David Beckham for H&M | Source: Zap 2 it

David Beckham Fetes H&M Launch in London (WWD)
“It takes an unusual amount of sex appeal for a man to make a pair of long johns look good — and David Beckham has pulled it off. After serving as the face and body for Armani Underwear, Beckham decided to develop his own range together with his business partner and manager, the entertainment mogul Simon Fuller.”

Yoox Chief Marchetti Raises Stake, Forecasts Strong U.S. Growth (Bloomberg)
“Yoox Chief Executive Officer Federico Marchetti raised his stake in the online retailer of fashion and luxury goods after exercising stock options, saying the Italian company is being undervalued by investors.”

Fashion Changes, and So Do the Magazines (NY Times)
“Glamour’s newsstand sales were down substantially last year, by 17 percent through June and (as submitted to the Audit Bureau of Circulation) 9.9 percent in the second half. Most women’s titles were down. Part of the problem, it would seem, is that by exploiting a winning formula, fashion magazines have made themselves indistinguishable.”

Fashion Tech Boom: Why It’s Happening  (Fashionista)
“Last year saw a major influx of new fashion-focused tech startups. With the early success of pioneers like Gilt Groupe and Ideeli, an industry that has typically been slow to embrace new technology has spawned a burgeoning community of game-changing ecommerce sites, mobile apps and social networking and discovery platforms.”

An Intellectual Fashion | Scott Schuman (AnOther)
“Scott Schuman is the founder and editor of the iconic fashion blog The Sartorialist which he set up in 2005. He achieved considerable influence with his photographs taken in the streets, a selection of which was published as a book by Penguin in 2009.”

Xiu.com screenshot | Source: Xiu.com

We continue this week’s focus on e-commerce by turning our attention on how to succeed in the rapidly expanding e-commerce market in China. 

BEIJING, China — According to a recent report by The Boston Consulting Group (BCG), China is set to become the world’s next e-commerce superpower, surpassing the United States to become the largest online commerce market in the world, with an estimated market size of $300 billion. In 2006, less than 10 percent of China’s urban population shopped online. By 2015, that figure is expected to have quadrupled, reaching 44 percent, while the total number of e-commerce shoppers in China will grow to 329 million.

What’s more, according to BCG, China’s massive geography, a middle class that is rapidly expanding beyond the country’s largest cities, and widely accessible, heavily subsidised high-speed internet — broadband in China costs just $10 per month, compared with $30 per month in India — make the country unusually fertile ground for e-commerce, with internet access far outpacing the reach of physical retailers. Indeed, up to a quarter of e-commerce demand in China is for products consumers cannot find in physical stores, with apparel and skincare amongst the fastest-growing online categories.

But for fashion companies aiming to crack the online retail opportunity in China, it’s imperative to understand that the country’s e-commerce market is very different to established markets in the United States and Europe and that online shoppers in China — much younger, on average, than their Western counterparts — have different expectations, preferences and patterns of behaviour.

“Chinese consumers’ recognition and preference for fashion brands is quite different from mature markets,” said George Wenhong Ji, founder and CEO of Shenzhen-based fashion e-tailer Xiu.com, which sells international luxury brands like Gucci and Chanel, and last year raised $100 million in a second round of funding from elite venture capital firm Kleiner Perkins Caufield & Byers and private equity firm Warburg Pincus.

“Fashion brands that are not so popular could be received very well in China and vice versa. [Chinese consumers] are still price-sensitive and have poor loyalty towards brands,” said Ji. “It’s important to study Chinese consumers’ income and expenditure – how much money they earn in different cities of China and how much they would spend on fashion; how much they would spend on fashion online,” he continued.

According to the BCG report, 7 percent of online shoppers are responsible for 40 percent of online spending. For fashion retailers, the importance of these “superheavy spenders,” each of whom complete over 50 transactions a year and have a preference for heavily branded goods, cannot be underscored enough.

To entice superheavy spenders, first and foremost, it’s vital for online retailers to get the product mix right, Morgan Tan, vice-president of e-business at Lane Crawford, told BoF. These high-spending consumers are looking for must-have seasonal items that aren’t available elsewhere, she said, noting a growing demand for niche labels. Indeed, Xiu.com, which last year recorded sales of approximately $150 million, plans to carry more international and Chinese labels that competitors do not offer, while The Corner, a luxury e-tailer owned by the Yoox Group, which operates a China-specific site at thecorner.com.cn, recently launched The Vogue Talents Corner, an initiative promoting less known emerging designers in collaboration with Vogue China.

