Whether a retailer should go online or not is essentially a rhetorical question. Of course they should. The only question is, what the business model should be.
In the fashion industry there are a number of routes to market, and having your own site or making a large investment in technology aren’t the only ones.
You can outsource your e-commerce operation to a supplier. You can also sell through portals and aggregators. In the UK there is a company called FarFetch who have provided the infrastructure for small fashion designers to sell online without having to make big upfront investments in their own platform. They are also responsible for generating the demand by driving traffic to the site in the first place.
Whatever model you choose, I’m not a fan of the ‘dip your toes’ approach, as in my experience this usually leads to an ineffective solution and customer proposition that subsequently means the retailer doesn’t get to maximise the opportunity.
And, with the growing threat from international retailers coming into the Australian market and taking market share away, retailers here should also be thinking about internationalisation and not just about the domestic market. Asos now ship over £1 million of goods every week to Australian customers, and with their new localised Australian site now live with local delivery and returns, that sales number is only going to rise.
Of course, the internet is also a cost-effective route to market for new brands. You don’t need a bricks-and-mortar presence to be successful online. The web could be your one and only channel to market.
Many of the most successful fashion players now are pureplay internet businesses, such as the aforementioned Asos.com and Net-A-Porter.com. One of the main benefits of investing in your own operation is the potential ability to then leverage this capability by becoming a service provider for other brands. It’s what we call ‘white labeling’.
One of the most successful fashion pureplays Yoox.com realised that by leveraging their technology and infrastructure they could generate significant additional revenue by enabling other brands to sell online. They enable other brands to use their technology, fulfillment and customer service. Just a few of the brands doing this include MissSixty, Valentino, Moschino, Diesel and Roberto Cavalli.
However, those with a store business (multi-channel retailers) have a potential advantage as they can offer a more convenient proposition to the customer, such as having the choice to reserve online and pick up in store.
This essentially means the customer can get their goods quicker. And in the UK, if you buy on any Aurora Group site (Karen Millen, Coast, Oasis, Warehouse) you can have your order delivered in 90 minutes in main conurbations!
But the cost of creating an integrated cross-channel proposition for a multi-channel retailer can be significantly more as they need to integrate stock and other systems and processes in order to provide the customer with these more convenient shopping propositions.
Also, an e-commerce channel involves a lot more than just the technology.
When setting up an e-commerce channel, you also have to invest in people and marketing. But the e-commerce value chain also entails a supply chain, customer service and logistics. Again, for very small businesses, to start with they will find it more cost-effective to fulfill from their store and possibly to handle customer service calls themselves. For larger business, this is unlikely to be workable and therefore they will most likely need to outsource some of these functions to a relevant third party.
The complexity and the costs behind each of the aforementioned models will be very different, as it will also be depending upon the size of the retail business.
By the same token, costs can also vary dramatically from a few thousand to a few million dollars.
Martin Newman is the chief executive of business consultancy Practicology. www.practicology.com.
