Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/FDHBpi
This is the ninth in a series of articles on the Business of Fashion basics, and is taken from the business of fashion website. Originally published in 2007, this series is used to educate those interested in going into the business of the fashion industry. NosaFashions claims no copyright to this material and is used strictly for educational purposes.
The Basics is BoF’s recurring series on how to set up a fashion business from scratch, developed in partnership with Ari Bloom, a NY-based entrepreneur and strategic advisor. Today, we provide a practical primer on how emerging brands can seize the direct-to-consumer e-commerce opportunity.
NEW YORK, United States -- It’s no secret that the web has become one of the most effective tools for fashion brands to market and sell their wares. According to market research firm Emarketer, online sales of apparel and accessories are now growing faster than any other e-commerce product segment (20 percent per year). By 2016, the category will account for $73 billion worth of online purchases in the US alone, just over 20 percent of all online retail sales. And while young fashion brands will always need to maintain offline touch points where customers can touch, feel and try on product, seizing the e-commerce opportunity is equally crucial to long-term success.
Thanks to platforms like Net-a-Porter, e-commerce already accounts for a large percentage of sales for many young fashion brands. Yet to be competitive, every emerging brand must eventually consider launching their own e-commerce presence. Not only does this allow young labels to provide consumers with a more controlled and pure online brand experience, but the economics of selling directly to consumers, bypassing wholesalers, allows a brand to capture the entire margin between the cost and retail price of each product sold. This can often mean 20 to 30 percent more profit.
Many young fashion brands worry that setting up their own e-commerce site will compete with existing online wholesale accounts, which can be an important source of revenue and exposure. But the simple fact is, the Internet is a big place with varied traffic patterns and diverse customer profiles. And having your own site, like a brick-and-mortar retail store, can actually help your sales on other sites by increasing exposure and offering consumers a more powerful brand experience. That said, it’s probably wise to offer some amount of exclusive product on your site, which can help to generate buzz through a unique experience that can’t be found elsewhere.
Selecting an e-commerce platform
While it’s clear to most emerging fashion brands that there is a compelling opportunity in e-commerce, their quandary is usually how and when to launch. This is often exacerbated by the level of investment required to get started and a lack of technical expertise.
Luckily, there are some great new tools available that enable easy setup of an e-commerce site at highly affordable rates. Platforms like Shopify, SquareSpace and Tictail offer off-the-shelf, plug-and-play options for companies new to e-commerce. These services require few technical skills to set up and are extremely simple to use, though they are heavily templated, with little scope for customisation. As for cost, however, most offer simple revenue sharing schemes or low monthly fees. Open source e-commerce platform Magento is another, more flexible, option, though deployment requires greater technical expertise. Generally speaking, these kinds of platforms are ideal for brands with expected sales below $1 million annually.
If your business is expected to sell over $1 million online, annually, you may want to consider more advanced platforms, such as DemandWare, Venda or Sellect. These services are more flexible and offer more robust, customisable feature sets, including easy-to-manage, drag-and-drop merchandising tools, but require significant investment to deploy.
Before choosing an e-commerce platform, you should be clear about your specific business goals and sales targets.
An equally important point to consider before you build a website is who is going to run it on a day-to-day basis. As with any storefront, e-commerce sites require constant management, as new product arrives and marketing messages evolve. If you or your team will be managing your e-commerce business day-to-day, the site must allow for easy, regular changes. Make sure you fully understand the content management system that accompanies the platform you choose, so you can operate the site and train others.
Every e-commerce platform should also come with a Customer Relationship Management (CRM) system, which will help you to collect and organise customer data. It’s very important to carefully vet these systems, as the direct relationship you develop with your customers through an e-commerce site can be one of the strongest tools in growing your business and result in significant sales lift.
No matter which platform you choose, you will need to design a compelling website. With simpler platforms, which allow for little customisation, you might consider doing this yourself. But more likely, site design will be undertaken by a professional web designer on your team, or by an outsourced individual or agency. While we could write an entire book on the finer points of building a great online store, we recommend that you work closely with vetted professionals to create a site that is not only a proper reflection of your brand, but also offers an engaging and enjoyable user experience. Working with a trained user experience professional, or UX, is as important as working with a visual designer. Be wary of agencies that tell you this function is not needed.
Your site should also work easily and gracefully across multiple types of devices, like smartphones and tablets. In 2013, around 15 percent of total e-commerce sales in the US will be made from “post-PC” devices, with 65 percent of those coming from tablets, according to Emarketer. By 2017, sales from mobile and tablet devices are expected to account for 25 percent of total purchases. With this in mind, it’s crucial that your e-commerce presence be optimised for these platforms. But rather than designing a separate mobile sites or apps, we suggest building your site using “responsive design,” an approach that enables you site to automatically detect your user’s device and adjust the experience to different display sizes and forms of interaction (like touch screens).
Remember, your e-commerce site is nothing without content. Beautiful brand images and product photography are a must. We recommend that you work with a trained photographer to shoot these images and remember to capture multiple angles. Zoom and 360 degree views of the product are also nice to have.
Inventory management is a critical part of operating an e-commerce site. For many brands, this site is their first foray into the direct-to-consumer sales channel. While this has several benefits, as outlined above, investing in inventory without the guarantee of confirmed orders can be a risky, cash-intensive undertaking.
Many young brands simply allocate a predetermined percentage of their offering to the online channel. While this approach may work for the inaugural season, we recommend a more precise planning process whereby you use past sales data for similar styles, look at traffic growth from season to season, and consider the overall “visibility” of each particular product. As can be expected, an item featured on the homepage, or one that might be planned for heavy press exposure, is likely to sell at a higher volume.
One of the benefits of an e-commerce site is the ability to manage your own liquidation channel. Whether it’s unsold units, excess inventory from returns, or even extra samples, you can utilise your new store to move goods. But it’s important that you do this in a way that does not damage full price sales, so be conscious of over-emphasising sales.
An e-commerce site must also be coupled to a fulfilment platform that can process orders, ship to customers and accept any returns. When some small brands first launch their sites, they fulfil goods right from their offices, or apartments! Other brands partner with a third-party logistics centre that will hold the goods, manage shipping and process returns. Often times, these warehouses do not manage customer service, so it falls on the brand to answer phone calls and emails from their customers. While this might seem a headache, it can often help a brand uncover important feedback that should be incorporated into future product designs and company strategies.
Finally, an e-commerce site cannot survive without ongoing promotion and traffic generation. There are many methods to achieve this. Our previous Basics article on marketing covers many of the most effective techniques that a brand can use to promote itself, but some specific methods to consider relating to e-commerce are search engine optimization (SEO), search engine marketing (SEM), affiliate marketing, email, and ongoing promotion via social media.
Ari Bloom is the founder of A2B Ventures. He has worked with numerous fashion brands as a consultant and a mentor working with the CFDA’s fashion incubator program. He collaborated with Imran Amed to continue The Business of Fashion Basics series.
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