successful business. It is also an important strategy that every fashion brand should employ. You can attract a wider audience and increase your sales by offering a wide selection of stylish clothing and other fashion accessories. Additionally, by selling a variety of products, you can reach a larger market and be more competitive in business. 

For more information on how to source materials for your fashion brand, contact Fashinza.


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