GQ and Park & Bond pop-up shop, NYC | Source: Selectism

When mags merge with bags (FT)
“GQ is not the only media operation to embrace a more overt commercial role. More and more publications have been trying to establish ecommerce operations in an effort to extend their brands beyond the printed page, and find new sources of revenue in a tough advertising market.”

Mulberry enjoys strong festive season, sales up (Reuters)
“Luxury fashion company Mulberry Group Plc expects 2012 financial year results to exceed its earlier forecast, led by strong Christmas and New Year sales, putting it firmly in the festive winners’ camp in the UK.”

Asos Third-Quarter Sales Rise on Retail Growth Outside U.K. (Bloomberg)
“Asos Plc, the U.K.’s second-largest online clothing retailer, reported a 46 percent increase in third-quarter retail sales because of growth abroad, and said it’s confident of meeting analysts’ full-year profit estimates.”

Chinese haute-couture steps up at HK Fashion Week (Reuters)
“China at one time may have been better known for fashion knockoffs than catwalk creations, but Chinese haute-couture is now finding its feet on the international stage — even as it grows ever more popular with customers at home.”

Marc Jacobs: “I don’t know what the key to happiness is” (The Talk)
“I don’t know, I don’t know what the key to happiness is. Happy is just a feeling like every other feeling. I certainly feel happy some days and in general I am pretty happy, but I have all the other feelings as well. So I don’t know if there is a key.”

Modcloth screenshot | Source: Modcloth

In Part I, we examined the innovations and infrastructural advances that have improved the historically poor economics of e-commerce and set the stage for a renaissance in online retail. Today, we explore some of new and exciting business models taking shape, the companies exploiting them and the challenges they face.

SAN FRANCISCO, United States — For years, e-commerce suffered from capital inefficiencies and complexities that pushed investors away. But in recent years, major infrastructural advances and the success of innovative start-ups like Gilt Groupe have rekindled investor interest and set the stage for an explosion of promising new business models including personal subscription, social merchandising, mass customisation and collaborative consumption.

PERSONAL SUBSCRIPTION

Opportunity: The model is relatively simple: consumers join a monthly club, complete a personal style survey, and are then shown a selection of products each month that they can choose to buy for a flat rate. While traditional online retailers struggle to gain and retain customer mindshare, and must constantly re-engage and convert customers to stay profitable, subscription style services generate far more predictable revenue streams. Subscription retailers also capture data on the tastes and size measurements of individual customers in order to deliver personalised product selections. This not only drives greater customer loyalty, but also enables retailers to better manage inventory risk.

Key Players:

• Shoedazzle offers personalised, stylist-selected shoes and accessories at affordable prices, delivered straight to doorsteps, and has attracted over 3 million members and over $60 million in venture capital from top tier firms.
• Beachmint has raised a total of $38.5 million and launched several subscription services across a number of verticals, working with celebrity designers, including jewelry site Jewelmint, launched with actress Kate Bosworth and her stylist Cher Coulter; Stylemint, launched with Mary-Kate and Ashley Olsen; skin care site Beautymint, launched with pop culture phenomenon Jessica Simpson; and shoe site Shoemint, launched with actress Rachel Bilson.
• Birchbox, an early subscription retail innovator, is a beauty subscription service that addresses product discovery and sampling and has raised a total of $11.9 million
• Manpacks is a convenience-focused men’s subscription service for staple male essentials like razors, underwear, socks and shirts.

Challenges: Competition in the subscription retail space is heating up, so we might start to see increasing churn rates. While subscription services have stickier revenues, they are vulnerable to cancellations. In order to succeed over the long term, they must continue to offer products that are constantly exciting and relevant to their customers. Multiple months of disappointment will most likely result in lost customers.

SOCIAL MERCHANDISING

Opportunity: Social merchandising enables retailers to collect consumer feedback on goods prior to buying them. Typically, consumers are asked to vote, comment or curate products (sometimes through contests), indicating their preferences in a way that generates hugely useful data that retailers can leverage to more accurately predict what will sell, better aligning supply and demand. Social merchandising also engages customers and drives greater loyalty.

Key Players:

• Threadless was one of the first online fashion retailers to let the crowd vote on their favourite t-shirt designs and determine which designs would be put into production and sold on the site.
• Modcloth, which raised $19.8 million in a Series B round led by Accel Partners in 2010, has experimented with a successful “Be the Buyer” program, which lets consumers vote on their favourite items, generating data that informs Modcloth’s merchandising strategies.
• ASOS now encourages consumers to vote on, curate and share the designers and products they fancy most, a sign that larger e-commerce sites are experimenting with social merchandising as well.

