Articles Worth Reading - Edition 10.2

Hope for Wholesale

Articles:

Articles Explores:

  • Weak performance at American department stores

  • Not overlooking the high cost of online customer acquisition

  • Partnering with multi-brand retailers remains important

  • Wholesale remains an affordable way to grow

  • Hard work & changes to a business to sell through third parties

Notable Content & Quotes:

  • Growing complexity and fragmentation of the wholesale market

  • Current state of multi-brand retail, which is struggling offline to retain customers and struggling online to maintain growth.

  • Department stores and other multi-brand retailers were successful because they made it more convenient to buy things. But online commerce has made it easier than ever to purchase anything, anywhere.

  • Escalating rents, drop in foot traffic, decreasing offline sales and debt from expansions, improvements, VC sales, etc have put especially large department stores in a tough situation to grow and turn a profit.

  • “Most young brands can’t afford to spend enough on digital marketing to get the presence and competitiveness they need through their own channels,” said Julie Gilhart, a business consultant.

  • No matter what the size of the business, specific wholesale partnerships can help with brand positioning.

  • In order to succeed, multi-brand retailers must be more audacious when it comes to the products they pull together which speaks to the need of the Brand to present a well defined and edited collection

  • As the pool of fashion brands fighting for eyeballs on Instagram and Facebook becomes more and more crowded, the cost of acquiring customers is spiraling out of control. Many brands are reaching the conclusion that it’s worth accepting slimmer margins with a wholesaler rather than going it alone online.

  • Wholesale is hard work: developing line sheets; realigning design and production to hit wholesale market timing; obtaining appointments; attending meetings; venue expenses; chargebacks for errors or late deliveries, to name just a few of the many hurdles.

A Paypal Alternative in the Works

Articles:

  • Visa, Mastercard and Amex Develop Remedy for Abandoned Online Purchases

Articles Explores:

  • The big three credit card companies along with Discover are abandoning their own “express” checkout systems to jointly develop an a widely accepted alternative to PayPal and Apple Pay that allows customers to save all their payment details in one place.

Notable Content & Quotes:

  • Only 5% of online merchants have adopted one of the various “express” checkout buttons offered by the credit card companies vs 70% adoption of PayPal

  • The new button (which covers Visa, Mastercard, Amex & Discover) is “allowing the consumer to go through a guest checkout experience with very limited friction and no static password to remember,” said Jess Turner, Mastercard's executive vice president of product and innovation for North America.

  • For now, the networks don't plan to introduce any incentives or penalties to entice retailers to adopt the new option.

Lessons From a Failed Start-Up

Articles:

Articles Explores:

  • Shoes of Prey (a customizable shoe at accessible price points) launched in 2009, hit break-even within two months, sales hit an estimated $115 million in 2017 and was shuttered one year later.

  • Shoes of Prey inked partnerships with a large Australian based department and with Nordstroms

  • Shoes of Prey brought in $25 million in third party funding

  • Founders had no retail, logistics or manufacturing experience

  • Founders found it difficult to hire, trust or delegate outsiders

Notable Content & Quotes:

  • Business grew by word of mouth, but Shoes of Prey also gifted YouTube stars like Blair Fowler. Sales boomed, with the US and Australia the biggest markets, though sales came in from Germany, Japan, the UK and beyond

  • The company initially resisted taking investor cash; because the shoes were made to order, overhead was low. But the brand raised $5.5 million in 2014 and $15.5 million in 2015.

  • The start-up used its funding to chase a high growth rate, at the expense of profitability. It invested heavily in hiring and marketing, opened its own factory in China and opened shop in shops at six Nordstrom stores (who had been one of the investors in 2015).

  • “We learned the hard way that mass-market customers don’t want to create, they want to be inspired and shown what to wear,” Michael Fox, one of the founders wrote in a Medium post in March. “They want to see the latest trends, what celebrities and Instagram influencers are wearing and they want to wear exactly that.”

