Assia Benmedjdoub provides an edited roundtable on the ever booming online fashion retail space.
Martin Newman CEO | Practicology
Martin Newman has been involved in multi channel retailing for over 25 years having had profit and loss responsibility for retail, direct mail, e-commerce, kiosks and call centre channels
for a number of retailers including Ted Baker, Harrods, Pentland brands (Speedo, Kickers, Boxfresh etc) Burberry and Intersport.
Daniel Jarosch | Founder of brandsExclusive and StyleTread
Daniel Jarosch has worked with leading media companies including eBay, Disney, Sony and IBM and started more than seven companies. His more recent ventures include private shopping club brandsExclusive and shoe e-tailer StyleTread, following on from the co-founding of group buying website spreets.com.au, which sold to Yahoo 7! for $40 million.
David Briskin
CEO | Sass & Bide
Prior to becoming the chief executive of Sass & Bide, David Briskin contributed to the success of a number of fashion labels including accessory retailer Mimco. Briskin and business partner
Daniel Besen bought a 50 per cent take in Sass & Bide in 2009, before securing a $42.25 million deal with department store Myer, which acquired a majority stake in the label.
Martin Newman, you launched Burberry and Ted Baker online in the UK. Were there the same problems affecting Australian retailers now in terms of addressing the e-tail space?
Martin: Not so much. I think the biggest issue when I started selling online with Ted Baker or Harrods or Burberry was that the customer experience of buying fashion online wasn’t that
great. Bear in mind that it was a very similar model to direct mail, which had worked very well in the UK for a number of years. Nowadays you’ve got technology such as augmented reality
that’s bridging the gap between what it’s like to buy fashion offline and what it’s like to buy online. I think the market was also at a very different stage - we didn’t have the economic
challenges six or five years ago that are happening now. Also, at that time UK retailers were very focussed on the domestic market, whereas now they have shifted their outlook globally. I
think a lot of it comes down to things like delivery and returns proposition, where brands such as ASOS have gone for free global delivery as part of a strategy to come into your market and
take market share away from you. My advice to local retailers would be don’t sit back and watch ASOS take your lunch.
Daniel, as a premium brand shopping club, how do you deal with the returns proposition?
Daniel: Firstly, we address a very particular customer segment. We address the impulse buyer. We basically send an email every day with new offers, so people buy things on brandsExclusive that they didn’t know they’d buy that day. It doesn’t mean they are things they don’t need, but it basically operates on an impulse. When we launched in 2008, we looked at all the online retailers in Australia and there were only two that had a no questions asked return policy for 30 days and free returns. That’s now increasing. So with Styletread you have free delivery and free returns, all taking the risk of shopping online away. That will obviously have an impact on return rates, but it will also increase your top line. We see the return rate in Australia as about a third of what we see in other markets. Other markets are around 15 per cent, here it’s around five. It will increase because with free shipping and free returns, people will order something, try it on, if it doesn’t fit, it goes back. So the consumer is learning in this market as well. But from that perspective, it’s actually a very good market to be in.
David, when you see these other business models emerge, do you fear them or think about adapting the Sass & Bide model to survive?
David: We see them as potential partners. Every fashion brand around the world has an issue with aged stock, so we see private shopping channels as a potential avenue for selling that
product, and we embrace these businesses as something we can work with. I think you have to do that with new platforms as it’s the way of the future. I think for us, the online channel is an opportunity to move stock as well so we can have our own online clearance strategy. What eBay is doing at the moment is very interesting - putting different fashion brands together online in a sort of clearance area [eBay Fashion Gallery], and I embrace it in terms of clearing stock using other platforms. In fact, we’re finding our own online channel increasing and growing month on month. We’ve rebuilt the site and looking at ways to improve it, and I think you have to do that. The issue is there are some customers who want to feel and touch the product offline, and that’s why you have your retail stores to provide that opportunity. But for others, once they’re comfortable with the brand, the product, the sizing, the quality and they understand what they’re buying, then they’re comfortable buying online, which is why we need to embrace it moving forward.
Is online at a danger of educating customers to wait for things to go on sale?
David: Well, that’s a bigger issue. That’s not about online and offline. That’s about a bigger marketplace driven really by a lot of public companies who need to meet their sales budgets and therefore discount in order to do that. So that issue has been around for a long time and it is getting worse, but it’s certainly not an offline and online issue. It is a big problem in the
Australian marketplace at the moment of constantly being on sale.
Martin: Would it not be the case though, that it’s providing a distribution channel for another type of customer? For instance, your high-end customers want in-season garments and they want them now. They’re probably not going to want to buy end of range product. But it could offer new customers.
David: Absolutely, and that’s what I said earlier. I embrace it as another channel to clear end of season products. I think what we’re referring to is the issue of the discount driving the
in-season purchase.
Martin, what about this idea of Australian brands going on sale earlier through their own online stores?
Martin: The initial challenge in the UK was, and I know that a lot of brands are going through this now as well, about cannibalisation. The fear of disappointing or falling out with an existing retail base that you are wholesaling to. I think generally now there’s a broad acceptance that the brand will have its own store, and that it will have the benefit of having a broader (unedited) range. Generally what happens is that a brand will have a very strong relationship with its retail distribution partners, and normally when they go on sale they all go on sale at the same time. I don’t think I’ve seen that type of undercutting, if you like, or getting to market quicker, with a sale offer. So there hasn’t been the challenge in that way. But
then again, a multi-brand retailer also has an advantage over a single label. It has multiple brands, so it depends on whether a customer is really a dedicated follower of a single brand or
whether they’re just a fashion junkie, who will gravitate more towards a store that has a broader range of products.
