Another Label Flows From Mind of Designer, a Wellspring of New Ideas
John Bernard has put his stamp on shorts, sneakers, swimwear, sunglasses and sweaters over the past decade, becoming a player in the rollicking world of youth apparel.
Now the brains behind such labels as Spot Sport, 26 Red and Fivecrown is at it again, with a new line called Suburban, whose worldwide sales are powered by aggressive licensing deals. The moderately priced urban designs for young men and women are sold everywhere from Nordstrom to Delia’s catalog to its own namesake store on Los Angeles’ hip La Brea Avenue.
Bernard can claim an influential stake in the Southland’s youth-driven $2-billion apparel industry, but he is not a household name like Stussy or Mossimo.
In fact, few of Bernard’s peers even know the 36-year-old Laguna Beach businessman. Bernard, unlike his colleagues in Southern California’s high-profile apparel trade, has remained behind the scenes, content with his incessant habit of starting one new label after another.
But what Bernard lacks in name recognition with consumers he more than makes up for with retailers.
“We see him as one of those visionary guys constantly coming up with new ideas,” said Bob Sayre, vice president of young menswear and outlets at Anaheim-based Pacific Sunwear of California, whose 300-plus stores carry Suburban and 26 Red. “It’s just his way.”
Bernard’s stream of ideas is cultivated under the umbrella of Spot International, which took in about $2.5 million last year in royalties from six licensed brands.
What sets Bernard apart from his peers is his extensive use of licensing agreements to expand his brands.
In such arrangements, the right to make products bearing a name, logo or design is sold to a manufacturer in exchange for a percentage of sales, usually 4% to 7%, paid in the form of royalties.
These deals allow companies to expand a brand at minimal cost, and are an effective way of penetrating overseas markets that, for many small companies, are either inaccessible or too expensive to ship to.
Bernard has pared his operations from a staff of 40 three years ago to a highly experienced team of just two: national sales manager Greg Garett, who worked at Ocean Pacific and Gotcha, and designer Bryce Cole, who works out of the Los Angeles store, where he keeps an eye on consumer reaction to the products.
The disadvantages of licensing agreements include the loss of control over quality, distribution and sales. The fine print of licensing contracts usually contains some safeguards, but ensuring that they are enforced is another matter.
Licensing deals work best with established, well-known brand names, said Tony Cherbak, an apparel industry expert at the Deloitte & Touche accounting firm. “It’s a great formula for the Hilfigers, the Quiksilvers and the Polos, brands that have been built over a span of decades, not three or four years,” he said.
Spot International’s labels “seem to have not gotten built up to the extent that you’d like to see before they started diversifying,” Cherbak said. “Those names never became a real mainstream, core type of brand.”
In an industry that places a premium on authenticity, it rankles some that Bernard creates brands and quickly pawns them off to licensees. It’s seen as cashing in, rather than cultivating a lifestyle.
Increasingly, the fashion business is not just about selling clothes. Consumers and competitors put pressure on companies to prove their commitment to the lifestyles they promote in their ads. Such participation is not limited to street and surf brands either, with Tommy Hilfiger, Ralph Lauren and Calvin Klein lending their mark to sports and music events.
But Bernard believes the opportunities outweigh the risks.
“My strengths are design, marketing and sales,” he said. “If I can focus on those things and not worry about production or fittings or shipping, the opportunity for growth is so much more. Plus I don’t have to worry about inventory and those related risks.”
With Suburban, Bernard is trying to capitalize on what his retailers and young customers expect: fashion packaged with cool logos and images, and priced 20% less than competing brands.
Bernard is able to achieve the lower prices through a 10-year licensing deal with Irving B. Reider, a Chatsworth manufacturer that has factories in the Dominican Republic, China, India and Pakistan.
Suburban currently accounts for 20% of Reider’s annual sales, and it could rise to 50% in the coming years, said owner Marty Reider, whose company has made Dickies boys wear, school uniforms and private-label apparel for Target and Miller’s Outpost.
