As fashion companies have become more connected to consumers, they have lost the bonds that bound the industry together for decades.
Blame it on the internet or the human urge to chase that flashing light or something. But large parts of the industry are disintegrating and changing, either disappearing or changing what happens next.
The most recent and dramatic change was the idea of digital luxury department stores, multi-brand retailers that offer a little bit of everything and allow shoppers to browse something close to a sophisticated experience.
If it was a delicate model before, it is now close to collapse.
In just a few months:
- Matches was sold in a fire sale for £52 million and was put into administration anyway, but short-term owner Frasers said: “Significant changes will be needed to restructure the organization.” That has become clear.”
- Farfetch is partnering with South Korean e-commerce giant Coupang, which spent $500 million to acquire the company, which was once worth nearly $40 billion.
- Yoox Net-a-porter appears to be at sea again in search of a new owner after its contract with Farfetch was terminated. The owner, Compagnie Financière Richemont, then wrote off the value on its books.
- Both Saks.com and Moda Operandi are considering raising capital.
More than 25 years later, the fashion industry is still finding ways to move its business online and make money with it.
Find a used Yoox on the market.
Yukes
Sure, there will always be profitable high-profile and luxury brands, but for most everyone else, the future is still uncertain.
For digital marketplaces, the problem is simply that luxury consumers have become more cautious and multi-brand players have not had the right digital bells and whistles, such as virtual try-on or the right kind of recommendation engines. Not.
It goes even deeper and is rooted in both the structure of the industry and the economics of the Internet.
First of all, it’s structural.
The natural impulse of the Internet is to provide choice. All kinds of choices are offered at all kinds of places, at all times. The e-commerce megacities of Amazon and Walmart offer more choice than Matches, Farfetch, Yoox, Saks, and more. And Google goes one step further, connecting the dots between merchants everywhere.
Digital marketplaces can provide a compilation of the best brands from a particular perspective and build something like a loyal base. But that’s not what people in the tech industry would call a business model moat, especially if the brand itself is appealing directly to consumers.
And today’s online shoppers aren’t just targeted, they’re laser-targeted and trained to track exactly what they’re looking for and find it elsewhere on the web.
Experience is important, but when it comes to finding something by keyword or retrieving it from social scrolling, experience with a digital luxury platform is not enough.
And then there are the economic issues at the heart of the luxury multi-brand world.
meanwhile of Digital platforms may gain some scale, but they will continue to spend to build back-end capacity, fulfill the demand to ship more individual orders, and handle all online returns. Must be.
Department stores could gain a little more of an edge by reducing the number of distribution centers that handle large volumes of packages. In fact, the OG department store had a business model that benefited from a degree of inefficiency. They guessed what consumers wanted, took bulk shipments from brands, sold what they could afford at full price, and marked down the rest. And if I didn’t get as much profit as I expected, I would go back to the brand and get a little discount.
A trip to a department store gave shoppers access, selection, sometimes assistance from staff, and sales at the end of the season or even during the season. The brands kept their factories busy and complained about end-of-season chargeback payments to retailers, but not enough to lose control of real estate.
In their heyday, brick-and-mortar department stores also served their markets almost exclusively with certain brands. If you wanted a hot young designer, there were only a few places you could go. For both department stores and online players, that advantage is long gone.
Department stores can benefit by controlling access and using high-end magazine executives to drive and shape demand.
There It was an industry-wide ecosystem that brought fashion together, for better or worse, and left room for players up and down the supply chain to profit.
Digital platforms don’t have any of the advantages enjoyed by old department stores, and Matches and Farfetch may not have had a chance, no matter how much noise they made at one point.of Digital While major corporations don’t seem to be able to build businesses that actually generate profits, department stores have the ability to remain profitable, even if their profit margins and growth rates aren’t as strong as Wall Street would like them to be. It has a long history.
Match at 5 Carlos Place, Mayfair.
courtesy
And brands are now directly driving demand for themselves by using social channels to drive shoppers to their e-commerce platforms and their stores. The fashion industry often makes less money from online sales, but brands are more reluctant than ever to share a portion of their sales with other retailers.
Due to this set of circumstances, many brands in the industry are still searching for a clear path forward.
Where will fast-growing brands go? If digital marketplaces fall short, e-commerce and retail are both expensive projects without massive scale, and brick-and-mortar department stores themselves will struggle. I will do it.
Macy’s is sparring with activists. The Nordstrom family is said to be considering taking Nordstrom private again. Additionally, Hudson’s Bay Company, the parent company of Saks Fifth Avenue, appears to be close to acquiring Neiman Marcus, a consolidation that will further increase pressure on designer brands.
Fashion needs a new step forward.
“The Bottom Line” is a business analysis column written by associate editor Evan Clark, who has been covering the fashion industry since 2000. Published every other Thursday.
