It’s mid-morning on a weekday. The store at the new fashion complex in South Tel Aviv is nearly empty. Two customers wander the meticulously designed space, poking through hangers bearing a young local designer’s winter collection. One pulls out a thin tank top. The price: nearly NIS 600. She holds it up against herself, and puts it back.

If it was the price that bothered her, a quick spin through the complex would be enough to prove that it was par for the course around here. A designer shoe store offers boots for NIS 1,000 and up, and shoes for NIS 800. The stores across the way offer similar prices, too: pants for NIS 700, shirts for NIS 400 and sweaters for NIS 600.

Not far away, at Tel Aviv’s new Hatachana complex, the local fashion industry held its first fashion week last month, with tents, stages, models and drinks. Internationally renowned designer Roberto Cavalli showed up. Almost like Milan.

All the indicators show Israel’s local fashion market is flourishing: There’s a wide variety of brands, boutiques and designers. Prices are high and loyal customers are willing to shell out. But these signs are deceptive.

The prices may be very high, but fashion design − and maintaining an independent brand − are complicated matters. They’re also very expensive. Most designers are barely making ends meet, say industry sources.

One common complaint in the industry is that if you buy a flimsy NIS 600 tank top, the designer is unlikely to see more than NIS 100 of that.

How can this be? Designer Avinat Gottesman, owner of the eponymous label and head of the Israel Textile and Fashion Association’s expo panel, says costs add up. “You have to take into account the price of the fabric − NIS 80 a meter for something decent, up to eight hours of a seamstress’s time − NIS 25 an hour, plus overhead. This means that the cost of production is about NIS 500, and that’s before you take into account the designer’s profit, of, say, 20%. The price is not expensive,” he explains.

For most customers of Rhus Ovata, the August announcement that the veteran fashion brand was closing up shop came as a complete surprise. The brand was founded six years ago by sisters Einav and Hadas Zucker, who studied fashion design at Shenkar College of Engineering and Design and the Royal Academy of Fine Arts in Antwerp. Business had seemed promising, even successful. They opened three stores, exported to Europe, the United States and Japan, received plentiful positive reviews in the press and had a following of loyal customers.

The Zucker sisters seemed to have managed to crack the code to the local fashion market.

Yet despite all their coups, the brand was struggling financially.

Early on, the Zuckers had partnered with Concept Marketing, the company that used to hold the Israeli franchise for international brand Lee Cooper. But two years ago, the brand was sold to Carmel Refaeli. The state of the economy in Israel and the world is deadly for small companies with uncompromising manufacturing standards, they said, promising to “be back later.”

Start with a large fortune

The Rhus Ovata story is not an isolated incident involving bad management, say industry sources.

“Israel has nearly 1,000 fashion designers,” says veteran designer Tamara Yuval Jones, who headed Shenkar’s fashion design department and now works as an adviser and personal trainer for young designers. “Every year, some 100 new designers enter the market from well-known institutes like Shenkar, WIZO Design Academy and Bezalel [Academy of Art and Design] alone. Since Israel doesn’t have a large textile industry, most of them open a small studio, and all are competing for a tiny market share.”

Sources say that in order to produce their first collection, designers need NIS 70,000 to NIS 80,000. This means that in order to launch an independent business, the designers need several hundred thousand shekels. While it’s true that every new business necessitates an investment, in this case the money is going only to producing the wares, and doesn’t include retail space, as it would for, say, a restaurant or a store.

“The first collection is only the beginning,” says Jones. “Every six months you need to come out with a new collection, advertise, market, conduct PR, and that’s without taking into account the cost of leasing a store.”

These are the fixed costs; there are also plenty of variable ones. “People aren’t aware of all the costs we can’t control,” says Ariel Doron, who owns the brand Bikaleh with his partner Tal Angel. “For instance, global cotton prices are up a steep 100%, and this is a significant factor in the cost of our inputs,” he says.

