Fashion 2.0 | What the Future Holds

About a month ago, I attended the Harvard Business School’s annual Retail and Luxury Goods Conference in Boston. It was an interesting day of speeches and panel discussions, bringing together industry veterans and experts from leading luxury goods and retail companies including Neiman Marcus, Loro Piana, and Holt Renfrew. You can read more about the conference in this news article from HBS’s Harbus Newspaper.

I was honoured to speak on a panel with a diverse group of talented people from across the world of Luxury Goods, including the American designer Peter Som, Olivier Cardon, President of Roche Bobois North America, and Roberto Vedovotto, Chairman of Lehman Brothers Global Luxury Goods practice. I thoroughly enjoyed the back and forth with my fellow panelists. We touched on many topics, but the one that seemed to provoke the most debate was regarding the role that the Internet and so-called “Web 2.0″ technologies can play in the branding, marketing and commercial strategies of luxury and fashion companies.

I have to say, it felt like being in a time warp. There was a notion that luxury “customers aren’t on the Internet” and that the Internet “is too risky” for luxury brands. All of a sudden, I knew what it must have been like to be Natalie Massenet (of Net-a-Porter) or Ernst Malmsten (of boo.com) back in 1999, making a case for the potential of Luxury and the Internet, to people who were very risk-averse, conservative and stuck in old mindsets; people who couldn’t see the potential for what the Internet could do for their brands and businesses.

Of course boo.com and Net-a-Porter have followed two very different stories. (One, which ended abruptly, was discussed in this post.) Massenet, however, has shown (with her company that is now turning over a reported $80m and growing at 100% per year), that as with all businesses, harnessing the power of the Internet for Luxury comes down to basic business acumen, strong marketing skills, and knowing how to properly manage and grow a start-up, while also understanding technological issues such as the adoption curve and limitations of sophisticated technologies.

As for Luxury customers not being on the Internet, this appears to be an assumption made in the absence of basic facts or data. One need only look at a recent article from the Financial Times to see really how many luxury customers are online:

“A survey of  500 of America’s richest families published in 2005 by researchers Doug Harrison and Jim   Taylor found that the respondents spent on average 13.7 hours a week online. The Luxury Institute, in a  survey of 1,000 wealthy consumers published in March, found that 98 per cent used the internet for     shopping, and that 88 per cent read product research and review sites.”

Clearly, these are not just young bucks trying to pick each other up on Myspace or Facebook, but also high net worth communities like asmallworld and focused fashion communities like Iqons.com. Big brands and collections are being discussed passionately on all of these highly-trafficked sites, but also on blogs (purseblog.com, whowhatweardaily) and virtual communities (secondlife.com). The amount of content is mindboggling.

Obviously not all of it is good content. But, my basic point is that since conversations about Gucci, Prada and Burberry are going on, Gucci, Prada and Burberry might as well figure out a way to be part of those discussions, where it makes sense. The fact of the matter is that the conversations will continue, whether they are involved or not. Of course, not all of those places would make sense for every brand all the time, but to disregard the importance of the Internet outright seems shortsighted.

When it comes to the riskiness of luxury brands on the internet, I can certainly appreciate this point. Big players have the most at stake, given the energy and money that have been invested in their brands, sometimes over hundreds of years. But that said, where there is risk, there is also opportunity. Thankfully, some big brands have recognised this and started to experiment with some of these new communication channels. Armani and Karl Lagerfeld have brought their fashion show videos to the Internet, iPods and mobile phones, showing that being a pioneer has nothing to do with age, it has to do with attitude. Dior has also experimented with the launch of a jewelry collection on secondlife.com.

That said, some of the most exciting ways to really experience what online luxury might feel like in the future is by visiting the amazing virtual worlds created by emerging designers, who are able take more risks and experiment. Boudicca’s site at platform13.com is like walking right into the fantastical (sometimes incomprehensible) world of the designers, Zoe and Brian, who share all aspects of themselves and their passions. They have also uploaded all of their fashion shows to YouTube. Other fashion designers are also providing a peek into their everyday lives by keeping regularly updated blogs. New York-based Brit Sue Stemp and dynamic British-Japanese duo Eley Kishimoto are amongst those using blogs to create a space to communicate with their customers.