  • With losses mounting in 2017, Jodie Fox said Shoes of Prey was exploring other options to achieve profitability, including manufacturing custom products for other retailers. That proved to be expensive, given the cost per shoe, plus the expense of running its factory.

  • The start-up’s founders didn’t realize was that customization works best as an addition to a product, and not the main attraction.

  • The “Paradox of Choice” : The satisfaction we get from choice follows an inverted U curve. Having more options when there are just a few makes us feel good, but having even more when there are already a lot makes us feel worse.

  • A key lesson from Shoes of Prey is for start-ups to be ready to change quickly and radically if things start to go wrong, focus on profitability and don’t get your expenses out in front of your revenues leaving room for a rainy day/year.

Basics Business

Articles:

Articles Explores:

  • The Do’s and the Don’t in Growing a Basics Business

  • The definition of a “Basic”

Notable Content & Quotes:

  • A collection of continual best-sellers and basics that will be available year-round

  • Basic may not be considered a plain Jane basic item but rather a more complicated / style driven item that continually sells.

  • Pricing your “basics” collection at a price below your current fashion collection. That does not mean making less margin as the Development costs — from researching fabrics to making new patterns — are virtually eliminated after the first season they’re introduced and you can estimate volume needs making it easier on your factories to produce and hold until needed as they have manufacturing room.

  • While basics may be priced below current collection do not allow them to be placed on sale at any point in time.

  • Basics should not be commodity driven - it should be obvious that your Brand’s DNA is present in the item creating a differentiating point.

  • Important not to “change” quality, look and feel of the item. Don’t go chasing extra margin by downgrading these attributes. It is ok every 3 - 5 years to tweak a basic to fit changing tastes.

  • Basics can serve as a great brand introduction but make sure it is reminiscent of the brand for a new customer to the brand to encourage them to seek out and feel comfortable with your current collection as well as the loyalists because if you lose a loyal customer it is unlikely they are coming back.

Articles Worth Reading - Edition 10.1

Rise of the Secondhand Market

Articles:

Articles Explores:

  • Discussion on the future of secondhand selling

  • Luxury hitting more of the masses

  • Rapid devaluation in apparel & accessories

Notable Content & Quotes:

  • Depop, yet another secondhand platform site has grown to 15 million users across 147 countries

  • Prediction that secondhand fashion will over take fast fashion within a decade or less

  • Secondhand market is bringing luxury goods to the masses and younger generations which also plays into the sustainable trend

  • Within 1-6 months a new item has hit its apex of exposure and early stage buyers begin to list the item in the resale market

  • Within 6-12 months a new item has lost between 40-60% of its original retail value which is supported by pricing obtained at sample / excess inventory sales.

  • After a year, the amount of supply of that “new” item in the resale market place begins to hit an apex further driving down the price to as low as 20% of the original retail value.

Takeaways:

  • Make it a point to visit the resale sites for your Brand to get an idea of supply & demand

  • Track resale selling prices to determine to what extent the items retain their value and what attributes the buyers desire in determining long term value.

  • Keep the rate of depreciation (lose of value) in mind when determining how much inventory to maintain or retaining excess goods for future liquidation sales.

  • Use the secondhand market as another arm of your liquidation outlets (though may not want to do this under the company name)

Articles Worth Reading - Edition 9.2

Trouble at Tapestry - Lessons to Learn?

Article Explores:

  • What the trouble at the accessories conglomerate Tapestry has to say about American Fashion

  • What is dragging down Tapestry

  • Are there hidden lessons to learn?

Notable Content & Quotes:

  • After 13 years, the CEO of Tapestry, Victor Luis was ousted.

  • Tapestry (formerly Coach) got in trouble as an increasing portion of their sales were generated through their owned outlet stores. The outlet stores generated some good sales and cash flow but was tarnishing the brand and long term viability. Victor Luis guided Coach out of that trap and had sales again growing along with improving the Brand image.

