Fashion 101: Three Online Brands Offer Their Recipes For Success In The Digital Space

on May 01 2012 8:32 AM
  • Stephanie Phair
    Stepahnie Phair, Director of THE OUTNET
  • Polyvore
    Polyvore Co-Founders Jess Lee (L) and Pasha Sadri (R)
  • Nicola McClafferty
    Nicola McClafferty, CEO and Founder of Covetique
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Stunning clothes, exotic models and fabulous parties might sound like fun and games but peel back the glamorous layers and you quickly see that fashion is serious business.  A serious billion dollar business, to be precise.

Fashion - particularly the best aspects of fashion - has a remarkable hold on us. Despite the economic downturn, quality brands continue to flourish.  LVMH Moët Hennessy Louis Vuitton announced its first quarter revenues in mid-April, revealing a 25% surge powered by the company's fashion and leather goods division. Meanwhile, shares of mid-range retailers, including Macy's, Dillard's and Kohl's, have been climbing steadily recently. Macy's is near a 52-week high, almost doubling in the past year; Dillard's stock is up nearly 50 percent.

Classic Americana designer Michael Kors, who specializes in luxury accessories and ready-to-wear, had an initial public offering in December that valued the company at a whopping $3.63 billion.

Fashion blogs are also in the chips. After just six years of business, Refinery29, a fashion, beauty and shopping blog for the digitally-connected generation, is estimated to be worth $20 million today. 

Still, for all the good news and extraordinary success stories, fashion is an industry filled with disappointment and failure. Many of the most energetic and even creative designers find themselves scurrying for cash - and often out of business well before they should be. Indeed, there's no easy formula for making it in the fashion biz, but we decided to see if we could come up with at least a barebones strategy for a thriving fashion firm.

To do this, IBTimes Fashion & Life spoke with executives of three fashion companies that target distinctively different markets. While they offered a wide range of advice, there were some similarities in their strategic suggestions; namely, they recommended

  • Catering to a weakness in the market because consumers gravitate towards what they need but can't easily get;
  • Creating a robust and creative tablet experience for prospective customers to use because most fashion-conscious folk browse and shop digitally now;
  • Listening to customer feedback because they know the most about your product and can offer good hints about the overall target market.

Here is what the executives from these retailers told us in more detail:

THE OUTNET: Intimate Experience in a Major Market

Stephanie
Stephanie Phair, Managing Director of THE OUTNET

THE OUTNET was once the sister-site to NET-A-PORTER, the premiere online luxury fashion retailer for the world's savviest shoppers. Established in 2009, it was to be the outlet store of the luxury goods retailer, where designer duds went on sale for a more economically-cautious bunch.

However, three years later, THE OUTNET has developed a solid following unto itself and boasts a fashion-savvy customer base with an average household income of over $175,000. The UK-based website was established on the pillars of distinctiveness and exceptional design. Business of Fashion reported that THE OUTNET had an estimated annual turnover of $50 million as of August 2011.

Discount shopping in the luxury sector has surely never been the same. THE OUTNET currently features over 200 designer labels from previous seasons at up to 75 percent off. NET-A-PORTER and THE OUTNET are subsidiaries of Richemont and the two brought in a combined four million style-conscious consumers from around the world in 2011 alone.  

Managing Director of THE OUTNET Stephanie Phair might reign over a thriving company already, but she sees even greater returns ahead.

A third anniversary is such an exciting juncture for any business, Phair said. We've made some changes to the look and feel of the website, and the team has grown from a start-up of five people leveraging NET-A-PORTER's existing teams and resources, to over 80 staff spread across the globe in New York, London and Shanghai. We have never wavered in our commitment to providing THE OUTNET customer with great products and luxury service, which is rare in the discount world.

Despite previous notions, THE OUTNET was not established in response to the economic recession.

The idea for THE OUTNET was conceived by NET-A-PORTER several months before I came on board to launch and run the business in February 2009. Any mature business needs an outlet, but through its sale business, NET-A-PORTER identified a loyal sale shopper and an opportunity to service her via a dedicated discount website, said Stephanie Phair. -

 The key to the site's success is a combination of repeat business from loyal customers and high-end discounted goods offered in a global marketplace. An example this strategy for success is THE OUTNET's focus on the exploding Chinese luxury goods market.

Our unique proposition and our satisfied, repeat customers have fuelled growth. To give you an indication of our repeat business, over 50% of our top customers shop every two weeks. The ability to tap into fast-developing markets in Asia has also helped. THE OUTNET was a global business from day one, with shipping to 170 countries, including China. We know this is a huge market, so we wanted to quickly get in there with a dedicated Chinese-language website. THE OUTNET.CN launched last month.

We see enormous potential in the Asia-Pacific region following the recent launch of THE OUTNET.CN and the forthcoming launch of the NET-A-PORTER Group's third Distribution Center, in Hong Kong, she said.