Compared to their counterparts in the West, affluent consumers in China have a lower baseline knowledge of fashion products and are ravenous for information, an opportunity for retailers to engage them more frequently with content and advice. “It is about engaging her daily,” said Jeff Yurcisin, president of Shopbop.com, which recently launched a site in Chinese. “We send out daily emails to our customers, so she gets her fashion fix every day,” he continued. “The opportunity is for us to be a personal stylist, to spend more time telling stories and introduce her to brands that the American customer already knows.”

But despite their hunger for information, Chinese consumers are distrustful of online retailers. Amongst the world’s most highly social shoppers, Chinese shoppers trust information and recommendations from their peers on blogs, social networks and user review sites far more than official brand communications. In fact, according to BCG, only 19 percent of Chinese consumers even visit official brand sites, as compared to between 41 and 60 percent in Japan, the US and Europe.

“Online shoppers in China are much more wary than the US and UK,” said Fabienne Pellegrin, Asia business development director for Salvatore Ferragamo, who also oversees the brand’s digital development. “They need more information than the average online shopper. There’s so much abuse online, so they are programmed not to trust anything,” she continued, emphasising the importance of peer recommendations and user reviews. In fact, over 40 percent of Chinese shoppers surveyed by BCG had both read and posted online product reviews, nearly double the rate in the US. “Encourage [consumers] to write reviews about your product because so many people read them,” advised Ms. Pellegrin.

As in the West, a high level of customer service is another essential part of a successful China e-commerce strategy. “[Chinese consumers] will become loyal to an e-commerce company because of high quality service,” said Mr. Ji. “It’s about making the online shopping experience as convenient and risk-free as possible with reliable deliveries and free returns,” said Ms. Tan. “Unlike many other online retailers, we offer a multi-channel approach for customers that allows them to collect or return their order to our stores,” she continued.

While shipping costs are low, China has a poor delivery network dominated by local, independent couriers that are neither efficient nor reliable, a major hurdle for online retailers. To address the issue, The Corner has partnered with international shipping service Fedex to provide couriers who wait at customers’ doorsteps while they try on their purchases and facilitate on-the-spot returns. The Corner also leverages sophisticated RFID technology to seal packages with anti-counterfeit microchips (according to the BCG study, 45 percent of shoppers worry that their goods will be swapped for fakes while in transit).

Alongside delivery-related services that lower risk and make shopping more convenient, affluent Chinese consumers also expect rewards for their loyalty. As a result, VIP reward programmes or other special incentives are critical to success. For example, VIP shoppers on Xiu.com can view fashion shows and pre-order next season’s products months in advance of others. “We find that for more high-end customers, they value additional services, such as VIP sales alerts, pre-order, seasonal gifts,” said Mr. Ji.

But for international retailers targeting China’s fashion e-commerce market, consistently delivering a high quality experience that’s localised to the needs, behaviours and expectations of Chinese consumers often means investing in China-based operations. Indeed, while Net-a-Porter has long shipped to China, the company recently announced that it would open a distribution centre in Hong Kong this summer to better serve the Asia-Pacific region.

“Throughout 2010, we set up local operations — an office and logistics centre — in Shanghai to run the business locally,” said Federico Marchetti, founder and CEO of Yoox Group. “A local structure and local team ensures we provide Chinese customers with a unique online shopping experience characterised by completely localised, best-in-class customer service,” he added. “Although e-commerce enables brands to have an international distribution, the online shopping experience still works better at a local level.”

Ultimately, a successful China e-commerce strategy is composed of the same fundamental elements that matter in the West: engaging content, great customer service, dependable deliveries and easy returns are all critical. But in China, these elements count in different ways and weights, with editorial-style content, peer-to-peer persuasion, risk-free deliveries and rewards programmes carrying particular importance.

Divia Harilela is an associate contributor at The Business of Fashion.

Fab.com Screenshot | Source: Fab.com

Yesterday, BoF was first to bring you the news of the recent $18 million investment in Farfetch.com. Today, we continue a week focused on e-commerce by examining the historical challenges faced by online retailers and how recent innovations and infrastructural advances have fundamentally improved the economics of e-commerce, setting the stage for a renaissance in online retail.

SAN FRANCISCO, United States — Following the burst of the dot-com bubble in early 1999, e-commerce suffered from a lack of venture capital investment. The unrealised, over-hyped expectations for e-commerce — at a time when the market, consumer technology and infrastructure were less evolved — and the subsequent burns left venture firms with a nasty aftertaste. Perhaps the most spectacular fashion e-commerce failure was that of Boo.com, which launched in the Autumn of 1999, burned through $135 million in venture capital in just 18 months and was liquidated in 2000.