  • To further boost sales, create additional leveraging opportunities and with a desire to create the “American” LVMH, Coach acquired Stuart Weitzman in 2015 and Kate Spade in 2017.

  • The timing of the acquisitions may have been a bit premature as the core Coach brand was still in fragile shape as it was working to reduce its reliance on the outlet channels while also under the scrutiny of being a publicly held company.

  • Kate Spade began to drag the company down, as its once popular colorful bags sputtered through changes inclusive of launching Kate Spade New York and design redirection.

  • Simultaneously redirecting Coach while also trying to reinvent Kate Spade and mis-steps along the way started to erode sales and profits.

  • The primary battleground for fashion labels is no longer department store racks but Instagram, having a strong story is more important than ever, and simply knocking off luxury brands without a specific identity is no longer enough.

  • Unlike accessible luxury label Michael Kors, which benefits from its charismatic founders, neither Stuart Weitzman nor Kate Spade have direct ties to the designers whose names are on the door.

  • More than anything brand building takes time and patience and willingness to play a long game rooted in selective distribution, price integrity and creative risk-taking.

Etsy’s Evolution - Fighting the Mainstream

Article Explores:

  • The evolution of Etsy as website featuring handcrafted items to what it is today

  • The difficulty of retaining uniqueness as pressures build to continue to increase sales

  • Are websites destined to follow Amazon to try to compete with it?

Notable Content & Quotes:

  • Etsy the online conglomeration of stores was a community consisting of people who handcrafted goods for people who cherished one of kind, handmade products.

  • The concept worked and grew but the power of the mainstream stepped in.

  • Rob Kalin, the founder of Etsy, had a vision which he stated as “Instead of having an economy dictate the behavior of communities, to empower communities to influence the behavior of economies.” He was ousted 16 months later from his own company.

  • The growth of orders led to the need for Sellers to move the production of goods out of their homes and into factories which Etsy ushered forward in order to capture the increasing revenue streams.

  • As changes took place groups engaged with the “handmade concept” complained about the culture changing but as Alison Feldmann, one of the first employees of Etsy stated: “As a progressive business, people are going to be taking potshots at any change that happens in terms of ‘selling out.’ You know, it isn’t a nonprofit. It is a capitalist world that we live in.

  • As factory production took hold, Sellers who had produced a product that was “handmade” were now competing with a Sellers of a similar item that was mass produced.

  • A private equity firm took over the company and fired over a matter of months 220 workers, instilling a new direction stating “You need to furnish your apartment. You need to prepare for a party. You need to find a gift for a friend. You need a dress. Handmade is not the value proposition — unique, personalized, expresses your sense of identity, those are things that speak to buyers.”

  • Now Etsy recently encouraged its sellers to offer free shipping for all orders over $35 to compete with Amazon. To help their decision they also informed their sellers that they would de-prioritize their store on the site if they didn’t.

  • While Etsy may be on better ground in terms of sales and profits it serves as an example of uniqueness giving way to the mainstream and perhaps the natural evolution of new ideas.

10 Commandments of New Consumerism

Article Explores:

  • While titled “New Consumerism” the 10 Commandments are likely to sound familiar.

  • What is “New Consumerism”

Notable Content & Quotes:

  • New Consumerism: “[Its] about today’s consumers reassessing their priorities and increasingly asking themselves what they truly value,” says Sarah Boumphrey, Euromonitor’s global lead of economies and consumers. “[And] conscious consumption replacing the conspicuous consumption of yesteryear.”

  • Provide Transparency: The millennial generation is really starting to push the boundaries of traditional fashion retail and driving demand for honesty and transparency for the products they purchase.

  • Brand Authenticity: Brands need to demonstrate a level of authenticity by offering products that are in keeping with the company history and culture.

  • Sustainable Processes: While a fairly new buzz word and not yet fully vetted out it does present a new bandwagon to jump on if it is fairly inexpensively obtainable within your business.

