# Challengers versus incumbents: how newcomers break in
In 2021, a French designer named Simon Porte Jacquemus sent models down a runway in a lavender field in Provence. No flagship store on Avenue Montaigne. No hundred-year archive. Yet within a few years his tiny handbags were spotted on the arms of celebrities and his brand was doing hundreds of millions in revenue. He did not beat LVMH at LVMH's game. He found a door the giants had left unlocked.
That is the core lesson here. Fashion is defended by two moats: scale (the ability to make and move product cheaply at volume) and heritage (decades of brand equitybrand equityThe commercial value your brand adds beyond functional product attributes: the price premium, preference and loyalty it generates.View full definition → you cannot buy overnight). Incumbents like Inditex (owner of Zara), Nike, and the LVMH and Kering luxury houses sit behind those moats. Challengers do not charge the wall. They find the wedge.
First, know who holds power.
These players are not fragile. But every moatmoatA lasting edge over competitors: a resource, capability or position they cannot easily replicate, letting a firm earn above-average returns over time.View full definition → has a cost. Scale makes you slow to react to niche taste. Heritage makes you cautious about looking cheap or trendy. Big distribution deals make you dependent on wholesalers. Each weakness is a wedge.
Shein, founded in China and now a global force, did not invent cheap clothes. It compressed the design-to-doorstep cycle to a level Zara could not match.
Zara's famous model turns a design into a store product in roughly two to three weeks. Shein's "small batch" model tests tiny production runs (often a few hundred units), reads real-time sales data, then reorders only what sells. This is sometimes called real-time retail or on-demand manufacturing.
The wedge: Shein attacked the incumbent's *inventory risk*. Zara commits to seasons. Shein commits to almost nothing until customers vote with clicks.
The vulnerability of this wedge is regulatory, not competitive. Shein's model has leaned on the de minimis rule (a customs threshold below which imported parcels enter duty-free; in the US this was historically 800 dollars per shipment). In 2025 the US moved to end de minimis treatment for low-value parcels, and the EU has proposed reforms too. When your wedge depends on a tax loophole, regulators are your real competitor.
For a clear primer on the de minimis debate, see the US Customs and Border Protection overview.
On, the Swiss running brand founded in 2010, walked into a category owned by Nike and adidas. Insane, on paper. Nike spends more on marketing in a quarter than On's entire early revenue.
On's wedge was the *product itself*. Its "CloudTec" sole (a visible, patented cushioning design) gave runners something to see and feel that the incumbents did not offer. A patent is a legal wedge: it buys you a window where the giant cannot simply copy you.
The wedge: On attacked *product differentiation* in a market where incumbents had grown complacent, iterating on the same silhouettes. A genuinely new feel plus a clean visual identityvisual identityThe visual, verbal and cultural elements that define how your brand presents itself: logo, colours, tone of voice, and values.View full definition → let On charge premium prices and build a following before Nike took it seriously.
Note the discipline. On did not try to out-distribute Nike. It went direct-to-consumer and into specialty running stores first, then expanded. It picked its battlefield.
🎬 [VIDEO: "How On Running Became a $10 Billion Brand" - youtube.com - a short case study on On's product-led rise against sportswear incumbents]
Back to Provence. Jacquemus could never outspend LVMH on stores or advertising. So he competed on *narrative and intimacy*.
The wedge: incumbents in luxury are cautious. A house like Dior protects a century of image and moves slowly. That caution leaves room for a founder who is personal, fast, and native to social media. Jacquemus turned his own life, his mother, the south of France, into brand story. His viral micro-bags and set-piece runway shows generated earned mediaearned mediaUnpaid media exposure such as press coverage, word-of-mouth, social shares and customer reviews generated organically rather than bought or self-published.View full definition → (free coverage and social sharing) that would cost a giant tens of millions to buy.
