Online retail: do or die

With internet sales at record highs the time is right for fashion retailers to turn clicks into cash. Melissa Gulbin reports.

Until now online shopping has been a distant threat to high-street retailers - the paperless tiger upon the horizon. But unprecedented online growth in the apparel and accessories category over the past six months, spurred by developments in social media by the likes of Facebook, indicate that the future is here. An online presence isn't merely a luxury, it's a necessity.

According to online monitoring company Hitwise, in the six months to July 2008 the apparel and accessories shopping category grew 15.45 per cent in market share, considerably more than the general online shopping sector which experienced only 0.36 per cent growth.

Facebook frenzy
Hitwise research director Alan Long attributes this trend partly to fashion's early adoption of social networking sites and online forums which provide new, open ways for consumers to engage with online brands. Apparel and accessories websites received 8.05% of all traffic from social network and forum sites, up 35 per cent on a year ago. It is a trend, says Long, that "cannot be ignored".

Australia's shining example of social marketing comes from Gen-Y retail giant Sportsgirl. According to Hitwise figures, the average weekly upstream traffic from Facebook to Sportgirl.com.au from December 2007 to June 2008 accounted for 16.91 per cent of visits compared to the 3.79 per cent experienced by the rest of the apparel and accessories category.

Central to Sportsgirl's Facebook presence is its "Hot or Not" application which allows users to critique Sportsgirl looks. It provides a social space that opens up a branded conversation - positive or negative - which is driven by Sportsgirl fans, not marketing directors. Importantly, it is also a space that can drive online sales.

Long says consumers have more power than ever to choose what [marketing] messages they will be exposed to, accept and interact with, so there is great value in either starting, facilitating or being a part of those conversations.

"Over the past decade we have seen the influence of the internet, in a marketing sense, moving communication from an interruption model to an engagement model. This provides a lot of challenges in effectively marketing to the youth market who are digital natives. They're smart and sophisticated about the digital world and aware of marketing devices," says Long.

It is no coincidence then that Sportsgirl, which directly targets the female "digital native", has done remarkably well with online sales since its foray into ecommerce 12 months ago. According to a statement made by Sportsgirl chief executive Elle Roseby to the Sydney Morning Herald in July, online sales have grown 30 per cent each month since the online store opened. Roseby said Sportsgirl was topping three million page views a month and had plans for its online store to deliver up to 10 per cent of overall revenues within five years.

So too, sales for UK fast-fashion chain Topshop have been spurred by a Facebook application that enables users to select outfits for the weekend and view and rate clothes handpicked by Topshop buyers each week. Titled "Topshop Fashion Fix", the application reinforces the chain's fast-fashion focus, encouraging girls to buy weekly from its ever-changing collections. Similarly, in the US, department store Sears recently implemented a function that enabled users to share their prom dress recommendations via Facebook.

Another exciting international social media development noted by Hitwise analysts is Polyvore.com, a website which enables users to mix and match images from anywhere on the web, to create outfits, interior designs, or any kind of collage. The idea is that Polyvore users can browse and shop for thousands of looks created by a community of fashionistas to whom they feel socially connected.

Long says such examples exemplify the new school of online marketing that simply provides a premise [fashion], the utility and the functionality. "One of the most important things is to be genuine, talk with, not to," he says.

"There are so many different ways to approach the social media - both web and mobile - from blogging, to applications, to fan pages, myspace pages and microblogging such as twitter and pownce," adds Long.

Luring back the Mallrats
It seems young people, traditionally spurned from shopping malls as loitering nuisances, are having the last laugh. Instead of hanging out at Westfield they are gathering online - in Gen Y-friendly spaces that imitate the shopping mall experience by facilitating social interaction with the ability to buy online.

What makes this trend worrying for traditional retailers is that these disenfranchised cyber-junkies are tomorrow's cashed-up adults. Executive director of the Australian Retailers Association (ARA), Richard Evans, warns that the trend toward online socialising could adversely impact the future of bricks and mortar retailers if nothing is done to re-engage youth with the physical shopping experience.

"In the past there has been a fear-factor among shopping centres with attracting young people" - mostly related to occasional violence and loitering gangs. "But I think we need to look at how we can bring young people back to the shopping centres. Slowly attitudes are changing," says Evans.

For the majority of consumers, however, the physical experience is still preferred. Women in particularly will continue to have a thirst for the leisurely physical experience of shopping over the convenience of the web, foresees Evans. "Cafes and child-minding services add to the experiential experience of shopping,"

Fashion retail stores could learn a lot from booksellers, adds Evans, which were among the first stores to introduce cafes in order to differentiate themselves from online giants like Amazon.

Global villagers
Evans observes that one of ecommerce's biggest threats to Australian retailers is its globally competitive nature. Australian retailers now have to compete with the scale of economy of big US brands such as Victoria's Secret, which consistently makes it into Australia's top-five most-visited sites. According to Hitwise figures, 51 per cent of traffic to the apparel and accessories category was directed at local sites and 49 per cent to international stores.