Challenges: With social merchandising, timing is a challenge. What consumers want today may not be the same as what they want in a few months time. So, for these feedback loops to be most effective, short cycle production and fulfilment are essential.

MASS CUSTOMISATION

Opportunity: Mass customisation lets businesses deliver individualised products to every single customer, based on the buyer’s choice of aesthetic, functional, or contextual components such as styles, colours, materials and measurements. The individualised tailoring of products has, traditionally, been too costly to scale. But mass customisation allows customers to participate meaningfully in the design of their goods, restoring individuality to the process, while leveraging the cost-efficiencies of mass production to make the model feasible. Customers get the exact products they want. And by offering goods that, by definition, cannot be found elsewhere, the model enables companies to differentiate themselves vis-à-vis competitors and build stronger, more engaged and loyal relationships with consumers. Plus, by getting commitment (and payment) at the top of the purchase funnel, mass customisers avoid the perennial issue of excess, end of season inventory that didn’t sell. Indeed, customers pulling — rather than companies pushing — product designs offers practical, emotional and economic advantages.

Key Players:

• Nike first launched its highly successful mass customisation platform NikeiD back in 1999, allowing consumers to add a personalised look and feel to select shoe models. Ten years later, following a 2008 redesign of the application, the company reported that the platform had “surpassed $100 million for the first time.”
• Zazzle and Cafépress, which earns over $100 million in revenue per year, are white label companies also active in the space.
• Burberry Bespoke allows customers to create trench coats to their personal specifications, choosing from a wide range of style, fabric, colour, embellishment and detail options.

Challenges: The downside of mass customisation is the increased cost and complexity of production, which is ultimately reflected in higher prices. Prices for Burberry’s custom trenches start at about $1,800, while special materials can bring the price up as high as $8,800. Customers derive greater value from personalised products and are willing to pay a premium for these goods, but it’s simply not feasible that every part of a product design will be customisable. The trick is identifying which key elements of a product to make customisable and offering the right degree of variability in order to provide a made-to-order feeling, while ensuring manageable and scalable production.

COLLABORATIVE CONSUMPTION

Opportunity: Collaborative consumption is the next generation of swapping, sharing, bartering, trading and renting, behaviours which are being re-energised through the growth of peer-to-peer marketplaces and other technology-enabled platforms. Sellers can get rid of used or depreciating assets, while buyers can consume the items’ residual value at a price point that is substantially cheaper than retail. Collaborative consumption also includes rental models. For high cost items, especially those that are fashionable or ephemeral, renting items often makes more sense and gives a new customer base access to products that would normally be outside of their reach. As a result of the troubled economy and the rise of flash sale and daily deal sites, consumers expect discounts as a matter of course and routinely seek out high quality or high design items at cheaper price points, creating an environment ripe for the growth of businesses built on collaborative consumption.

Key Players:

• Rent the Runway, a mail-order service which lets women rent designer fashion and is sometimes described as “the Netflix for fashion,” has attracted over 1 million members and secured over $30 million in funding from top tier firms Highland Capital, Bain Capital and Kleiner Perkins Caufield & Byers.
• Bag Borrow or Steal lets consumers rent designer bags by the week, month or season.
• TheRealReal, backed by start-up accelerator 500 Startups and other noteworthy angel investors, recently launched an online consignment store selling previously owned luxury fashion at prices as low as 90 percent below retail.
• I-Ella enables consumers to easily swap and exchange fashion.

Challenges: Peer-to-peer models faces obvious challenges around trust and quality control. And, as with any marketplace business, getting liquidity through a critical mass of products and users is essential, but challenging. The rental model is initially capital intensive, because a company has to purchase inventory upfront and absorb the depreciation and maintenance costs associated with each item, which creates barriers to entry for copycats aiming to get off the ground and achieve profitability. Overtime, the model can be lucrative, especially for companies that are able to make accurate assumptions around depreciation from wear and tear and the costs of upkeep.

Although winners are already emerging from the current explosion of e-commerce start-ups, we will continue to witness constant e-commerce innovation for the foreseeable future. Indeed, with only 9 percent of commerce currently being conducted online, there is still tremendous room for growth. Beyond the aforementioned approaches, a number of promising young companies are building businesses around innovative models like shoppable media (Joyus), multi-level marketing (Stella & Dot), curation (AHAlife), local shopping (Aisle50) and retail gaming (Lockerz and Sneakpeeq). And while venture capital investment is a symptom of a good market, not a cause, investment in e-commerce more than doubled from $1.06 billion in 2010 to $2.39 billion in 2011. This kind of interest from VCs will surely accelerate the explosion of new start-ups set to disrupt the retail industry in the months and years to come.