  • Invest in Retail Technology: An increasingly number of tasks are being made significantly less burdensome everyday through technology and as a result becoming an “expectation” to the consumer.

  • Help Customers Achieve Personal Goals: Understand what draws customers to your products; what they are looking for and why. Make it clear to them that your products offer them an opportunity to fill a need and feel good and confident about it.

  • Price Products Competitively: This does not mean the cheapest! This means understanding on how your product’s quality stacks up against those you wish to compete against and then pricing your product competitively so the choice to the consumer at that level is not price driven.

  • Provide Efficient Services: similar to investing in Retail Technology the goal is to make things easier for your customer whether that is a Retailer or the end consumer. The less “resistance” met will assist in increasing the flow of transactions.

  • Deliver Experiences to Drive Sales: more dollars today are going to “experiences” that are memorable and will “last” in the minds of consumers. This could be as simple as an event to meet the designer, get a behind the scenes view, or connecting to a community.

  • Embrace the Sharing Economy: The birth and growth of companies like Rent the Runway or resale sites like The RealReal reflect that sharing and reusing apparel and accessories is not frowned on and in fact an acceptable trend. Don’t overlook these venues to build a base.

  • Recognize Customer’s Individuality: This concept never gets old. Differentiation is vitally important not only as you look at your products vs competitors but also how to make the product feel even more special and one of a kind for your customer.

Articles Worth Reading - Edition 9.1

PR Doesn’t Work Anymore

Article Explores:

  • Traditional PR failing to move the needle

  • Stories are getting pushed more - not products

  • How are small & midsize companies building awareness

Notable Content & Quotes:

  • Being your own influencer on instagram: posting her own outfits — mixing third party brands with in-house designs — almost daily, and offering both styling and business advice for entrepreneurs.

  • Build online personas and interact directly with your customers. The more truthful you are, the more you communicate, the more it resonates

  • Cultivate editor relationships

  • Consumers are exposed to new things several times a day. For that product to stick, the brand and publicist need to work together to come up with a legitimate reason for a consumer to pay attention. A new colourway is not news. No one cares.

  • A broader seeding strategy that is not solely focused on celebrities and influencers with mass audiences, but a range of names that help create a brand identity in the eyes of the consumer

  • Affiliate links via shopping-driven sites — such as The Strategist or Who What Wear — or influencers who make a believable argument that they really love what they are shilling.

Rental Services - Is There Enough Demand?

Article Explores:

  • Post Rent the Runway - start ups and large Retailers are entering the fray - is the demand there?

  • What are these companies using to attract their next customer

  • Rental allows the customer to be more adventurous in style

  • Importance of Brand offerings offered

Notable Content & Quotes:

  • Rental model is geared towards those that want a more varied wardrobe without the desire to invest in purchasing it.

  • Individuals find it “fun” posting on Instagram their favorite rental pieces

  • Ann Taylor, Express, American Eagle, Scotch & Soda and Urban Outfitters now offer rentals, with Banana Republic and Bloomingdale’s to launch their respective services soon.

  • Vs the one off gown or cocktail dress, now more than half of Rent the Runway revenues are generated by its monthly Unlimited subscription service.

  • Forrester retail analyst Sucharita Mulpuru believes Retailers think that so many people will sign up for the recurring billing that it will be a no-brainer,, but customer acquisition costs will be high, churn will be high, and it won’t be that successful.

Articles Worth Reading - Edition 7.2

Wholesale Channel Pressures

Investment Banking group Cowen dug a bit into the wholesale channel for retail & consumer brands

Article Explores:

  • Department store inventory levels

  • Competing channels

  • What’s missing

Notable Content & Quotes:

  • Inventory levels at department stores are reaching multi-year highs (worst level in four years) which will put pressure on de-stocking and markdowns

  • Financial performance at department stores is declining due to various competing channels and lower returns on investment within their digital group

  • Brands own DTC efforts, deterioration in foreign tourist traffic and increasing penetration of subscription and resale channels are negatively impacting department store sales.