But on closer inspection, e-commerce has also faced additional complexities and capital inefficiencies that, for years, continued to push investors away.

HISTORICAL CHALLENGES AND FIRST MOVER ADVANTAGE

First, e-commerce lacked defensibility. With software or other internet services, intellectual property or the complexities of build create barriers to market entry for would-be competitors. But e-commerce businesses are essentially selling products. The most important elements of these businesses are the assortment, breadth and variability of the merchandise they offer, along with overall access to this merchandise. Access to inventory is not a sufficient barrier, however, as other stores can carry the same products unless a business has exclusive agreements with vendors, which happens rarely and usually only for a limited time.

In the absence of defensibility, companies needed to demonstrate solid metrics around scale of revenues, registered users and overall profitability in order to secure investment. But for e-commerce companies, this requirement created something of a catch-22. When compared to software or other internet services, start-up costs for e-commerce companies were higher, due to the expense associated with buying physical inventory, setting up a logistics platform for warehousing and fulfilment, and acquiring and retaining customers. Furthermore, since they operated at the wholesale level, their margins were relatively smaller.

In order to work and attract investment, these businesses required scale. But in order to achieve scale, they needed significant investment.

There were a few big success stories, such as e-Bay and Amazon, which gained significant first mover advantages. As Josh Kopelman of First Round Capital has pointed out, from 1999 to the beginning of 2010, the list of top general e-commerce sites in the United States remained almost unchanged. In fashion, online juggernauts like Net-a-Porter, Yoox, Neiman Marcus, and Shopbop maintained their incumbent positions.

IMPROVED ECONOMICS AND REDUCED ENTRY COSTS

In recent years, however, the tides have turned in e-commerce. For one, consumers are now acclimated to the concept of online retail. According to Forrester, the online retail market in the US alone is expected to grow to $279 billion by 2015. But critically, major innovations and infrastructural advances have also fundamentally improved the economics of e-commerce, attracting significant venture capital interest in the sector.

Starting in 2007, US private sales pioneers like Gilt Groupe, Rue La La, Hautelook and Ideeli were able to drive massive consumer adoption in a very short amount of time when compared to traditional e-commerce sites. They offered designer fashion at significant discounts, distributed directly to email inboxes.

With timing and supply constraints to compel immediate action, these members-only sites successfully identified and leveraged key behavioural insights to drive engagement, collect customer data and generate rapid sales. But perhaps most importantly, their ability to move product much more quickly than traditional sites reduced cash flow requirements. Indeed, many flash sales sites buy on consignment, while others do not touch or pay for inventory at all until it is purchased by the end consumer.

In recent cycles, the rise of social media channels like Facebook and Twitter have also enabled e-commerce businesses to acquire customers and accelerate growth far more efficiently. Fab.com, which sells discounted furniture, jewelry and art in 72-hour flash sales, has leveraged social media to great success, attracting a total of 1.65 million registered users in just six months. According to The Wall Street Journal, in November of last year the start-up processed approximately 100,000 orders, double the previous month, and is now averaging $1.4 million in sales per week. The company recently raised a Series B round of $40 million, led by Andreessen Horowitz, valuing Fab.com at more than $200 million. “They’ve leveraged social extremely effectively,” said general partner Jeff Jordan in a blog post on the transaction.

The evolution of e-commerce solutions like Shopify, Magento and BigCommerce, along with the growth of Software-as-a-Service (SaaS) tools like Mailchimp, RJ Metrics and Shipwire and the rise of Amazon Web Services, a cloud computing platform, have also made it significantly easier and cheaper for retailers to build and manage beautifully designed e-commerce storefronts. Additionally, leveraging APIs (application programming interfaces that make it easy for software programs to talk to each other) has made integration much more time- and cost-efficient, not only for the consumer-facing storefront, but also in terms of the back-end workflow.

Innovation across the supply chain is also making development easier, improving scalability and easing integration, while also decreasing capital requirements for e-commerce businesses. Web-based point of sale systems, wholesale marketplaces, ordering and invoicing software, enterprise resource planning systems, and shipping and fulfilment systems are becoming simpler, cheaper and more flexible. In fact, companies can now use highly efficient software-as-a-service (SaaS) tools across the entire supply chain, paying periodically to access hosted software, without having to incur the costs and complexities of hosting and managing back-end infrastructure.