While Australia's uptake of online shopping is certainly lower than our UK and US counterparts we are seeing steady growth. "Part of the reasoning behind Australia's lag maybe cultural, due to the media's influence regarding online security, or slow uptake of broadband," explains Hitwise's research head Alan Long.

Long also observes another worrying trend for Australian high street brands. Those companies that operate purely online (pure-plays) like Amazon are closing the gap with the bricks and mortars retailers such as Sportsgirl in online market share. "This is no doubt reflective in sales, and those retailers that are yet to move to open an online retail store can't afford to allow pure-plays in their category to establish an online leadership position.

"As the visits to apparel and accessories websites increase so will the urgency for Australian retailers to be more active and participate online and find different ways than to communicate with their customers," Long says.

The pressure on high street boutiques from pure-plays is often felt hardest in regional Australia. According to Julie Cluer, owner of Byron Bay boutique Pompidou, the popularity of pure-play stores such as mycatwalk.com.au, has detrimentally affected sales.

"We used to be the only place where locals, from Lismore and beyond, could go to get labels like Alice McCall. Then those customers started telling me that they were buying Alice McCall from mycatwalk.com.au. It didn't seem fair," she admits. But instead of surrendering, Cluer, like an increasing number of retailers, reckoned if you can't beat them, join them, and six months ago launched Pompidou online.

Online movers and shakers

Which websites to consumers turn to when they looking to flex their shopping muscles? Ragtrader investigates.

Top 10 Shopping and Classifieds - Apparel and Accessories Websites. Rankings for the month of July, 2008.

Rank# Website Domain Market Share
1 EziBuy Australia Ezibuy.com.au 4.22%
2 Witchery Witchery.com.au 1.28%
3 Rebel Sport Australia Rebelsport.com.au 1.27%
4 Victoria's Secret Victoriassecret.com 1.21%
5 Supre Supre.au.com 1.14%
6 Rivers Australia Rivers.com.au 1.11%
7 Peter Alexander Peteralexander.com.au 0.97%
8 Net-a-porter.com net-a-porter.com 0.86%
9 Just Jeans Justjeans.com.au 0.79%
10 BuyCostumes.com Buycostumes.com 0.78%

Top 10 Lifestyle - Fashion Websites*. Rankings for July, 2008.
Rank# Website Domain Market Share
1 Vogue Australia Forums Forums.vogue.com.au 9.80%
2 Vogue Australia Vogue.com.au 4.55%
3 Glam Glam.com 4.48%
4 Grazia Grazia.ninemsn.com.au 2.06%
5 Witchery Witchery.com.au 1.85%
6 Victoria's Secret Victoriassecret.com 1.74%
7 Supre Supre.au.com 1.64%
8 Rivers Australia Rivers.com.au 1.60%
9 Model Mayhem MModelmayhem.co 1.55%
10 Miss Bimbo Missbimbo.com 1.42%

Spotlight on Ezibuy Australia
Ezibuy is far and away Australia's favourite online store for fashion. The New Zealand-based company leverages its online business with 40 catalogues each year mailed to a subscriber base of more than 500,000 across New Zealand and Australia.

Ezibuy CEO Mary Devine told Ragtrader in June that the company planned to boost its annual turnover from its current $260 million to in excess of $300 million over the next three years as a result of the opportunities available in Australia.

It's recent acquisition of Kiwi womenswear chain Max Fashion late last year poses a further online threat - the brand intends introducing Max to the Australian market in 2009 through internet retailing, catalogue sales and a small number of flagship stores. Ezibuy's top womenswear brands include Capture, Emerge, Urban and Grace Hill as well as menswear and its fast-growing plus size brand Sara.

Victoria's Secret
With a history in bricks and mortar retailing, the future of this US underwear giant is focused online. Its catalogue and internet sales were up 11 per cent in the first quarter of this year while same-store sales declined eight per cent.
Australia's online answer to Victoria's Secret is pure-play website Zodee.com.au. Founded by Zoe Pallister in 1997, Zodee often creeps into the Hitwise Australia's Top Ten Most Visited list and is one for intimate apparel retailer's to watch.

Peter Alexander
The Just Group-owned label which specialises in sleepwear and loungewear has found its niche online. The fashion brand Peter Alexander is already generating about $11 million of its $50 million annual sales from online retailing. His time-poor online customers spend an average of 15 per cent more online than they do in a retail store purchase. The brand advertises its website in mainstream fashion press and leverages publicity off the media-magnetism of Peter Alexander the man. The site's photo-rich interactive catalogue is a distinctive feature.

Supre
Following the Topshop model for fast fashion, Supre keeps its 'community' up-to-date with weekly online drops. The site is updated on a daily basis with new information on fashion jobs, promotions, and competitions. Supre online distributes two newsletters each month, which keeps its 'A-List members' up to date with all the latest trends and in-store campaigns. As well as an online shop, the site consistently rates as a hot lifestyle destination by offering an interactive stylebook feature.

By Melissa Gulbin