NEW YORK, United States — Blogging and other forms of social media are surfacing emerging designers faster than ever before, bringing greater transparency to a previously underexposed part of the market and empowering consumers to discover new names. But the emerging fashion businesses which stand to benefit most have long faced significant distribution barriers and unfavourable economic terms that make bringing their product to market problematic.
Because young labels can rarely afford the huge investments associated with opening their own bricks-and-mortar stores, their primary path to market has been selling pieces at wholesale prices to multi-brand boutiques and department stores, who traditionally mark up items 2.5 to 3 times before selling them to end consumers, taking 60 to 70 percent of the retail value. But for emerging brands, even this is far from guaranteed, as risk-averse retailers typically wait a few seasons before buying a new designer in order to first confirm that the brand has proven its ability to generate consumer demand, creating a kind of “Catch-22.”
In recent years, the growth of internet retailing has enabled smaller brands to route around retailers and earn more favourable margins by establishing direct-to-consumer sales channels online, at a fraction of what it costs to build a physical store. But for the majority of emerging fashion businesses just entering the market, the costs associated with implementing their own e-commerce presence have traditionally been too high to make a directly-owned and operated online sales channel a viable immediate option.
Now, a number start-ups are aiming to disrupt the traditional retail model by changing the way emerging fashion designers break into the market. Launched in October 2010, London-based Boticca is a curated online marketplace for fashion accessories that enables emerging designers, hand-picked by the Boticca team, to sell pieces directly to end consumers, earning 75 to 80 percent of retail value, nearly twice as much as they would make via traditional wholesale channels.
“Independent designers were really up against some major distribution barriers and facing adverse conditions in the retail environment,” said Kiyan Foroughi, CEO and co-founder of Boticca. “Platforms like Boticca are completely transforming the way designers approach distribution by making online the preferred immediate channel for scaling their brand and sales globally from the get-go, as well as by providing them with a sustainable commercial route where they enjoy the lion’s share of the retail economics and connecting them directly to a global customer base,” he explained.
In its first year, Boticca has grown swiftly. Last May, the company closed a $2.5 million (£1.5 million) Series A round led by French investment fund Isai and their site has since scaled to approximately 5,000 products from more than 210 designers in over 30 countries, including Turkey, Iran and Estonia. “Boticca truly connects customers all over the world with inspiring designers in far-flung places,” said Foroughi. “It’s not unusual for individual designers to have customers on five continents.”
Not Just a Label, a London-based marketplace that has worked with Damir Doma, Mary Katrantzou, Rad Hourani and Patrick Mohr, was one of the first and fastest growing platforms of this type. “We allow users and customers to bypass middlemen and antiquated systems that make it so hard for designers to break through,” said founder Stefan Siegel. Launched in 2008 and representing over 6,000 designers in 94 countries, the platform offers young brands easy access to e-commerce via Not Just a Label’s online store and takes a 30 percent commission on resulting sales. “The idea was to increase a designer’s profit margin,” said Siegel, who achieved break-even without seeking external investment and reported a “six-digit turnover” for 2010.
But alongside e-commerce, platforms like Boticca and Not Just a Label also offer emerging fashion businesses tools and services for marketing and PR. “By insisting that no young designer should be forced to pay a large sum to get the exposure they deserve, we provide designers with an all-encompassing digital space to kick-start their careers,” said Siegal, whose company editorialises the product it sells and even acts as a liaison between designers and press. “We also support the independent designers we work with in how they market and merchandise their work, and provide PR resources to help tell their stories to a wider audience,” said Foroughi of Boticca, which also features a blog that spotlights the designers it carries.
Still in the early stages of fundraising, New York-based Wondermode offers selected designers a fast and inexpensive way to set up their own simple e-commerce business, complete with web-based tools for managing payment, shipping logistics, analytics, email marketing and social media, in exchange for 20 percent of retail sales and a “product upload charge” of $0.50 per style per season, for up to four product images. “It’s a ‘one-stop shop’ sales and marketing platform,” said founder and CEO Aaron Duncan. Wondermode, which is still in beta, even offers designers the option of buying add-ons like a photo shoot service.
But the recently re-branded Lookk.com, a 2010 Seedcamp winner formerly called Garmz, which recently raised a seed round led by Eden Ventures and has staff in London, Vienna and Sofia, is perhaps the most ambitious and promising start-up in the space. “Each week new designers are featured in countless blogs,” said Andreas Klinger, co-founder and COO of Lookk. “New trends and names surface more often and quicker than retail and seasonal cycles could ever adapt to,” he continued. “This leaves an untapped potential: new designers with proven demand, but without the tools to follow through and reach greater parts of the market.”
Like the other platforms exploiting this potential, Lookk is a curated marketplace where selected designers can reach a global customer base. “We do not believe in completely open marketplaces as they usually leave the consumer unsatisfied with production quality and product price,” said Klinger. Similarly, Lookk also offers designers web-based tools to manage marketing and fulfillment.
But unlike other players in the space, Lookk offers emerging designers a genuine end-to-end solution that goes all the way to manufacturing, a powerful differentiator for young labels for whom sourcing reliable and cost-effective production is a constant challenge. Lookk empowers designers to not just promote and sell, but also produce pieces, using the company’s in-house production facilities and network of manufacturers. “When we enter into a contract to manufacture, the designer will receive 5 percent commission on the retail price of each piece sold — very competitive considering we handle all associated retail, distribution, marketing and customer care costs,” said a spokesperson for the company, who declined to reveal the commission the company charges brands who have already established their own production, stating only that “buying and wholesale prices are worked out on individual terms with each designer and are competitive with industry standards.”
Critically, Lookk has also far surpassed competitors in fundamentally reimagining fashion retail in the context of the open social web, harnessing the voice of the end consumer to quickly understand market demand and drive more effective business decisions. When designers upload lookbooks to the site, consumers feed back their preferences via a voting mechanism, generating valuable data that directly influences which pieces Lookk’s panel of buyers decides to put into production and sell via the online store.
“We want to build a retail model which truly leverages the possibilities of the internet,” said Klinger. “If we see market demand in a new designer’s products, we can control the full process from design to finished product up to the moment of delivery,” he added. “By directly bringing consumers and designers together and controlling key elements in the resulting value chain we can lower risk and make quicker decisions when bringing new products to market.”
Indeed, the kind of detailed consumer demand data generated by Lookk, combined with shorter production cycles, means the business can produce in smaller, demand-driven batches, significantly reducing risk and improving efficiency. But ultimately, the benefits of this approach extend beyond balance sheets alone. If adopted more widely, this type of social retail model could have powerful and far reaching positive effects on diversity and creativity in the fashion industry at large, enabling traditionally risk-averse retailers to embrace many more emerging designers and still turn a tidy profit.
Vikram Alexei Kansara is Managing Editor of The Business of Fashion.