NEW OPPORTUNITIES AND ECOSYSTEMS

In the context of these improved economics, there are a number of problems to be solved that provide interesting opportunities in e-commerce. Traditionally, retailers have faced difficulties in turning customer data into actionable insight. This is beginning to change. SaaS tools let retailers more easily access and make sense of data, opening up opportunities for businesses to leverage the inadvertent “buyer profiles” that consumers are now creating as they express themselves on social media. Particularly interesting are the taste and behavioural data that consumers share on social curation sites like Svpply, Pinterest, Lyst and The Fancy.

While brands and retailers are scratching their heads solving their data issues, consumers are frustrated with the process of discovering products. It’s easy browse through a physical store, but searching millions of items online is overwhelming. Even if you know you want to buy a black pair of shoes, you still end up with thousands of options. Discovering products that are right for you remains challenging.

The growth of new technology channels and ecosystems created and supported by large players is also providing fertile ground for e-commerce innovation. Alongside the growth of social channels like Facebook, which offers retailers new ways to achieve viral distribution and offer social discovery, the mobile commerce market is expected to reach $31 billion in the US alone by 2016, up from $3 billion in 2010. But while these new channels create new opportunities for e-commerce companies, they also present a major challenge: multi-channel integration. Historically, merchants have been forced to cobble tools together to create a seamless, multi-channel workflow.

EBay’s new X.commerce initiative aims to address this problem, offering retailers a single platform that lets them easily add, customise and integrate tools from the X.commerce marketplace, making it easier for young companies to capitalise on the multi-channel opportunity. The stated vision of the X.Commerce initiative is to “help merchants and businesses of all sizes to compete and thrive in the fast-changing world of social, mobile, local and digital driven e-commerce.”

Indeed, with improved economics, new opportunities and goliaths like eBay supporting the ecosystem, the stage is set for a renaissance in online retail and the growth of disruptive business models built around new ways of buying, selling and engaging with goods.

Tomorrow, we explore the recent explosion of new business models in online retail, including personal subscription, social merchandising, mass customisation and collaborative consumption.

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

Michael Clinton | Source: Direct Marketing News

Michael Clinton, Hearst’s Billion-Dollar Man (WWD)
“It was a mere 18 months ago that many questioned whether his career at Hearst Magazines was over… But Clinton, a 30-year publishing veteran, has had plenty of practice at taking a proverbial punch, shaking it off and bouncing back. Since his very public pass over, he’s been promoted to president, marketing and publishing director and one could argue his career is going better than ever.”

Yoox Samples Chinese Labels Online (WSJ)
“Yoox Group, an online Italian luxury retail company, has tapped five Chinese designers —Uma Wang (王汁), Christine Lau (刘清扬), Riko Manchit Au (欧敏捷), Shangguan Jie (上官喆), and Zou You (邹游) — to temporarily sell their collections on its niche-designer site, thecorner.com.cn… Now, after Western labels have flooded China, domestic designers are getting their turn.”

Euro Woes, weather dampen Inditex sales (Reuters)
“Sales at Spain’s Inditex , the world’s largest clothing retailer and owner of the popular Zara label, eased in the third quarter as the euro zone debt crisis rattled shoppers and unseasonably good autumn weather altered spending patterns. But the company, founded by Spain’s richest man Amancio Ortega, still cheered the market with evidence it remains capable of outperforming rivals.”

Fake paper bags are the latest buzz in the malls (China Daily)
“It’s not only fake designer handbags that are attracting bargain hunters. Nowadays, the fever is spreading to fake paper shopping bags featuring famous brands. A random search using the keyword combination of “paper bag” with any famous brand name will find dozens – sometimes more than 100 – of results on Taobao.com, the most widely used shopping website in China.”

Rise: Helen Bullock (Dazed Digital)
“For anyone who thinks a Mark Rothko piece too depressing, fashion textiles designer Helen Bullock’s MA collection is like a fresh breath of life. Bold, bright, glittered shapes and blocks of jarring floral, the Central Saint Martins graduate debuted with a collection in February that seemed to evoke the abstract expressionist’s Seagram Murals – on acid.”

Hedi Slimane | Source: Hypebeast

A Fashion Designer’s Second Act (NY Times)
“When Hedi Slimane stepped down as artistic director at Dior Homme in 2007, Fashion Wire Daily summed up his tenure this way: ‘Slimane leaves Dior with the well-earned reputation as the single most influential men’s designer this century, the most copied of his peers and the only one to achieve the status of a rock star.’… But Mr. Slimane seems to have left fashion behind with nary a second thought, reinventing himself as a photographer in the past few years, one who has produced an array of strikingly intimate portraits, nearly all of them black and white.”