The popularity of Suburban has allowed Reider to “grow a lot faster than I expected, than anyone expected,” Reider said. “But it fits [Bernard]. He’s a very high-energy guy who keeps his fingers in everything.”
Bernard expected Suburban to generate $7 million in sales its first year. Instead, it grossed $10 million, and Bernard now thinks sales could reach $20 million this year. He recently signed agreements with Canadian and Australian licensees and projects an additional $2 million in sales from each of those deals.
His relationship with his nine licensees ranges from direct participation in design and marketing to simply collecting the royalty checks.
Fashion was the furthest thing from Bernard’s mind when it came to choosing a career. After graduating from high school in California, he considered returning to Tulsa, Okla., where he spent his early childhood.
Instead, he enrolled at USC and earned a degree in urban regional planning. Real estate was booming at the time, and Bernard thought he might join many of his friends in the business.
But Bernard went to work in his father’s Hayward computer business, Casi, which invented an automated warehouse distribution system used by Levi Strauss & Co. and Gap Inc. But that didn’t hold his interest.
“I was always enthralled by the fashion industry. I just never thought of it as a career,” he said.
In 1987, Bernard saw fellow Trojan Mossimo Giannulli pocket a bundle with his blinding neon volleyball shorts. So Bernard borrowed $250,000 from his parents to launch Spot Sport.
The market “was going Richter at the time,” he recalled. Bernard repaid his parents’ loan and, as he has with each new brand, reinvested the profit.
In a business where timing is everything, Bernard has been most punctual.
In the early 1990s, when beach apparel was in the tank, Bernard had already turned to the burgeoning underground music events called raves. Like many designers, he saw inspiration in the electronic music and oversized fashion, and launched 26 Red.
In 1989, sensing a void in young women’s apparel, he launched Spot Girl and Spot Swim, licensing them within a year. A slew of other brands followed.
Today, Spot International has nine licensing agreements, with sales projected at about $57 million this year.
Bernard’s ideas haven’t been confined to apparel. He’s also a partner in Shout Public Relations, a fashion-oriented agency with which he shares office space.
The construction of a $2-million Frank Lloyd Wright-inspired home in Laguna Beach has kindled Bernard’s interest in furniture and fixtures and revived a latent dream of owning a hotel.
Where and when that might happen isn’t clear, but Bernard and his two partners are casting about in Laguna Beach.
Bernard wants to introduce Orange County to the latest trend in lodging: the chic boutique hotel, such as the Avalon in Los Angeles or the Paramount in New York.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
John Bernard
Age: 36
Residence: Tustin
Education: Bachelor’s degree in urban regional planning, USC, 1987
Personal: Divorced, one son.
Hobbies: Shopping, studying architecture, collecting mid-century furnishings.
Quote: “I was always enthralled by the fashion industry. I just never thought of it as a career.”
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Expanding Spot
Spot International is one of the more prolific apparel licensers in Southern California. Here’s a look at the company’s licensing deals, which are expected to generate sales of about $57 million this year.
*--*
Label (business) Founded Licensee 26 Red (street wear) 1993 Azita Mfg., Irvine Palmer Corp., Australia Sugar (young women’s) 1994 Smart, Irvine 26 Redtred, Sugar Shoes 1996 Rim Inc., Irvine (footwear) 26 Redeye (eyewear) 1996 Blue Gem Sunglasses, Carpinteria Fivecrown (men’s shirts) 1995 Azita Mfg., Irvine Suburban 1998 Irving B. Reider, Chatsworth (street/sportswear) Glen Knott, Canada Ron Luff, Australia
Projected 1999 sales, Label (business) in millions 26 Red (street wear) $6.0 6.5 Sugar (young women’s) 12.0 26 Redtred, Sugar Shoes 5.0 (footwear) 26 Redeye (eyewear) 1.5 Fivecrown (men’s shirts) 2.0 Suburban 20.0 (street/sportswear) 2.0 2.0
*--*
Source: Spot International
