The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW YORK, United States — When it comes to e-commerce, fashion has been slow on the uptick. And yet, the channel has never been so important. The coronavirus pandemic — which has cost thousands of lives and yet-uncalculated damage to the world economy — has cut off cash flow from physical retail. This means that the rate at which consumers buy items online instead of simply researching them is rising, and is likely to continue to grow once normal trading resumes.
About 15 percent of luxury goods will be sold online this year, up from 10 percent in 2019, according to Bank of America’s projections, with online sales up 30 percent year-over-year as the overall market dips 5 percent.
So, how can brands and multi-brand retailers make the most of what is, for many, their only remaining revenue source? It certainly won’t be easy. Seasonal deliveries have been delayed or cancelled altogether; distribution centres are closing left and right in order to protect workers from the virus.
“From a fulfilment perspective globally, we’re seeing fashion and apparel slow,” said David Emerson, vice president for sales and marketing for Europe, the Middle East and Africa at Seko Logistics. “It’s not dead, but there’s a slow down.”
Meanwhile, on the marketing front, how do you encourage shopping without seeming crass? Or shoot products to sell on e-commerce when social distancing mandates are in effect?
BoF talked to five different businesses — multi-brand, jewellery, direct-to-consumer, independent and luxury — about how they’re making it work.
The Multi-Brand Retailer: Bird Brooklyn
Before coronavirus, multi-brand retailer Bird Brooklyn was struggling as it felt squeezed from all angles. Brand partners have developed their own e-commerce presence and discount sites continue to eat up market share. Today, the company is doing everything it can to maintain its existing vendor relationships while ensuring its own future.
The pandemic has hampered consumer spending, forcing physical multi-brand retail spaces to close, either temporarily or permanently, as is the case with 10 Corso Como in Manhattan. Companies like Bird Brooklyn are working with fewer resources to figure out how to improve their engagement with shoppers online.
It's not dead, but there's a slow down.
“In reality, what should have been like a year's worth of work is now going to be compressed into like a month or two worth of work,” said Jen Mankins, owner of Bird, which carries a mix of independent designers and it-brands like Maryam Nassir Zadeh and Ganni. Before the pandemic, Mankin’s business — including four retail locations and an e-commerce site that accounted for about 10 percent of the company’s sales — was already struggling in an increasingly cutthroat climate. Today, it’s in “survival mode.”
Much of the work Bird needs to do, like other multi-brand sites, is to figure out how to work with existing partners to move excess inventory without relying on massive discounting, which seems more likely than ever. (Bird is considering selling items at anywhere from 20 percent to 80 percent off.) Some of Bird's brands — known as vendors, in industry parlance — have allowed it to sell products online that would normally only be sold in-store. Offering limited sales on brands that would normally never go on sale — for instance, Jesse Kamm's popular high-waisted cotton trousers — next to full-price merchandise like Ulla Johnson dresses has also helped drive e-comm sales, Mankins said. The best-case scenario? "It seems like everyone will have to accept working with zero profits this season."
“We have so much inventory and a ton of debt, and it's like we owe everybody a ton of money and the only way that it works is if we're open and we can sell it,” Mankins told BoF.
Given that Bird is a small retailer, it has had to reduce its marketing expenses greatly given the sales decrease. The company has paused customer acquisition efforts, including online advertising and sponsored posts. Bird said it does not mix vendor imagery with its own e-commerce and social media imagery, and has considered asking artist and photographer friends for help shooting new content from their homes. Communicating directly with top clients, many of whom Mankins counts as friends, and the rest of the Bird community through Instagram, email newsletters and direct telephone calls has proven to be a short-term sales driver. In some cases, customers have reached out via Instagram direct message to purchase clothing. Products like cozy Rachel Comey sweaters have sold particularly well.
Bird continues to fulfil e-commerce orders through its stores, one employee working at a time, and delivers products through the United Parcel Service, abiding by social distancing protocol when working with delivery persons.
For now, there is reason to be cautiously optimistic. “We've been able to see really strong support and sales through e-comm that has basically doubled or tripled,” Mankins said. “But I have no idea if that is sustainable.”
The DTC Giant: Allbirds
Allbirds, best known for its wool sneakers that ignited a frenzy among tech types in Silicon Valley before exploding globally, was preparing to mark its four-year anniversary just as the coronavirus pandemic hit. The company, which has raised more than $100 million in funding since 2016, intended to add more physical retail locations to its existing 18 this year, plans that are now on pause.
As brands scramble to bolster their e-commerce operations to make up for the sales slump caused by store closures, direct-to-consumer brands like Allbirds are perhaps better positioned to ride out the fallout from the coronavirus. Still, the pandemic has affected the brand’s future plans.
"Given that some of the things that have changed, we're tapping the brakes on things that are expensive from a cash perspective," Co-Founder Joey Zwillinger told BoF. "We have some big software projects internally that we're slowing down, and we have store growth that we were planning — probably 20 stores this year — and as a result of this, I think we're going to most likely do less than half of that."
It seems like everyone will have to accept working with zero profits this season.