  • Retailers continue to desire brands which provide differentiation, good quality to value propositions and timely and accurate fulfillment.

The Need to Evolve

https://www.businessoffashion.com/articles/opinion/op-ed-winner-takes-all-trend-raises-tough-questions-for-everyone-else?utm_source=daily-digest-newsletter&utm_campaign=1640109185718485&utm_term=11&utm_medium=email

Article Explores:

  • Lack of profitable fashion players

  • Benchmarks on company’s operating expenses

  • Need to invest in channels, segments and markets

  • Evolution of change needed

Notable Content & Quotes:

  • 80% of the “listed” (meaning: their financials are publicly available) fashion players are failing to make money

  • The top quartile of fashion players were seeing 11% revenue growth

  • Companies are investing in areas like e-commerce, infrastructure and marketing but only a few are getting a sufficient return on those investments.

  • Need to spend dollars wisely in brand-building, expanding channels of distribution and entering into new markets while also working on product/design to capture revenues.

Building a Brand Outside of NY & LA

https://www.businessoffashion.com/articles/professional/how-fashion-brands-strike-gold-outside-ny-and-la?utm_source=daily-digest-newsletter&utm_campaign=1640040329672748&utm_term=11&utm_medium=email

Article Explores:

  • Building a product line and following outside of the lights of NY & LA

  • Gaining the support of your local media outlets and customers to introduce the brand

  • Exploring more unique ways to gain awareness than through the typical higher cost paths

  • The upside & downside to being outside of the big talent pools

Building Fashion People into YouTube Creators

https://fashionista.com/2019/07/fashion-people-youtube-videos-strategy

YouTube is a social channel that has an incredible amount of new video content uploaded to it daily. The channel offers designers and brands a chance to show a bit of who they are to its current and potential customers in a low key and relatable way. It should not be overlooked as a key part of your social media outreach.

Article Explores:

  • Marc Jacobs doing a learn to drive and car shopping YouTube video

  • Naomi Campbell spending time between flights and sanitizing her airline seat

  • Vlogging in pursuit of views, likes and channel subscribers

Notable Content & Quotes:

  • Derek Blasberg, YouTube's head of beauty and fashion partnerships, has convinced the likes of Victoria Beckham, Naomi Campbell, Alexa Chung, Rosie Huntington-Whiteley and Marc Jacobs to start vlogging on a regular basis

  • Mr Blasberg has also masterminded some very clever partnerships:

    • Emma Chamberlain and the Dolan Twins, whose channels have more than 8M and 10M subscribers, respectively, sat front row at Louis Vuitton's runway shows for the past couple of seasons.

    • YouTube personalities Rickey Thompson and Jay Versace have hosted videos and livestreams for Alexander Wang

    • Liza Koshy, a YouTuber with a whopping 17M subscribers, hosted the 2019 Met Gala live stream for Vogue.

Influencer Fraud

https://www.businessoffashion.com/articles/professional/influencer-marketing-fraud-buying-followers?utm_source=daily-digest-newsletter&utm_campaign=1639849027650017&utm_term=11&utm_medium=email

As you would have guessed, people are finding fraudulent ways to catapult themselves to higher social media status to lure advertising dollars. You might have read as well that huge numbers of the reviews on Amazon and other online retailers are false even though supposedly “verified”. This will likely get worse and with it a mistrust by consumers. If you are a designer, you are of course bound to be biased on your own designs which is expected but at least your followers can see your product through your own eyes. If you have followed real estate, you have undoubtedly noticed many of the real estate agents putting into the description “what they like most” about that particular listing. Assuming you liked each of your offerings enough to put it on a line sheet than why not in your social meeting posting explain what “you” like most about that item?

