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Sales spike heats up web fashion fight
Published in The Saudi Gazette on 14 - 03 - 2009

Competition in the online fashion industry is set to intensify as store groups, hit by sliding sales in the economic downturn, try to grab a slice of one of the few strongly growing retail markets.
Better online payment and delivery systems, innovative Web sites that allow consumers to try on clothes virtually and even shop together, and the rising purchasing power of the first generation to grow up with the internet mean online fashion will continue to defy the recession, analysts say. These factors will attract store groups that have shied away from selling clothes online, like Europe's No.1 fashion retailer Inditex, as well as more department stores and grocers. That will pose a challenge to pure-play pioneers of the industry, like Britain's ASOS and Italy's YOOX Group, which are currently enjoying sales growth of up to 100 percent.
However, if they take their cue from pure-play success stories in other sectors – like Amazon.com in entertainment – and act as a brand-neutral home for the maximum number of products, they can still flourish, analysts think.
“If ASOS is to succeed as a pure-play, it needs to do something fundamentally different and that has got to be down the (brand) aggregator route and the service proposition,” ASOS Chief Executive Nick Robertson told Reuters in an interview.
Online sales account for only a small part of Europe's clothing market, which is worth about 300 billion euros ($386 billion) a year, according to retail researchers Verdict.
Victoria Bracewell-Lewis, senior analyst at e-commerce consultancy Forrester, estimates the proportion at between 3 and 5 percent, depending on the country, but thinks this is set to increase markedly. “As more customers shop online, more retailers will go online and you get a virtuous circle,” she said, adding sales figures understate the importance of the internet as shoppers are also using Web sites to research before buying in store. Forrester forecasts online apparel sales in Britain and Germany will grow by more than 50 percent to $9.9 billion and 6 billion euros respectively by 2014, while sales in France will almost double to 3.5 billion euros. ASOS's Robertson is also confident the internet will continue to rapidly increase share of the total clothing market. “Can I see 10 percent of clothes being bought online? Yes, and I can see that two to three years away,” he said.
Multi-channel vs pure-play
Soaring online sales are putting pressure on the big store groups to accelerate their expansion onto the internet.
“Inditex is increasingly missing out on a growth market and if it doesn't get online it is going to ultimately restrict its maximum growth potential,” said Exane analyst Phil Rudman. Setting up online is neither cheap, nor easy, as firms have to organize payment systems, distribution and returns. But a growing number are making it work, creating a powerful “multi-channel” offering where shoppers can buy online and collect in store, or try on goods in store and order at home. Britain's John Lewis and Debenhams are among the store groups reporting strong online fashion sales, and many others are following suit.
British supermarket giant Tesco plans to launch a Web site this autumn to sell its own-brand clothes, and many analysts think it will eventually expand into brands. Bernstein analyst Luca Solca thinks the arrival online of major shopping street brands will be decisive. “It's the High Street brands that are going to drive internet adoption and are going to be generating traffic in the end,” he said.
Others, however, think there is a big role for pure-play online fashion firms as they can offer more choice than single-brand retailers and a better customer experience than the department stores and supermarkets. “It's about choice,” said ASOS's Robertson. “In a provincial high street store you might have the choice of eight dresses and in the flagship store it might be 200.” “If you go to ASOS today there are 2,000 dresses.”
ASOS, which sells over 19,400 branded and own-label products and is expanding into Europe, is also launching a social networking site, The Community, and plans an Amazon-style marketplace for members to sell their own goods online.
YOOX Group is going a slightly different route. It has signed deals to design and manage online stores for major brands like Marni, Diesel and Bally, which run alongside its own multi-brand websites and stock different products.
Founder and Chief Executive Federico Marchetti told Reuters that YOOX expects to add another six major fashion brands to its existing 12 partnerships by the end of this year. But will any of this prevent pure-play online fashion retailers from being crushed by the store group heavyweights?
“That remains to be seen. But I will say that because pure-play tends to be more flexible and nimbler, they are more likely to be able to move with the trend and capture that trend very quickly,” said Forrester's Bracewell


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