Ralph Lauren margins fall, shares hit (Reuters)
“Ralph Lauren Corp posted a sharp drop in quarterly margins on Wednesday, hurt by rising costs, and its shares fell in premarket dealings. Shares fell 5.7 percent as gross margin fell dropped to 56.6 percent from 58 percent a year earlier. The clothing maker, which makes brands including Polo, Club Monaco and Chaps, said net income rose to $233.5 million, or $2.46 a share, in the second quarter ended October 1 from $205.2 million, or $2.09 a share, a year earlier.”

Online fashion retailer Yoox sees Q4 growth (Reuters)
“Italian online fashion retailer Yoox is looking to further revenue growth for the end of the year after strong sales in the first nine months confirmed the vigor of the luxury industry despite wider economic woes in Europe. Yoox, which powers sites for top brands such as Valentino and Roberto Cavalli alongside its own multibrand online stores, said core earnings rose 20.2 percent to 11.8 million euros ($16 million) in the nine months ended in September.”

Retail Site Raids a Big Closet (NY Times)
“Since its debut in February, Moda Operandi, the online retailer that sells designer clothes right off the runway, has become a surprise competitor on the lucrative trunk-show circuit. Now the site is becoming a competitor to traditional department stores and magazines for personnel, as well. Roopal Patel, a longtime executive in the fashion offices of Neiman Marcus and Bergdorf Goodman, will join Moda Operandi this month as its fashion director. And Taylor Tomasi Hill, formerly the style and accessories director of Marie Claire, will become its artistic director.”

Yohji’s World (Vogue)
“Yohji Yamamoto has explained his love of the colour black – a signature that punctuates most of his collections… ‘Colour disturbs people. I am confident in black, not in light. This dark side of life is attractive to me forever and from the beginnings. I am a lazy designer when it comes to colour. The body is the important thing to me – it is the beginning of my work.’”

Federico Marchetti | Source: Fastcodesign

Net prophet (AFR)
“In 2000, Federico Marchetti, who was born in a small town below Venice on Italy’s Adriatic coast… Launched an innovative e-commerce business that has made him an industry titan. The planning that led up to the launch and what has happened since surely distinguish Marchetti as the ultimate ‘zagger’.”

The Beating Heart of Fashion (WSJ)
“Even if you don’t follow fashion, a stylist has indirectly influenced what you have on right now, informing your sartorial ideas on everything from power dressing to pastel romance. Grand, whose clients range from high fashion to mass market, is at the top of the pyramid.”

Why Jonathan Saunders is the designer of the moment (Guardian)
“Saunders has been on the London fashion week scene for eight years but it’s only been in the last year that his label has really cranked up a gear. So what changed? ‘Creatively I feel more confident,’ he admits. ‘I come from a textiles background with quite a niche brand image, but through experience I’ve learned to expand. The collection now has more separates and is less dress focussed, so it feels like there’s more of what women actually want to wear.’”

Traditional, ancient accents at China Fashion Week (Reuters)
“Haute couture mixing traditional Chinese touches and styles from more than 1,000 years ago with Western designs opened China Fashion Week, as the world’s fastest-growing market for luxury products catches the eyes of more designers. Models showed off a wide range of long gowns in bright colours, some featuring traditional Chinese embroidery and replicas of attire from the Tang Dynasty, AD 618 to AD 907, from NE TIGER.”

Talley Prepares Museum Exhibition (On the Runway)
“‘Walls are being painted, all of the dresses are basically in place,’ said André Leon Talley, on the phone from the Savannah College of Art and Design, where he was putting the finishing touches on the first exhibition in the André Leon Talley Gallery in the school’s new museum of art.”

Gucci Spring/Summer 2012 | Source: Style.com

Gucci at 90: ‘Hard Deco’ (IHT)
“The Gucci designer Frida Giannini, celebrating the brand’s 90th year, certainly sent out a polished and upscale collection, with shiny metallic surfaces and a focus on jazzy evening outfits — even if they were inspired by the 1920s, when flappers danced up to the edge of the Great Depression.”