This wedge attacks *cultural relevance and community*. It is cheap to start and brutal to sustain. Taste shifts. But it can build enough brand equitybrand equityThe commercial value your brand adds beyond functional product attributes: the price premium, preference and loyalty it generates.View full definition → that a big group eventually wants to invest or acquire, which is often the challenger's real exit.
The fourth wedge is structural: bypass the distributor.
For decades, brands reached shoppers through department stores and multi-brand retailers, who took a large cut and owned the customer data. Direct-to-consumer (DTC) brands, Warby Parker in eyewear, Glossier in beauty-adjacent, Allbirds in footwear, sold straight to the customer online.
The wedge: capture the *margin and the data* that distributors used to hold. When you sell direct, you keep the wholesale markup and you learn exactly who your customer is.
The vulnerability, learned the hard way from 2021 to 2024: online customer acquisition got expensive as ad costs rose, and many pure-DTC brands struggled to reachreachThe number of unique people exposed to your message in a given period. Unlike impressions, reach counts each person once, no matter how often they see it.View full definition → profitability. Several ended up opening physical stores or selling through wholesale anyway. The channel wedge works to *break in*, but rarely as a permanent moatmoatA lasting edge over competitors: a resource, capability or position they cannot easily replicate, letting a firm earn above-average returns over time.View full definition → on its own.
Knowledge check
1. The lesson argues that challengers succeed not by 'charging the wall' but by 'finding the wedge.' What does this metaphor primarily teach about competing against incumbents?
2. Why does the lesson describe heritage as both a moat AND a source of weakness for luxury incumbents?
3. Shein's 'small-batch' model tests tiny production runs, reads real-time sales data, then reorders only winners. Conceptually, what competitive advantage does this approach create over Zara's faster-than-traditional cycle?
4. Select ALL correct answers. According to the lesson, which weaknesses arise as costs of incumbents' moats?
Select all the correct answers.
5. Select ALL correct answers. Which statements accurately capture the concept of the two fashion moats described in the lesson?
Select all the correct answers.
The four wedges mapmapUsing software to automate repetitive marketing tasks and campaigns, enabling personalisation at scale across channels like email, web, and social.View full definition → cleanly onto the four incumbent weaknesses.
| Wedge | Incumbent weakness it exploits | Example |
|---|---|---|
| Cost and speed | Scale makes you slow and inventory-heavy | Shein |
| Product innovation | Complacency in mature categories | On Running |
| Brand narrative | Heritage brands move cautiously | Jacquemus |
| Channel (DTC) | Dependence on distributors who own dataown dataData collected directly from your own customers and prospects through your own channels: your most reliable and privacy-compliant source.View full definition → | Warby Parker |
A simple framework: when you meet a new fashion brand, ask *which incumbent weakness are they attacking, and is that weakness structural or temporary?* Shein's cost wedge is structural but legally exposed. On's product wedge is real but eventually copyable. Jacquemus's narrative wedge is powerful but fragile. DTC's channel wedge is easy to enter and hard to defend.
Understanding the wedge means understanding the money.
A rough, widely cited industry rule of thumb (treat as an estimate, not a precise figure) is that a garment's retail price is often two to five times its landed cost (manufacturing plus shipping and duties). The gap covers design, marketing, distribution margin, retail rent, and profit.
Worked example: suppose a shirt costs 10 dollars to make and land.
That is the whole DTC bet in one line: you capture the retailer's margin but inherit the retailer's marketing cost. Whether the wedge works is arithmetic, not vibes.
Challengers open a door. Incumbents often walk through it later with more force. Nike absorbed the visible-cushioning trend. Zara accelerated its own dataown dataData collected directly from your own customers and prospects through your own channels: your most reliable and privacy-compliant source.View full definition →-driven ordering to answer Shein. LVMH and Kering simply buy promising challengers, which is why so many founders build to be acquired rather than to dethrone.
The takeaway is not "small beats big." It is that big has predictable blind spots, and disciplined newcomers exploit exactly one at a time.