Article Explores:

  • How individuals are fraudulently building their social media status

Notable Content & Quotes:

  • individuals are hiring “click farms” to like or comment on posts

  • On average, influencers who buy likes spend $49 for 1000 followers on Youtube and $34 for 1000 followers on Facebook. The rate is even lower on Instagram, though, with influencers being able to pay as low as $16 for 1000 followers.

  • There are vending machines in Russia that sell Instagram likes

  • In one survey analysed by Cavazos, a University of Baltimore professor and economist, 25 percent of followers of 10,000 influencers surveyed were fake.

  • Groups of influencers who team up to like and comment on each other’s content in order to boost the engagement rate and game the Instagram algorithm so that it becomes more visible to followers.

Articles Worth Reading - Edition 7.1

Vietnam’s Apparel Industry Braces for Cost Surge

https://asia.nikkei.com/Economy/Trade-war/Vietnam-s-apparel-sector-fears-cost-surge-as-tech-giants-move-in

Article Explores:

  • Rising costs of labor in Vietnam

  • Tech giants moving into Vietnam creating a labor squeeze

  • Vietnam may be next target for US placed tariffs

Notable Content & Quotes:

  • Major apparel companies are halting or significantly slowing down any expansion in Vietnam

  • With a population of 95 million and close proximity to China, Vietnam has long been a popular destination for the apparel industry hoping to seek lower production costs.

  • Wages in Vietnam have increased 4 fold in the last 10 years with a governmental directive to increase minimum wages by over 10% yearly.

  • "A lot of companies are moving to Vietnam, but Vietnam takes advantage of us even worse than China. So there's a very interesting situation going on there," Trump said during an interview with Fox Business.

REVOLVE’s Web Attributes

https://www.cowen.com/capabilities/investment-banking/

Article Explores:

  • Cowen’s equity research team explored REVOLVE’s web base attributes

  • Survey results of how REVOLVE’s web-based customers interacted with their web platform

Notable Content & Quotes:

  • REVOLVE’s identified attributes are (1) Engaged Customers (2) Aspirational (3) On-Trend (4) High Satisfaction

  • REVOLVE’s web customer is highly engaged with their web site

    • 35% shop the site once a week

    • 32% are on the site daily

    • 20% visit bi-weekly

    • 12% visit the site once a month

    • 2% visit infrequently (once in awhile)

What does REVOLVE’s web-based customers shop for?

  • 29% Clothes to go out in (excluding work & everyday clothes)

  • 26% Clothes for everyday wear

  • 26% New product discovery

  • 18% Work clothes

Virtual Reality Clothing

https://www.businessoffashion.com/articles/fashion-tech/virtual-fashion-digital-products?utm_campaign=a830fada87-can-influencers-save-the-fur-industry&utm_medium=email&utm_source=Subscribers&utm_term=0_d2191372b3-a830fada87-416999661

Article Explores:

  • Do you kids spend money on-line to dress their avatar in a unique set of clothes or armor (called skins)

  • Is the world of virtual clothing to try on continuing to surge forward

  • Are we starting to see merger of virtual clothing and social marketing?

Notable Content & Quotes:

  • Epic Games’s Fortnite, the popular online game that has over 250 million global users, reportedly earns $300 million a month selling skins.

  • Apps that allow users on Instagram and Snapchat to alter their appearance are wildly popular, and several brands have also started using augmented-reality technology to let shoppers virtually “try on” clothing and shoes.

  • “Some kids can’t afford Gucci in real life, but they can in the digital world. It works as an entry point”, said Akash Niham, the CEO of virtual avatar startup Genies.

  • Carlings, a Scandinavian fashion brand, debuted a 19-piece virtual collection in November 2018 that sold for €10 to €30 (roughly $11 to $34). Shoppers who bought the virtual products submitted photos, which the brand turned into 3D images.

  • Some brands are already creating digital images for Influencer Instagram posting to identify the interest level before producing the item.

  • Companies like Ann Taylor, BetaBrand and Hugo Boss, which use virtual clothing to partially replace sampling in the design process, as does the fashion supply chain company Li & Fung.