Milan fashion picks glam over gloom (Reuters)
“Designers have prepared a marathon of catwalk shows and gala openings to wow shoppers and woo their wallets at a Milan fashion week… ‘This is our chance to react to the crisis,’ Mario Boselli, chairman of Italy’s National Chamber of Fashion… Fashion is a key contributor to the euro-zone’s third largest economy. Italian brands are expected to generate total revenues of almost 63 billion euros (54.9 billion pounds) this year.”

Designer-hungry China in sight at London fashion (Reuters)
“The world’s biggest luxury market within five years has become a second home for brands such Hermes, Prada and Tiffany & Co that tap Chinese appetite for sports cars, luxury handbags and diamonds. And British designers have taken note.’There’s quite a boom in the world of fashion and I believe that is mostly because of China,’ designer Vivienne Westwood told Reuters.”

The etail highway to China (FT)
“Yoox Group, the Italian company that builds and manages about half the fashion world’s etail outlets (Armani, Marni, Zegna, Dolce & Gabbana etc.) and has taken Armani and Dolce into China, is to make a move of its own into the country. Next week, thecorner.com, its high-end multi-brand boutique, will become the first multi-brand etailer to launch in China.”

Former Intermix COO Raises $33M For Fashion Brand JustFabulous (Forbes)
“Launched in March 2010, JustFabulous has a subscription fashion business built on its personalized fashion styling advice and in-house designed clothing and lifestyle brand. After just more than one year, the site already has 2.5 million members and more than $3 million in revenue per month.”

Simone Cipriani, Andreas Kronthaler, Vivienne Westwood, Federico Marchetti at the launch of the Ethical Fashion Africa Collection | Source: ITC

FLORENCE, Italy — Simone Cipriani spearheads the Ethical Fashion initiative of The International Trade Centre (ITC), a joint agency of the United Nations and the World Trade Organisation. Connecting “the world’s most marginalised people to the top of fashion’s value chain for mutual benefit,” it enables communities of artisans and micro-manufacturers — the majority of them women — to thrive in association with the talents of the fashion world by fostering local creativity, enabling female employment, and promoting gender equality in order to reduce extreme poverty, according to a detailed brochure published by the ITC this month.

Of her recent collection with the Ethical Fashion Initiative, unveiled during Pitti Uomo last month and now available on Yoox.com, Vivienne Westwood said “it’s quite incredible to think that we might save the world through fashion.”

But ethical fashion remains a somewhat fuzzy, idealistic concept, which has proven difficult to implement in practice. It also remains a niche market, even if consumers are becoming more conscious about their purchasing habits and sales of ethical fashion are growing. According to Mr. Cipriani, its widespread adoption will require a wholesale mindset shift for the fashion industry, which must eliminate waste from a fashion system that remains bloated with excess product and underpays those at the very early stages of production.

Mr. Cipriani’s official title is typical of bureaucratic nomenclature: Head, Poor Communities & Trade Program, Chief Technical Advisor, Ethical Fashion. But make no mistake, this is no ivory-towered diplomat. Cipriani spends most of his time in the field — the slums of Nairobi and rural communities around Africa — laying the groundwork for ethical fashion at the front lines and building ties to fashion houses in Europe in order to make his vision a reality.

I caught up with Simone Cipriani on a quiet rooftop terrazza during one of his rare visits to his native Florence for the launch of Vivienne Westwood’s Ethical Fashion Africa collection.

BoF: There is a lot of debate about this term ‘ethical fashion.’ What does ethical fashion mean to you?

SC: I think ethical fashion is being responsible for people and for the planet. For the planet we know sustainability is the word of today, but sustainability is a very vague concept which came out after The Brundtland Report, so it’s a word which has been over used. Now we have to talk about something which is immediately understandable by people. It is about the place where we live, usable also by those who come after us and making it liveable, making it a place worth living in for those who are here today.

The social dimension is about extreme poverty and exclusion from the wealth of the world. The reality is that 30 percent of human kind lives in a way which is not sustainable. It is about the ethics of responsibility. We are responsible for it because if we change it, it becomes better also for us. It’s not an abstract responsibility it’s a very concrete one: I am responsible for it because I am responsible for my life, the quality of my life depends on that.

If we don’t address this extreme poverty and this exclusion of the path of the human kind in a few years time, the world, and parts of the world [will become] a very dangerous place to live in.

BoF: What does this mean for the fashion industry, and in particular for our culture of consumerism?

This ethic of responsibility is also something that has to be adopted by the fashion industry, because no product can be a product today unless it is responsible. Cars have to be hybrid. If I throw [out] the garbage I have to separate [it]. That is an obligation which is part of our life. If we want to live on this planet, we have to do it. It’s like drinking water, if I want to live I have to drink water otherwise I die. If I want to live on this planet today, in this condition, I have to be responsible in whatever I do, so all the products I produce have to be responsible because products are part of our life. We are a product of our products, we are the product of what we wear and what we produce.