Despite the turmoil, Zwillinger said that Allbirds is taking the slowdown as an opportunity to refocus its attention towards product development and its bread-and-butter platform, e-commerce. The company said that online sales have mirrored the slowdown elsewhere across the industry. The brand’s most popular product remains its wool sneakers, although it has also sold out of a $35 merino-wool eye mask.
As unseasonable, widespread sales pop up across the retail space, regardless of category, Zwillinger said Allbirds has no plans to discount its products. “We just don't believe in sacrificing the long-term health of the brand for a quick, short-term cash fix or a quick short-term bump in sales,” he said.
Instead, its promotions are taking the form buy-one-give-one purchases and other donation options to benefit healthcare workers at the front lines of the pandemic. As a certified B-corporation that pledged to go carbon neutral in 2019, Allbirds can use these acts of corporate responsibility as a marketing tool, too.
In terms of straightforward customer acquisition, the company plans to maintain its existing advertising through Facebook, Instagram, Google and podcasts, although the team is “looking at various expenses and some of the big, fixed brand marketing expenses that are difficult to rationalise when sales are down dramatically.”
Allbirds also got lucky with its supply chain. So far, it hasn’t missed production targets as its best-selling footwear is produced in Korea, where the outbreak was mitigated with rigorous health monitoring.
“They were essentially checking everyone's temperature every single day and monitoring everyone's health,” Zwillinger said. “We had the information down to the employee, not just with our tier-one factories, but even the component suppliers.”
However, the brand’s North Carolina factory has closed, creating production delays on smaller items like socks. Spotty international shipping and the restriction of the free-flowing movement of goods has also interrupted the company’s supply, although not to the point where Zwillinger is worried. Of Allbirds’s eight distribution centres (all of which are third-party operated), seven are still operating.
“We’re trying to take a really conservative approach to what we expect from sales and make sure that we can take care of our employees, and then set appropriate expectations with customers as we learn more,” Zwillinger said, referring to the company’s contingency plans should more distribution centres close.
As for the ethical question of continuing to sell, requiring people to ship products from distribution centres despite global government stay-home orders, the answer isn’t so obvious.
“Look, there's a balance here between the economic welfare of individuals and the economic viability of our company and the welfare of the community surrounding everywhere where we operate,” Zwillinger said. “If you only take the approach where you take the least risky approach and everything is the most conservative, as a result you sacrifice individual economic welfare of people. You can create a lot of other consequences that are much worse.”
The Independent Designer: Tanya Taylor
New York-based Designer Tanya Taylor sells her contemporary line at 133 stores across the US and Canada. She also has 10 digital online retail partners in addition to her own e-commerce site. But without the seemingly endless resources of a parent company, Taylor must find a way to pivot amidst supply chain disruptions and negotiate with equally-challenged retail partners.
The Tanya Taylor brand, known for its feminine, flouncy dresses bathed in colour and inclusively sized, is sold mostly at department stores, with 85 percent of sales coming from retail partners. But now that she’s feeling pressure from “both sides of the supply chain,” the designer said, the company’s e-commerce platform is now more important than ever.
“How do we kind of pivot our e-commerce to drive loyalty and drive storytelling and not, you know, unrealistically try to push sales at this point?” Taylor said, noting that sales dropped immediately following the US coronavirus outbreak, interrupting what would have been 40 percent year-over-year growth in the brand’s wholesale business and 32 percent in e-commerce. “When people are relocating or feeling anxiety around their jobs they're not going to be shopping for $500 printed dresses.”
In part, the brand’s digital strategy, led by director of marketing Katie Underhill and senior e-commerce manager Madeline Komen, who was just hired in February, included offering a sale featuring archival Tanya Taylor items, which the company said has influenced full-priced purchasing on the site as well. Full-price, new arrivals are already on sale — 25 percent off, mirroring the discounts the brand’s wholesale partners have offered — and each purchase triggers the donation of five non-medical grade masks to various organisations in need. Colourful tops have sold well on the site, relatively speaking, equipping shoppers for their waist-up webcam interactions.
You can create a lot of other consequences that are much worse.
Sales fluctuations have kept in line with government announcements, Taylor said. For example, when the American government announced its stimulus package, sales saw an uptick. Regional sales in the brand's biggest markets — New York, Texas, and Florida — shifted as the virus hit those places. The team is relying on partner data from Google and Facebook to predict consumer purchasing behaviour and is more critical of its advertising spend than ever. It continues to send email marketing messages twice per week, though the content is less sales focused and more mood-boosting (for example, a downloadable colouring book.) Its spring digital lookbook, which the team initially budgeted $30,000 to complete, is now being produced for $2,000.
In addition to rethinking how to sell existing inventory, Tanya Taylor has had to communicate to its wholesale partners that halted production in China and now India have delayed delivery on new spring orders. The brand’s e-commerce distribution partner in New Jersey, Bergen Logistics, is still operating, though they speak to those partners daily to reassess.
Ultimately, the supply chain disruption has prompted Taylor to rethink the fashion calendar altogether. “Instead of cancelling summer and spring deliveries from us, we've been able to kind of reorganize products and consolidate what we're shipping in the summer so that we're always shipping full price goods,” Taylor said. “That's allowed us to kind of get out of losing a lot of money for goods we've already paid for.”
