Article for Ragtrader in Australia - Blog

Article for Ragtrader in Australia

01/02/2012

Whether a retailer should go online or not is really 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 like Practicology. We trade the channel for a number of our clients under their brand (including Myla.com). They benefit from having to make a lower investment in the start up costs and having very experienced practitioners trading the channel and driving a bigger and more rapid growth in sales performance.

You can also sell through portals and aggregator’s. 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 maximize the opportunity.

And with the growing threat from International retailers coming in to 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 £1m of goods every week to Australian customers, and with their new localized 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 realized 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.

And an e-commerce channel involves a lot more than just the technology.

Setting up an e-commerce channel, you also have to invest in people and marketing.  But the e-commerce value chain also entails 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 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 and costs can vary dramatically from a few thousand to a few million dollars.