David: I think a lot of these issues are not new issues in terms of the industry. The issue of a brand going on sale earlier in its own store, either online or offline, than a department
store would or a multi-brand boutique has been a problem for a while now. It’s a case of a brand needing to communicate to their department store or boutique about when their going on sale and, realistically, that’s what you should do in order to protect those relationships. And the issue about multi-brand stores competing, that really comes down to the service they’re offering. So if they’re giving their customers great service and almost styling them in how to put different looks together and take products from different brands and look amazing, if
you’re getting great service from someone, you might keep going back to that store. I think that service is something that has been forgotten in this country. It’s not an online/offline
issue; it’s bigger than that.
Martin: In terms of online shopping, price is an issue, but it’s not the primary issue. The primary issue is how convenient is the proposition: when can I get my goods? How quickly can I get
my goods? What happens if I don’t like it? How do I return it? Does it cost me to return it? Can I take it back to the store? In that context, a multi-channel store is a powerful tool.
Because if a company gets the cross-channel mix right, and recognises how the customer shops and provides them with a convenient proposition, then I think a multi-channel business has a distinct advantage over a pure play. A pure play can’t deliver the kind of service a retailer can in a one-to-one environment in the store. They can’t deliver that customer experience where
I might be popping out tomorrow night to go to the ARIAs, forgotten to bring a black tie, order it online and pick it up from the store first thing in the morning. I can’t do that with a pure play. I do think in this respect, multi-channel retailers have an advantage and will win out in the long term.
David: Online shopping certainly is an opportunity for us. As a brand that only sells Sass & Bide product, which we design, we’ve got control over where we distribute it. So whether we
choose to sell to an ASOS or someone else going to market. We see online as a huge growth potential and aim to have it as our number one performing store. For Macy’s, it represents something like 10 per cent of their sales. It’s probably their best performing store, so from nothing to their top-selling platform in a couple of years is huge. Someone said to me today it’s like here you go, a store that you can lease which is guaranteed to be your best performing store in couple of years. I mean, you can’t find that now. WeAreDigital [have built] our site and as soon as that [went] live, we [said], what else can we do? What else can we build? Because it’s so fast moving that you don’t want to stand still in that space.
Daniel: The good thing for us is that we can learn from other markets. The private sales model is nothing new, it has existed in France since 2001. Every channel has two purposes: build
brand equity or drive sales. What we’re seeing today is that brands have discovered online as a great avenue for sales, but forgotten to build brand equity. Discounting often hurts in
building your brand online. What we’re seeing overseas is that technology is changing but consumer values are still the same. The consumer loves brands. They love Sass & Bide. They don’t love channel. They’re loyal to your channel because you have same day delivery or good service, but in the end they love the brand. In terms of fulfillment, you have to trial and error.
Don’t fail big. Fail fast and small. So if you’re a brand, you want to go online, do it soft and try it out. In the end it’s much easier to build an online channel than to build a proper
retail store. When I hear the fit-out costs for retailers, and all the proper things you need to do before going live, going online is much easier and presents more opportunities as well.
Martin: I think the reality is to deliver the optimum customer experience, you’ve got to let customers shop the way they want to shop and that’s going to mean fulfilling from store.
Fulfilling from store is an issue around how you optimise stock across all your channels; you have got to have a single view of stock availability in order to do that. It’s actually a big
piece of supply chain management - you’ve got people working in the store environment who are great at serving customers but have no fulfillment experience. So all of a sudden you’re going to ask them to dedicate a percentage of a day, or put resources towards, helping them fulfill customer orders online. That’s the way you’re going to have to go. You’ve got the likes of the Aurora Group in the UK that now have two very compelling propositions. One is reserve online and collect from store or actually get the product delivered in 90 minutes. That only works because they’re fulfilling goods from their store environment, so you have to have a significant network of stores to make that work. But I think that’s the way to compete effectively,
that’s how it has to be.
It’s a huge investment...
Martin: If you look at the way your market is evolving, it’s evolving exactly the same way as the US market evolved and the same way Europe evolved. Nobody should be lacking the confidence now to make the right level investment in cross channel experience. If you do that, you’ll leap frog ahead of what the guys in the UK are doing. Because the guys in the UK, many of the multi-channel retailers, are still scrambling around their third, or fourth, or fifth iteration of their e-commerce platforms. You can take the learnings from these guys and actually leap frog all of that. The answer is if you don’t make that investment, you won’t be around in the next few years. Look at ASOS, look at John Lewis. All of these guys are coming after your lunch.
We all operate in the social environment - do we need to play in the social media space more heavily?
Martin: Fundamentally, it’s how you approach social media. If you approach social media as something that is going to be a monetisation opportunity, especially in the world of fashion,
you’ll probably get it wrong and you’ll end up disappointing your customers and talking to them in a way they hadn’t expected. I think if you embrace it as an engagement opportunity, then you’ve got a better chance of success. To give you an example, when I was at Burberry six or seven years ago, I had great difficulty convincing the corporate marketing team that we should be doing anything when it came to the web in terms of marketing. In fact, I was told I couldn’t do any of that search engine marketing stuff because, ‘we’re a luxury brand and we’re going to invest all of our money in a micro-site’. I thought it was a great idea and asked, ‘How are you going to get traffic to the micro-site in the first place without all the search engine
marketing stuff?’. Burberry have now woken up and spend 60 per cent of their total marketing communications in the digital space. A large chunk of that is going into social media. When they launched their fragrance recently, they got over eight million likes, offered a free sample and within two weeks they had over 250,000 people request a free sample. I think that
inadvertently became a very successful sales driver for them, whereas had they gone online and said, ‘here’s a coupon, get five per cent off, 10 per cent off or free shipping’, I’m not sure
it wouldn’t have been a damp squid. It’s how you approach it.