The Fine Jeweller: Irene Neuwirth
When Barneys New York went bankrupt in 2019, designer Irene Neuwirth thought her business would follow. The brand, which has become a red carpet fixture favoured by stylists who dress celebrities like Jennifer Aniston and Octavia Spencer, survived thanks to a series of belt-tightening measures and new wholesale relationships with Bergdorf Goodman and Moda Operandi. But Covid-19 is challenging the luxury brand in new ways.
Luxury brands have had a fraught relationship with e-commerce, Irene Neuwirth’s fine jewellery line is no exception. About a year and a half ago — the death knell of their biggest wholesale partner, Barneys, yet unrung —the brand launched its own e-commerce site, which now represents about a tenth of its business. As challenging as it was in the beginning, the timing may have saved the brand.
“It was a work in progress to learn how to sell something that's true luxury and one of a kind, how that experience sells online, but it was an incredible tool for our clients,” Neuwirth said.
As the coronavirus pandemic has halted all of the brand’s jewellery production, e-commerce — and a glut of inventory that was prepared for a now-cancelled trade show — has offered some salvation. Neuwirth, now at least partially in control of how her products exist digitally, doesn’t intend to discount anything on the brand’s site. And though her team has ramped up its digital services (by offering online chats for personal shopping and virtual styling sessions, for example), the intention is hardly to sell as it is to communicate honestly with customers.
Do people need jewellery right now? Of course not.
“I wanted to put things on Instagram that I thought were beautiful ... I wanted people to enjoy the pictures, I didn't want the pictures to be tagged with prices,” Neuwirth said of her Instagram page, which accounts for the bulk of its social media marketing strategy. The brand’s web team had initially tagged posts with shopping links back to the website, which typically drives a considerable amount of web traffic and e-commerce sales, but Neuwirth vetoed the move.
“It just felt like a mixed message, you know? Do people need jewellery right now? Of course not, nobody needs jewellery,” she said. “Does anybody want to enjoy a beautiful picture? Tons of people like to do that.”
That earnest approach also applies to how Neuwirth is communicating with retail partners. In jewellery, brands ship their inventory to their wholesale partners either on consignment, meaning items are lent to a wholesale partner for a set duration of time, or through purchase orders. After the Barneys bankruptcy, which left Neuwirth's items liquidated rather than sold or sent back to the brand, she determined they would come up with their own consignment-like strategy to protect against future retail downturns. As such, she's been able to negotiate clear-but-fair terms with her digital retail partners, offering extended terms for products to appear online.
“I'm very controlling with stores in what I'll allow them to have, not because I don't want them to have beautiful things, but I just don't want anyone to have an abundance of inventory that they're stuck with in a time where things get crazy,” Neuwirth said. Luckily, jewellery is also less sensitive to trends and seasonality than clothing items, a boon for brands like Neuwirth’s.
The Luxury Label: The Elder Statesman
Greg Chait founded The Elder Statesman in 2007, just as the Great Recession was taking hold on the global economy. A little over a decade later, he's facing another crisis. The Los Angeles-based lifestyle brand — best known for its cashmere sweaters and throws, with its own store in West Hollywood and retail partners all over the world — has leaned into its foundations to produce and distribute goods from Chait's home.
Towards the latter half of 2019, Greg Chait and his team at The Elder Statesman began putting to action their plan for the brand’s e-commerce site. The website launched in early March, though there was no time to mark the occasion, as the worldwide coronavirus pandemic disrupted not only retail operations, but their personal lives. As California mandated social distancing practices, Chait found himself at home in Venice, “running the company from top to bottom from a landline and a computer,” relying on know-how from the brand’s early days to make its signature hand-dyed cashmere crewnecks and blankets.
Nothing's off the table.
Chait said he is prepared to ride the pandemic out from his home without delaying existing or future orders. The brand, which sources some of its wool materials from hard-hit countries like Italy, has stockpiled enough excess fabric over its 13 years to continue producing locally. "Many vendors we work with are shut at the moment, but since we are vertical and spread out we can make it work for us," Chait said. "Within that inventory is lots of opportunity to make product we love."
While The Elder Statesman is new to e-commerce and operates just one retail store, it’s been doing direct sales since the beginning through its private-order business, which has become especially important in this unprecedented time. “Obviously the world is tricky right now, but we are still interacting closely with our amazing client base,” Chait said. While the newly launched e-commerce site makes selling to a broader swath of customers easier, the brand encourages followers on its Instagram page to directly message them for “virtual shopping.”
The Elder Statesman is still trying to figure out how to shoot product without violating social distancing rules and how much to spend on digital marketing. (For now, the idea is to work with “friends of the brand,” rather than traditional influencers.) When it comes to discounting, which many of Chait’s retail partners have already started doing, he’s eager to hold off as he doesn’t want to condition customers to expect it. “Nothing’s off the table,” he said. “But we’re not going to do anything that hurts our brand.”
Additional reporting by Sarah Kent.