Dion Lee collapse: Why Australian fashion businesses are struggling

The CEO of a popular luxury brand rental company has revealed why so many designer clothing brands are collapsing in Australia.

Fashion lovers were shocked when the Australian franchise of renowned fashion label Dion Lee went into administration this week.

It’s understood the beloved brand, worn by megastars like Taylor Swift and Dua Lipa, went bankrupt after a partnership deal with Cue Clothing Co fell through.

It follows the collapse of other fashion giants J. Crew, Neiman Marcus and Brooks Brothers, with Farfetch and Net-a-Porter also facing financial problems.

Bernadette Olivier, CEO and co-founder of The Volte – a marketplace for the rental of designer fashion – told Daily Mail Australia the industry was “on the brink of collapse”.

Ms Olivier said the rise of Chinese fast fashion powerhouses such as Shein and Temu was only adding to the increasing pressure on designer labels.

A model walks the runway during the Dion Lee Spring 2023 fashion show in 2022

“These new players, with criminally low prices and huge advertising budgets, have brought an already fragile industry to the brink of collapse,” she said.

The CEO said a new trend of ‘online trying’ – where influencers share their proceeds with their followers to decide which items to keep – was causing waste.

“The rise of TikTok and the increased popularity of Instagram stories and reels have revealed new consumer habits,” she explained.

‘Consumers are turning online shopping into ‘trying online’, often posting their ‘purchases’ to followers to decide which garments to keep, while returning the majority.

‘Retailers have been slow to recognize this trend and report that as much as 50 percent of inventory sold online is returned, with a significant portion ending up in landfill or incinerated due to cost-effectiveness.’

In the United States, the mismatch between supply and demand has resulted in up to 30 percent of the inventory produced never being sold.

According to the Boston Consulting Group, the growing trend is costing the fashion industry up to $210 billion.

“This overproduction poses not only a financial threat, but also a rapidly increasing threat to the global environment,” Ms Olivier said.

The CEO said changing customer sentiments, rapid decline in brand loyalty and higher regulatory costs also increased the retailer’s challengers.

She encouraged brands to use data analytics and AI to predict their customers’ demands, which could then be better matched to production.

Fashion lovers were shocked when the Australian franchise of renowned fashion label Dion Lee went into administration this week (designer Dion Lee is pictured in 2023)

It’s understood Dion Lee’s Australian franchise collapsed after a partnership deal fell through, with only Australian store operations affected

“Improved virtual card development, accurate sizing, descriptions and images, and the use of AI to make personalized recommendations based on previous purchases can reduce returns,” she said.

Ms Olivier said it is important that brands embrace the circular economy, with the resale economy growing ten times faster than the traditional clothing industry.

“Part of the integration is to ensure that brands can monetize these new business models, allowing retailers to generate revenue in addition to producing and selling more clothing,” she says.

Antony Resnick, a trustee of insolvency company dVT Group, was appointed as administrator for Australian Dion Lee.

Major clothing label Cue Clothing Co has reportedly terminated their partnership agreement with Dion Lee and also canceled their investment in the company.

Cue Clothing Co first became a partner of Dion Lee over a decade ago and was a shareholder in the company. The Australian reports.

Only Australian store operations are said to be affected and customers can still access the company’s online website.

Founded in 2009, the company has six stores in Australia and 160 points of sale worldwide, including a store in the US that opened in December last year.