Elizabeth Knopf is a former investment associate and the co-founder of Sorced, an online showroom.

Miu Miu Autumn/Winter 2011 photographed by Bruce Weber | Source: Miu Miu

Prada Woos Young Chinese With Edgier Sister-Brand (WSJ)
“Aiming to cash in on China’s bulging population of young fashion-lovers, Prada is turning its focus in the Chinese market to its… Sister-brand… Miu Miu has struck a chord with China’s young luxury shoppers… Who… Don’t remember the era in which the brand was overshadowed by the Prada label.”

Global growth drives ASOS sales (FT)
“Online fashion retailer Asos intends to make free global shipping a “permanent” part of its business model, after international sales growth fuelled a 63 per cent jump in sales in the first quarter to £107m… International sales grew 160 per cent… And now make up 57 per cent of overall sales.”

Hugo Boss raises outlook on China, U.S. demand (Reuters)
“German fashion house Hugo Boss raised its outlook for the year, boosted by growing sales in China and the United States…  The group, known for its sharp suits for men, said it now expected 2011 sales to rise by between 15 and 17 percent and underlying earnings to rise by 25 and 30 percent.”

Yves Saint Laurent Defends Its Red Soles Against Christian Louboutin (The Cut)
“Yves Saint Laurent, Inc.’s lawyers issued a… response to Christian Louboutin’s trademark-infringement charges this week, stating first… That no one can prove that YSL’s use of red soles hurt Louboutin’s sales or caused any consumer confusion… They argued that Louboutin never should have gotten a trademark for those red soles.”

In Berlin, Rocking the Fashion Trade Fair (IHT)
“A person stumbling into this spectacle… could easily mistake it for an artsy free-for-all in Berlin… Yet that is precisely what makes Bread & Butter, among the world’s most important urban and street fashion trade fairs… Held this year… It drew 100,000 visitors and 600 brands like Adidas, Diesel and G-Star”

Kris Van Assche by Paolo Roversi | Source: Interiew Magazine

Kris Van Assche By Rick Owens (Interview)
“The last two years have marked a subtle turning point for the 35-year-old Van Assche, who has weathered the early storms, turned back the critics, and started to carve out his own territory. But as he confesses to Rick Owens, beneath his organized, controlled surface lies a quiet intensity that continues to fuel his work.”

The height of fashion (Marketing Week)
“‘If you bought the first Harry Potter film, then you are probably going to buy the next one… But if you’ve bought a pair of red shoes there’s no certainty over what you are going to buy after that.. It’s more about understanding a customer’s preferred brands, styles and price point, then engineering that to a point where the product served to them is relevant.’”

Madewell, but Remade How Well? (NY Times)
“Around the turn of this millennium, Mr. Drexler… presciently intuited a groundswell of consumer yearning for traditional American dry goods and bought the rights to, though not the physical remains of, Madewell, a brave little workwear manufacturer in New Bedford, Mass.”

Mulberry profits surge as fashion group expands (BBC)
“Luxury fashion group Mulberry has reported a sharp rise in profits as the boom in luxury goods continues to defy the economic gloom. Pre-tax profit for the year to March jumped to £23.3m from £5.1m a year ago… ‘Strong demand in all markets has continued into the new financial year and the outlook for the Mulberry brand is positive.’”

The Sound of Style | Tim Blanks (AnOther)
“‘I’ve been doing what I’ve been doing for such a long time, but people don’t really know that much about me,’… Blanks rose to prominence celebrating and disseminating shows on video for Canada’s Fashion File, an international cult that gave thousands of viewers an insight to the world’s most vibrant catwalks, opening a closed-door culture.”

Marc Jacobs | Source: Wajima

Marc Jacobs: The Survivor (NY Times)
“Call him a genius. Call him a junkie, an original, a shameless copycat, a winsome recluse, a brazen exhibitionist. Marc Jacobs has heard it all. And he has absorbed it all with a hard-won equanimity.”

One size does not fit all (FT)
“Sizing is a national issue: whether fashion brands are upscaling their definition of a size four for the upscaled US consumer, shrinking their purses for Japan, or… launching a new shoe shape specifically for the Hong Kong foot.”