THE OUTNET is surely able to maintain its loyal customer base not only because of its stylish offerings, but also because of its strategic web design.

At the core of our identity is our tagline, 'the most fashionable fashion outlet'; we edit collections carefully so that our customers are only shopping the best fashion that's covetable and relevant, irrespective of the season it came from. We also show them how to wear it through cool videos and animations and compelling fashion shoots that link directly to product sorted by occasion, Phair said.

In keeping with forward-thinking web design, THE OUTNET is moving ahead to integrate a superior mobile shopping experience via phone and tablet.

THE OUTNET customer has the means to spend on luxury fashion, and shops across a range of online luxury fashion retailers, mixing and matching designers and pairing current season with previous or vintage. We know that when our customer is shopping she's mainly doing so from her laptop, but she is likely to own an iPhone or iPad, described Phair.

 With this in mind, a big part of our marketing strategy this year is to ensure we are providing a seamless shopping experience across all devices. At the moment, we've concentrated on optimizing our site for mobile, and creating our StyleCred app for the iPhone where you can create and share looks and earn store credit. We will look into creating apps across other devices, but anything we develop we will do because we believe it will enhance our customer's shopping experience - not just for the sake of it.

The reason for this emphasis is that Phair reports seeing strong sales from mobile phones and four times as many sales from iPads, So we are excited about the possibilities of emerging platforms as growth channels in the coming years. We're looking at other categories that will coexist well with our existing fashionable offering, she advised.

Polyvore: An Online Fashion Democracy

Polyvore
Polyvore Co-Founders Jess Lee (L) and Pasha Sadri (R)

Jess Lee and Pasha Sadri are the co-founders behind Polyvore, an online community of tastemakers that showcases unique styles and launch trends around the world through collages known as sets. Polyvore is not only a platform for the expression of  creative style, but also a channel for retail consumption, allowing visitors to access purchasing information on all featured products.

The genesis for the site was actually based in interior design, Pasha Sadri described to IBTimes Fashion & Life. I was, at the time, busy building a home and picking styles for the bathroom and the kitchen as an interior design project. And I was spending a lot of time going to magazines and websites and finding inspirational clippings for my folders. Being a software engineer at the time, I was like, 'Oh, there must be a better way to organize all this stuff.' So I quickly built a prototype version of what later became the core of Polyvore.

What was originally founded upon an interior design hobby eventually evolved into an online fashion community. We chose fashion because fashion is something that people use on a daily basis versus interior design that you might need every few years or longer, he said.

Polyvore now has 15 million unique monthly visitors. In January, the website raised $14 million in a Series C financing led by DAG Ventures with participation from Goldman Sachs, Vivi Nevo (NV Investments), Benchmark Capital and Matrix Partners, reported TechCrunch. This brought Polyvore's total funding to over $22 million.  

Since launching, says Jess Lee: We have morphed into a place where anybody can express their sense of style. So it is almost like a fashion democracy where anyone can say, 'Hey, this is what I think is stylish.' Fashion has always been a very top-down industry, very exclusive. It used to be very closed. But with the rise of social media, there are designs on Twitter and with Facebook pages, and shows like 'Project Runway' all let you see behind that curtain. So we are trying to make the new voices in fashion heard.

The typical Polyvore user is the every-day fashionista, who uses her body as her palette and dresses to evoke every whim and fancy. However, the Polyvore community is peppered with fashion professionals like stylists and designers, people who are serious about starting their fashion careers.

Polyvore enacts a lean start-up strategy to monitor its users' actions and keep track of the multiple variants of its community. We typically test multiple variants. So we might spend one week running three slightly different versions of the same feature on the site and at the end of the week we review the data, make some more tweaks, but generally pick the best one and refine that, said Sadri. These analyses are conducted each week. One particular metric the founders care about is the interaction within the Polyvore community.

 We view Polyvore users in two segments. The first segment, which is really important, is our community who are really the contributors to the site, people who are actually publishing sets and styling. But as with every community-generated site, their number is actually quite small compared to the larger audience that comes and interacts with all the content they have produced, explained Pasha Sadri.

Polyvore is delving further into mobile and tablet use. Polyvore has been primarily a desktop experience, but recently we added a mobile-optimized version of our website and we have seen really great traction there. And now we are working on an iPad version of the site and we are super-excited about that because Polyvore's beautiful imagery will look fantastic on tablet devices as sort of a glossy magazine experience, he added.

Having successfully entered the digital arena, Polyvore's co-founders know what it takes to develop a lucrative online fashion business.

We think that the Internet is a more level playing field. It is a very democratic medium. If you were trying to build a TV show or print a book, there are so many barriers to getting published or finding a studio. It is actually not that hard to set up a website. Of course you need to gather a team of people who know how to build one, but anyone can sign up for a domain and get a website, said Jess Lee.

Polyvore even uses its current standing to help its users dip their feet deeper into the fashion pool.