What the future holds for luxury eCommerce in particular is very exciting indeed, because much of the basic foundation has been laid. Competition is just beginning to heat up.  Since pioneers like Massenet successfully brought luxury online, all of the big retail and luxury players have jumped in. You could say, they have been fashionably late. Neiman Marcus’ direct business (which includes the nm.com, bergdorfgoodman.com and the catalogue business) now generates $700m in revenue. Revenue growth rates for the online boutiques of Coach and Gucci are massive, somewhere in the 60%+ range. Interestingly, partially because of the rush to capture online real estate and market share quickly, almost every online luxury site feels the same. Not much time has really been spent in creating a truly unique destination. Just check out  brittique.com, matchesfashion.com, brownsfashion.com,neimanmarcus.com, eLuxury.com , and bluefly.com and you will see what I mean. For the most part, each site is a one-way interaction with the consumer. They also tend to be organized in the same way, with similar aesthetics using similar fonts and layout. Only Net-a-porter has successfully integrated compelling content into their site (with its magazine) and just Yoox has a truly different look and feel.

So now, as with any other business where the product/service starts to become commoditised, the key players will have to take it to the next level and differentiate themselves to keep up with the rapid pace of what’s going on. It’s not a zero sum game yet because the industry’s growth is so high, but with so many players in the game, its bound to be more competitive. This is where Web 2.0 can play a role. Luxury ecommerce sites which differentiate themselves through unique product assortments, clever editorial and content, and interactive community development, will be the ones that succeed. On the other hand, with retail it always comes down to number of visits and average purchase size, so its also important that the interactivity and community don’t detract from the primary objective at hand, which is to drive sales.

Related Articles

Post a Comment

8 comments

  1. web 2.0 thoughts The stats very clearly show that less then 1% of web users do things like build personal profiles while 99% browse. On youtube, much less then 1% actually make and upload videos while more then 99% watch….dont drink the koolaid because nothing has changed. People basically like to watch, just like they did 70 year ago when TV first came out.

  2. Yes, I’m not surprised by those stats. It doesnt change the fact that the 1% of people who are posting comments, uploading profiles, rating designers, writing blogs, are having an impact on the 99% of people who are browsing.

  3. The fashion retail world has been notoriously slow to embrace the web preferring to believe that customers won’t buy clothing purchases on-line. The opposite has proved true by the success of e-tailers like Zappos.com and shopbop.com. With the hectic pace of life today, I think shopping on-line makes perfect sense for some consumers. This will only expound as the younger generation-which tends to think of the internet as secondary as breathing-ages and matures into adulthood.

  4. Hello, and thank you for the great blog. I posted on this subject a while ago. http://dailyluxury.blogspot.com/2006/10/my-perfect-e-lux-site.html E-commerce will defenitely be a sales booster, as well as an opportunity for brands to be “at the hight of it”- but in my opinion too much has been invested in physical points of sale to seperate virtual from physical retailing. I truly believe that e-commerce should also serve as a client recruiting and trend watching tool.

  5. Love the blog! Maybe you can help me? I own a surf and skate store in Florida. We’ve been open for just a year now after buying out a woman who was not making it as a beach store / surf shop after just 1 year of business. When we came in a year ago we infused the business with enough capital to purchase adequate – well, more than adequate since we’re busting at the seams with product. That’s the history. I’m trying to get some market (financial) research into things like what size store should generate x? Info like what other successful stores in my business generate – above average stores / average stores / etc. Obviously the square foot size of the business is a factor and I’d like to get an indication of revenues per square feet — that kind of stuff. Got any idea how I can find it and where I’d begin to look? Thanks, Cheryl Peters

    Cheryl Peters from Pompano Beach, FL, United States
  6. Dear Cheryl, I think you shouldnt look at what other companies are doing. Just critically look at what market you are trying to serve, and what their needs are. Companring to other businesses will, at best, only make you as good as they are. I dont think you want that, you want to rule them!! I know of little shops selling like crazy, and larger ones going out of business really quickly. There are so many factors out there influencing your succes… Good luck, Matt

    Matt from Amsterdam, North Holland, Netherlands
  7. Thanks, this is an interesting article, and mirrors some of our experience. We are developing an Internet fashion avatar communication focused around real world branded items. Dealing with some of the brands reveals a range of differing opinions about getting involved. Quite a few, especially the smaller and younger brands are keen to explore and use new channels online such as 3D products. Surprisingly, some of the larger brands but not necessarily luxury, such as Levis have led the way in this. For example, with Levis World launched in Hong Kong around a fashion avatar concept. I think it may take a bit of time and a few success stories from earlier adopters which will help encourage some of the more conservative players to move forward. FYI, I recently put together and article on the five of the best Fashion 2.0 social sites. The post is at http://vrfashion.blogspot.com

  8. Being a fashion blogger myself http://thepassionatefashionista.blogspot.com, I am constantly looking at fashion retail websites. I find it shocking at how slow fashion retailers are to embrace the internet as an adjunct to selling their wares. Often they have websites with content is infrequently updated. The potential to reach consumers near and far is there if savvy retailers will only harness it.