This is ethics. Ethics of responsibility. Responsibility towards the place where we live. It’s only fair.

BoF: But ethical fashion also has to work as a business as well, right? Ethical fashion cannot just be idealistic. It has to be a product that people actually want to buy regardless of how it was made and it has to be commercially viable.

SC: Being responsible means being practical. A fashion product has to be gorgeous [in order to be sold], it has to be beautiful; it has to be within a certain margin or price, and so on. This is the bottom line. But then there is a new bottom line which is also responsible; responsible with a positive story which is how the value is built in the whole value chain.

In the value chain today — from the producer to the customer — the majority of the value lies in the last rings of the value chain, the biggest share of the pie — the retail margin — is there. We produce in Africa then it’s multiplied by 2.5 or 3.5, then it’s multiplied again and again, so $20 here, 20 euros here, becomes 180 there. Come on, justify that. It’s a huge spread. I know it’s justified by the fact that those who buy here have huge overheads and have to cover marketing costs, and the rejects, and then they also have the 40 percent, and the rest goes to outlets.

BoF: But it’s also because they don’t run their business smartly, right? They don’t buy things in a way…

SC: Bravo! Exactly, because of lack of responsibility on their side. In order to be sure that I make it, I don’t run the business in a very smart way, I just put a huge margin and whatever happens, I’m fine. It’s irresponsible, because those people [early in the value chain] cannot get enough to live.

In order for these people to get enough to live — because through this money they change their lives — we need these people to manage their businesses in a proper way, in a responsible way. Responsible also for their companies, because it’s business. If they do that, their margins remain big, always, but they minimise waste, [optimise] investment, allocate resources in a proper way. Why? Because they know that they have to give something back.

BoF: What will it take to get this message understood by fashion companies?

SC: At present they know that they don’t have to give anything back. The system through which you build the value in fashion is wrong. It is not about corporate management, because management is another thing. Management is about management, and is about being fair to people, first of all, then it’s about managing the market, then it’s about finance, but first it’s about managing people. How can you be responsible to people if you neglect what happens in the first stage of the value chain?

So, it’s about being profitable, otherwise you’re not sustainable and you’re not responsible to your stakeholders, shareholders. It’s about organising and allocating resources in such a way that this profit is also shared with the first stages. This is ethical fashion.

BoF: Who is leading the way in this regard?

SC: There are companies that [are making a good start]. Some companies start because of the inner motivation of the designers, such as Stella McCartney. People who are motivated inside, people who really have a deep, almost spiritual motivation.

But sometimes you deal with companies who do this — big distributors for instance like CO-OP Italia that does huge orders with us. They do it because they see the market changing, and realise if they don’t change their business model, they will remain out of the market. It forces everybody to work better; to maintain the same profit, but to share that in a different way.

BoF: When I walk into certain retailers in the UK or US and I see the prices at which products are being sold and the quality level at which things are being made, I can’t help but wonder, how could this have possibly been made in an ethical way? We’ve talked about smaller businesses, such as Stella McCartney and Vivienne Westwood, but isn’t the hugest potential impact at the mass consumer level, brands like Zara and H&M?

SM: We work with some big brands. We just became a supplier to Walmart, so we are going towards that, but you’re absolutely right.

There are two issues there, one is timing and one is money. Timing is always too squeezed. We develop this sample together now, it’s June, and I want to have the first delivery [in] mid-July. What does [that] mean? How can you think I don’t exploit people to do that, because people have to work over time, it’s impossible. Then at the same time, they say, this is what I pay in China.

But this is changing. First of all the cost of living is changing in China and the age of the cheap garment is finishing, that’s one point. The other point is that consumers are now aware. Yes, the majority of consumers want a t-shirt for $5 and that’s all. But there is a growing segment of of people who are affluent, who are able to pay $8 for that [same t-shirt] if you explain why they pay $8 and where this money is going. The only way is to communicate that to consumers, to enable consumers to see what it is about. If you don’t communicate to consumers it’s a problem and this is a fashion problem.

BoF: It sounds like you’re saying the biggest challenge we face is a mindset problem?

SC: It’s a mindset issue, and it’s all about management. What we are talking about is not a new kind [of management], it’s pure management. Manage your company well, according to what you study in the books. Because the thing is that people don’t do it; when we arrive at a company, we take shortcuts to be more profitable.