Another problem many designers without their own stores face is the industry’s pay structure: Suppliers and seamstresses demand that the designers pay bills within 30 days, while the stores pay designers for clothing that is sold within 90 days of the sale. This means designers are paying for their clothing as much as two months before getting money back.

Designers also blame the consignment system, which is how the local market functions, as the root of all evil. Under the system, stores pay the designers nothing until clothing actually sells. Thus, designers make their clothing and pay their suppliers, but receive money only after a long wait. In many cases, the designers get back piles of clothing at the end of the season.

Yet some believe the consignment system is a good way to let younger designers get their foot through the door.

“As a young designer, this method enabled me to get exposure for my collection and receive feedback. I could learn what worked and what didn’t,” says Chen Nevo, the brain behind the label Bluma, which she launched three years ago after graduating from Shenkar. “Nowadays, too, as the owner of a store, I’m aware of the system’s advantages. There are designers whose wares I couldn’t stock any other way.”

Gottesman adds that the biggest problem facing Israel’s fashion industry is the lack of organized wholesale expos, which would enable designers to manufacture based on wholesale orders and not based on guesses of what will or won’t sell.

He also believes that the designers’ prices aren’t all that high, but are perceived as such due to the alternatives.

“At the market, for example, you can find a jersey shirt for NIS 5,” Gottesman says. “It costs more to manufacture those shirts in India. These are surplus shirts, and these aren’t real prices, though they make a designer skirt selling for NIS 300 at the end of the season seem expensive.”

Business sense needed

This summer’s cost-of-living protest swept up local designers, too. While they are still charging hundreds of shekels per item, and are responsible for part of the high cost of living, Jones used the opportunity to launch a Facebook group for local designers to confab . The group now has 600 members. While Jones is not active in the group anymore, its members include jewelry designer Shlomit Ofir, the brand Gusta, Hagar Nissimov of the boutique ShoeShoe, and the designers behind the brand Alef Alef.

The members meet occasionally. At one meeting, for instance, they discussed drafting a basic contract for consignment agreements.

The high costs and the structural problems are not their only issue. Another is that a designer may be talented but have no business sense. “A person who studied design doesn’t know management or finance,” says Jones. “I know many promising designers who failed simply because they didn’t know how to handle money. Some are now up to their heads in bank debt. They couldn’t achieve sales volumes large enough in order to cover the interest payments. You can get by in this industry, but you can’t really get rich.”

This problem isn’t unique to Israel. Jones’ experience abroad indicates that things aren’t easy there, either.

“Major designers are also targeting a very limited audience,” she says. “What you see on the Fashion Channel is mostly show. Most of the clothes celebrities wear are on loan. Most of the clothing hasn’t been sold, aside from a small number of items to Saudi princesses. The money comes from accessories.”

“I studied and worked in New York for a few years, so I know the market there, and I believe it’s easier to start off in Israel than in other parts of the world, certainly compared to New York,” says designer Idit Barak, a lecturer in Shenkar’s design faculty and the person behind the label Delicatessen. “Here you can start very small, which makes it less problematic. The main difficulty is how to grow, survive and turn it into a business. Sewing 20 shirts in your mom’s living room isn’t a business, after all.”

Barak says that manufacturing clothing is so expensive in Israel in part because the textile industry is imploding. “Small designers can’t manufacture in China, so they can’t compete with other brands,” she says. “Israeli textile workers receive very fair wages, which makes local production very expensive. In addition, we’re losing our manufacturing abilities. Once we had a respected textile industry, but the more it moved abroad, the more we lost our abilities.” A close-by solution, outsourcing to the Turkish textile industry, has been popular among Israeli designers but has became more difficult over the past year because of the political tensions between Jerusalem and Ankara, Barak says.

She feels a solution could lie in creating traditions. “In other countries, everyone knows when the end-of-year sales are held, or other sales such as Black Friday. Here, we’re always having sales.”

“We chose this field because this is our passion,” says Nevo optimistically, maybe because she’s still starting out. “Obviously it’s not easy to make it, but everyone needs to find his own way. I’m still at the start. I’m developing my brand, investing money, and hoping it’ll work out.”