This theme, the democratizing nature of the Internet, is something we are trying to apply to fashion because it is so closed. So we are really excited when we get to enter into partnerships to help our users get opportunities in the fashion industry, she told IBTimes Fashion & Life. Polyvore has offered some select users chances such as a partnership with Piperlime, a trip to the Vogue offices in New York and a Polyvore Live fashion show during New York Fashion Week.

Extending a plethora of sage advice, Polyvore's co-founders emphasized the need to set one's product apart from the rest.

We have a philosophy around trying to do things exceptionally well. One of the nice things about the Internet is that if you have an outstanding product or service, it really has a good chance of taking off and becoming successful, said Sadri.

We sometimes joke, 'Can we create the next Anna Wintour on Polyvore?' added Jess Lee. So for anyone wanting to start their own fashion business, go online. Build up a portfolio, post your work online, participate on Polyvore, make a Twitter account. There is a lot that you can do with just the tools that are available online.

Covetique: Revamping the Rep of Pre-Owned Luxury Fashion

Nicola
Nicola McClafferty, CEO and Founder of Covetique

Nicola McClafferty spent six years working in venture capital with Balderton Capital, one of Europe's largest venture funds and more recently, Ravensbeck, a media-focused consulting and investment firm, focusing primarily on ecommerce and digital media businesses, before founding Covetique, an online hub for pre-owned luxury fashion.

McClafferty founded Covetique in 2011 in an attempt to redefine the pre-owned luxury fashion industry, transforming how women think about buying and selling luxury fashion. Covetique connects individual sellers with buyers from around the globe. Covetique's collection of pre-owned fashions ranges from Elie Saab and Fendi to Lot 78 and Pinko.

Individuals are increasingly focused on extracting maximum value from their existing assets -- like home rental, car-sharing -- and the clothes in their wardrobes are no exception, Nicola McClafferty described to IBTimes Fashion & Life. There is an enormous amount of value sitting in women's wardrobes across the globe but the category is not adequately addressed by existing secondary marketplaces. The online selling process is a cumbersome one and eBay, is not always an appropriate platform for the high value, luxury end of fashion. In parallel there is significant demand from buyers around the world for high quality 'bargain luxury.'

Covetique was established to offer a premium, hassle-free way to sell luxury fashion online and to provide a trusted, global retail destination for high quality luxury fashion at affordable prices.

McClafferty wants to dismantle the preconceived notion that selling pre-owned fashions online is a time-consuming, hassle-laden experience. We collect all of the items from our sellers directly and manage the listing and fulfillment from start to finish, she said.

Offering this service is vital for maintaining the Covetique target market. 

As a marketplace, we target both sellers and buyers. Our sellers typically range from women with significant disposable income who spend substantial amounts on designer fashion each season, to women who buy key one-off designer pieces more occasionally - our sellers are all time-poor and resistant to the hassle of existing online shopping/selling sites. Our buyer is a fashion-savvy, aspirational woman who may splash out on a designer piece for a special occasion but now can access those pieces more easily, said McClafferty.

Covetique is currently in the small-market realm but is utilizing partnerships to reach greater groups of buyers and sellers. The brand is also developing its social media platforms to engage with Covetique buyers, such as building its Twitter following on @Covetique.

We are very focused on building up a large network of sellers to ensure we have a comprehensive breadth and depth of stock; this means a wide range of designers, sizes and styles to offer buyers around the world, McClafferty explained. We also have a pipeline of new content and features that we will be rolling out on our website over the next few months and throughout the year to improve the online experience for both sellers and buyers.

Our focus is currently on the UK market, she stated. However it is also clear that the wardrobes of the firm's sellers are highly coveted internationally. We are already shipping their items globally, explained McClafferty. We firmly believe that there is a global market opportunity and will look closely at international expansion in the coming years.

No brick-and-mortar stores are in the works as of yet, but expansion utilizing various retail venues is a key component in Covetique's long-term growth.

We are not planning to open a brick-and-mortar store however we do see offline as a key part of our business. We are exploring a number of events that we may participate in or hold ourselves for both our sellers and our buyers. For example as part of our launch we are having a pop-up buyers evening. As mentioned before, international expansion is something we also are looking at closely, she said.

As a new small-business owner, Nicola McClafferty has advice for others hoping to break into the biz.

The online fashion space is evolving very rapidly - whether in content, social, discovery or ecommerce, we've seen more new models and innovation in this area in the last two-to-three years than we have in a long time. But that also means a lot of competition for the attention of the discerning fashion consumer, she said.

Here, bottom-line advice is succinct and cogent; and can serve as an applicable mantra to both fashion hopefuls and start-up entrepreneurs:

If you want to establish a new business, make sure that you have identified a very real gap or inefficiency in the market to address and that the proposition can be supported by a strong financial model. And brand is key. Do not compromise on customer experience or service!

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