Global luxury brands flock to Hong Kong bourse (AFP)
“Some of the world’s top luxury brands are set to list on the Hong Kong bourse to tap China’s deep capital markets — and draw more customers… China is forecast to be the world’s top buyer of products such as cosmetics, handbags, watches, shoes and clothes by 2015.”

Asos sales boosted by international growth (BBC)
“Asos has reported a sharp rise in full-year revenue as sales at the online fashion retailer’s international business continue to grow rapidly… “I am pleased to report another successful year for Asos,” said the group’s chief executive Nick Robertson.”

Vuitton’s Intrepid Effort to Court China’s Tourists (WSJ China Real Time Report)
“LV’s museum partnership also fits into China’s recent art rage. According to a report commissioned by the European Fine Art Foundation, China is now the world’s second-largest market for art and antiques.”

Prada's Spring/Summer Covers | Source: Fashionista

Prada’s Spring Collection Lands 48 Covers (Fashionista)
“Last season it was Miu Miu, specifically that one appliqued dress, that kept appearing on cover after cover. This season, Prada’s spring 2011 is sweeping the glossy covers… So far Prada’s colorful stripey bananas collection has seen 48 covers (that we’ve counted) and starred in countless editorials.”

He’s Only Just Begun to Fight (NY Times)
“To many, Mr. Charney is not only a somebody but even something of a hero: finding a new niche in a saturated market for cotton basics by refusing to make them overseas… crusading for workers’ rights; and successfully marketing the idea that young adults should embrace their natural sexuality… But to others, he is a morally challenged provocateur.”

D&G Will Die; Long Live Dolce & Gabbana (WSJ)
“When Dolce & Gabbana said recently that it is folding its younger, less expensive D&G brand into its high-end line, many retailers were bewildered… But there’s another way to look at this wager: Consumers—savvier and more confident than ever about fashion—no longer pay as much attention to narrow tiers of brands…. what consumers really care about is the designers who stand behind them.”

Asos apprenticeships will keep us in fashion that’s made in Britain (Telegraph)
“It’s not something that can happen overnight: setting up training, let alone new factories, is a long and laborious process which has to be overseen by people who are qualified, understand quality, and know how to direct a fashion business. But how great that the likes of Asos are already kicking things off.”

Insiders | Chanel Metiers D’Arts – Lemarié (AnOther)
“Ever since Marie Antoinette added exotic plumes to her headdress to get herself noticed in 18th century French society, feathers have come to represent the ultimate in fantasy and female frivolity. But this recherché craft has dwindled over the years from nearly 500 ateliers in Paris in the 1920s to barely a handful now, chief of which is Maison Lemarié.”

Josephine de la Baume for ASOS Women's Magazine | Source: ASOS

Asos overseas sales overtake UK sales for first time (BBC)
“Online fashion retailer Asos has said that overseas sales have overtaken those in the UK for the first time. In the three months to the end of March, international sales rose 161% to £48.4m compared with a year ago…  Asos has reported strong results in recent years and is bucking the current downbeat retail trend in the UK.”

J.Crew to launch UK online business (FT)
“J.Crew, the ‘preppy’ US retailer bought out in a $3bn private equity deal last year, is planning to launch an online business in the UK’s high-end fashion market… [Mickey Drexler] said the group would use its online business to spearhead its overseas expansion ahead of opening more bricks-and-mortar stores.”

The relaunch of Made in France (Fashion United)
“Local manufacturing is rediscovering its mark of prestige with customers placing orders who today can see the advantages and flexibility that they can obtain with Made in France and the added value in terms of image and even ethics with French customers.”

Italy fashion group Ferragamo planning IPO (Reuters)
“Italian luxury goods group Salvatore Ferragamo is planning an initial public offering by July or by the end of 2011…  [the] leather goods company would join other Italian fashion brands such as Prada and Moncler that are turning to equity markets this year to fund expansion.”

The Three Graces of Hearst (WWD)
“Later this summer, once the deal is closed and Elle is fully absorbed into the Hearst family, editor in chief Robbie Myers will join Harper’s Bazaar editor in chief Glenda Bailey and Marie Claire’s Joanna Coles under the same roof, creating a fashion magazine troika.”

Dries Van Noten Autumn/Winter 2011 | Source: Style.com

A Fresh Breeze of Change (IHT)
“This gentle zephyr is bringing a new fashion attitude. Out goes outré, excess and over-elaborate shows. In comes the quiet, no-fuss presentation of pleasing clothes. Freshness is the best word to describe what seems of the moment. Add to that ‘decency,’ meaning that any hint of ‘vulgarity chic’ has gone — and you get the new mood.”