BoF: Tell me a bit about how you are trying to address these issues.

SC: Ethical Fashion Africa, the first hub created by the [ITC] to manage its business and support infrastructure in Kenya and Uganda, is completely self sustainable, with a sufficient number of customers from the industry and big distribution. Around EFAL (Ethical Fashion Africa Limited) there is a number of small enterprises and cooperatives, developed thanks to the support of the program. These companies are managed mainly by women and are working with the international market (especially through EFAL) but also on the domestic and regional markets. They include the work of around 7,000 people.

Some groups of micro producers, who are still evolving towards a more stable form of business organisation are still supported by the ITC through EFAL: at least 3,000 more people are involved in them. The communities where these companies operate have become peace and cooperation buffer zones, i.e. zones where peace and cooperation have replaced conflict and all violence and deprivation associated to poverty.

BoF: What would you like to have achieved in 5 years time?

SC: In 5 years time, the program will have expanded its operations also to Ghana, Burkina, Mali and I hope it is able to address the catastrophe of cotton, by creating perspectives of value addition in place. Soon I will provide a business and development perspective for that area of work as well as we shall start developing our business and support infrastructure in Ghana in the months of September 2011.

I think that, by diversifying the products and focusing on the specificities of these new regions (cotton, beautiful prints, natural dyes, weaving techniques, large creative potential) we shall achieve similar results. We have already done feasibility studies but now we have to start working.

In The Long View, BoF speaks to leading thinkers about their forward-looking visions for the fashion industry

L'Wren Scott at Barneys | Source: Barneys

Will Top Firings Change Barneys’ Cool? (On the Runway)
“Increasing Barneys’ profitability was a prime objective… The recession forced retailers to become leaner and more competitive, in particular with online sales, and that urgency will be critical to Barneys’ cool.”

Moncler fights against fakes (Fashion United)
“The Italian Fashion Chamber is joining Moncler and also stepping up against fakes… fighting the collateral damages caused by the creation of a black market, which hits tax payers, companies, and puts jobs at risk.”

Gilt Groupe’s Full-Price Men’s Site Slated to Launch in July (NY Fashion)
“Gilt Groupe realizes that men, who approach shopping with the utmost effort to get in, get out, and get on with life rather than dig and dig for a great find to brag about later, will just as easily pay full prices as sale prices.”

Yoox to open new online stores in China in 2011 (Reuters)
“Italian online fashion retailer Yoox is planning to bring some of the most exclusive fashion brands to China next year, tapping into the demand for luxury goods of the world’s largest online population.”

Tom Ford’s catwalk pictures hit the web (Telegraph)
“Tickets were like gold dust and the anticipation sent shivers through New York Fashion Week in September. Tom Ford was back – but on his own terms. Mr Sexsational’s first women’s wear collection since leaving Gucii and Yves Saint Laurent was unveiled.”

Superdry Spring Summer 2010 | Source: Superdry

Sales soar at fashion label Superdry (Telegraph)
“The chain said that expectations for pre-tax profit for the year to the start of May will be ‘not less’ than the £25.7m it outlined in its IPO prospectus earlier this year. Total group sales over the year are up by £63m, or 83pc, to £139m.”

Italy’s Yoox Posts 1Q Growth In Net Profit, Revenue (WSJ)
“Italian Internet fashion retailer Yoox SpA (YOOX.MI) said Tuesday its revenue and net profit grew in the first quarter as business performed well across all segments and territories. Net profit for the first quarter increased fivefold to EUR2 million from the EUR0.4 million a year earlier.”

Fuller’s fashion website closed for lack of funds (Times)
“Fashionair was the brainchild of the former manager of the Spice Girls and Sojin Lee, a former Net-a-Porter executive, and was established as an ‘entertainment and shopping platform’. Last week staff were told that they would be made redundant after an investment review by its American parent.”

Fashion sales double with new system (Internet Retailing)
“In the first five weeks since launch, net retail sales on lkbennett.com rose by more than 100%, compared to the same period a year ago, and customer conversion also more than doubled. Compared to the previous season, sales were up by more than 70%.”

Is ‘wearable technology’ the future of fashion? (Telegraph)
“The ‘Look at me, I’m electric!’ appeal of wearable technology could prove far more lucrative than acting as a mere vehicle for its attention-hungry wearer. Surely it will only be a matter of time before arriving at the Oscars with your latest movie trailer playing on a loop across your chest maximises box-office longevity.”