Rags to riches: hip-hop moguls use groundbreaking designs and star power to challenge major clothing labels and become a force in the $164 billion fashion industry - The Hip-Hop Economy: Part 4 Of A Series

Black Enterprise, Sept, 2002 by Jeffrey McKinney

ON A MILD FEBRUARY EVENING, NEW YORK'S GLITTERATI ARE OUT IN FULL FORCE. GATHERED IN THE OPULENT catering hall of Cipriani's, a swank Italian restaurant in the heart of Manhattan, a mix of celebrities and business powerhouses mingle and sip champagne. They await one of the most talked-about events of Fashion Week--the industry's prestigious semiannual coming out party. Those in attendance represent a select group of luminaries who received invitations on an embroidered white linen handkerchief inside a velvet box, complete with a pair of silk-knot cuff links.

As Frank Sinatra tunes fill the room, a series of male models, dressed in natty three-piece suits, cashmere overcoats, and military style tuxedos, saunter up and down the runway. At the end of this sartorial display, the man responsible for the $1.2 million extravaganza emerge onto the catwalk. Scan Combs--better known as "Puff Daddy" or more recently "P. Diddy"--takes his bow. Al this event, he's not the multiplatinum-selling rap artist and producer. Combs is the designer-entrepreneur who just introduced Saville Row to the hip hop world. On this evening, the mogul unveils his classic men's line and, at the same time, comes closer to reaching the goal he set when he started his 3-year-old enterprise: "To bring entertainment to fashion."

In just a law short years. Combs has grabbed Seventh Avenue by the lapels. By building one of the hottest fashion houses, he has gained considerable clout. In fact, at the beginning of last February's Fashion Week, the audacious entrepreneur appeared with Terry Lundgren, president, chief operating officer, and chief merchandising officer of Federated Department Stores, one of the largest such chains in the world, to ring the opening bell at the New York Stock Exchange--an act typically performed by business heavyweights.

It's not surprising that he would be bestowed with such an honor. Scan John, the apparel arm of Comb's Bad Boy Entertainment, has rung up mammoth sales. Its 2001 estimated revenues: roughly $250 million.

The rise of Sean John represents a major shift in the world of fashion. Hip-hop moguls are creating new patterns in the industry and, consequently, sewing up market share. A decade ago, hip-hop artists were decked out in Timberland footwear or Tommy Hilfiger apparel, rapping about these brands in their lyrics. Just a few years ago, hip-hop entrepreneurs who produced their own lines were either shut out of major fashion shows or relegated to urban apparel ghettos within department stores.

Now, when models blaze runways at the make-or breaks Magic Marketplace fashion show--a major industry event held semi-annually in Las Vegas--styling a snazzy double-breasted, three button white dress suit from Sean John or a sporty V-neck velour two-piece stitched by rapper Jay-Z's Rocawear women's collection, they dominate the show. These hip-hop-inspired designs are also steadily capturing market share from such iconic labels a Ralph Lauren Polo and Donna Karan. By creating trendsetting brands, they're reaping huge financial rewards from the $164 billion domestic fashion industry.

Clothing companies launched over the past decade by Comb Jay-Z, and Godfather of Hip-Hop Russell Simmons have become dominant players in the so-called urban apparel niche. They're not alone: Other performers--Master P. Snoop Dogg, Fat Joe Busta Rhymes, Outkast, and Jennifer Lopez--have either developed apparel outfits or lent their names to marketing and [Unreadable text in original source.] efforts of new and existing lines. And that doesn't include scores of companies run by businesspeople who never picked up a mic.

These entrepreneurs are selling large. The urban apparel segment of the industry alone grosses a whopping $58 billion in annual sales, according to Marshal Cohen, co-president of NPD Fashion World, a consulting firm that tracks the nation's apparel and footwear industry. By 2007, urban apparel sales are expected to increase by another 48.28% to about $86 billion.

Such phenomenal growth explains why apparel manufacturing and licensing have become one of the fastest-growing sectors of the Hip-Hop Economy. Consider: Simmons' Rush Communications Inc. (No. 16 on the BE INDUSTRIAL/SERVICE 100 list) racked up $192 million in sales last year, 85% of which are derived from his men's, women's, and children's apparel lines.

Karl Kani, CEO of Karl Kani Infinity Inc. (No. 41 on the BE INDUSTRIAL/SERVICE 100 list with gross sales of $76.9 million) and the self-proclaimed Godfather of Hip-Hop Fashion, says the urban clothing market is not even in spitting distance of its peak. He's confident that urban fashion companies, already generating hundreds of millions of dollars in annual sales, will "easily become multibillion-dollar businesses within five years if they can sustain their current growth rate."

In this fourth--and final--installment on the Hip-Hop Economy, we reveal a new breed of hip-hop magnate, who is creating thriving businesses through sartorial innovation, marketing savvy, and star power. The leaders of these empires have taken the fashion industry by storm and, in some cases, have emerged as the next generation of BE 100s CEOs.