Fashion Retailer Asos Sets Up Shop on Facebook (Business Week)
“The U.K. clothing site is the first European fashion retailer to open an e-tailing outpost inside the social network… the hip, London-based online clothing site became the first European fashion retailer to open an e-tailing outpost inside Facebook. Competitors such as Gap and Inditex’s Zara use the networking site largely to communicate with fans.”

Whiteley moves to Givenchy (Evening Standard)
“When Sue Whiteley was 13, she bunked off school and went to buy a pair of designer trousers, having saved up her pocket money for six months. Today, some 30 years later, she bestrides the world of luxury fashion, as the newly announced head of Givenchy… [Within] LVMH, Givenchy is second only to Dior.”

Kim Jones takes the helm at Louis Vuitton menswear (Telegraph)
“Jones, 31, previously designed for Uniqlo, Mulberry, Alexander McQueen, Hugo Boss, Umbro and Topman, before moving to Alfred Dunhill in 2008. A fashion all-rounder, Jones has also contributed both as stylist and art director for magazines… and was awarded Menswear Designer of the Year by the British Fashion Council in 2006 and 2009.”

John Galliano Exits the Way That He Entered (NY Times)
“In circumstances like these, a sensible millionaire designer would have jumped into his chauffeured car and gone to his boss and pleaded insanity, whereupon he would have been given an all-expense-paid trip to rehab. But that’s just it: Mr. Galliano is not a sensible man, any more than fashion chiefs are missionaries.”

Nick Robertson, CEO of ASOS | Source: Retail Week

Fast fashion for fast consumers (FT)
“Critics have consistently tried – and failed – to turn [ASOS’s] growth story into something resembling the tale of the emperor’s new clothes. Online fashion would never take off, they said… In 2007, non-UK sales made up 10 per cent of the company’s annual retail sales. Today, it is 44 per cent.”

Materials Girls: Designers Trim Hemlines, Costs (WSJ)
“Bad weather in major producing regions, tight supplies and inflation have pushed prices of cotton to new, all-time highs. The cost of silk, wool and leather has also soared…. Having survived the recession, designers and retailers are wary of trying to pass along price increases to skittish shoppers.”

Italian fashion houses bounce back for Milan shows (Bloomberg)
“Milan Fashion Week kicks off Wednesday with a celebration of Italian flair fuelled by Asian spending power and a love of conspicuous excess. After New York and London, fashionistas and buyers from over 37 countries are set to flock to Italy’s financial capital.”

Vuitton Said to Hire 700 Leather Workers (Bloomberg)
“Louis Vuitton… may hire as many as 700 leather workers this year to cope with rising demand… Additions will be made at factories in France, where about 70 percent of Vuitton’s leather goods are produced, as well as in Spain and California.”

When Youth Is the Holy Grail (IHT)
“Growing up is hard to do, when youth is the holy grail of British fashion. Seats are filled with imaginatively dressed young Londoners, who are design inspirations even before the show kicks off. And while other European capitals are short on fresh talent, the focus of the London scene is the ‘New Gen’.”

Vintage Biba | Source: Couture Allure

Vintage labels find a new life (FT)
“‘The original Biba [is] very iconic… It changed the face of fashion and people loved it – it was affordable, easy and sexy. The new Biba has been the most successful launch in the House of Fraser’s history – it’s done way, way better than we’d expected.’”

Jimmy Choo to launch men’s shoe collection (Telegraph)
“Launching for the autumn/winter 2011 season, a sneak preview of the collection reveals something for every modern man: from chunky, black leather biker boots (a sell-out success over in the women’s department) to classic, leather loafers and on-trend Chelsea boots.”

ASOS sales growth accelerates (Reuters)
“ASOS, which targets internet-savvy 16 to 34 year old women looking to emulate the designer looks of celebrities like Kate Moss, Sienna Miller and Alexa Chung but at a fraction of the price, said on Wednesday its retail sales rose 59 percent to 100.0 million pounds ($160 million).”

Japanese Department store sales fall 3.1% in 2010 (Japan Times)
“Japan’s department store sales in 2010 declined 3.1% from the previous year on a same-store basis, down for the 14th consecutive year due to weak consumer confidence amid the economic downturn… Sales totaled 6.29 trillion yen, the lowest level since 1982.”

The sartorial geniuses – aged 60-plus (Telegraph)
“From the photographic evidence coming out of Florence and Milan this week, an Italian man only approaches his full power and confidence in dressing in his fifties. At 60-plus, he may qualify as a sartorial genius… completely [outclassing] younger men’s gaucher attempts at fashion.”