The Endless Store
How e-commerce is changing the fashion world
There was once upon a time this wonderful little film on surfing that I managed to see in the one tiny cinema in my little hometown in Lurgan called The Endless Summer. A great wee movie that grew into being a cult classic about a couple of surf bums wandering around the planet stopping off in California, Tahiti, Australia and Cape Town in search of the perfect wave, the Holy Grail for 365 days a year surfing.
It seemed hopelessly romantic to an Irish boy who had never seen a surfboard, never mind a surfer. The idea of going on holiday – which is what it was, then – for every single day of the year seemed like paradise. And still does.
That is of course if you are a new form of surfer – a shopaholic Internet surfer who can surf and shop not just 365 days a year, but 24 hours a day – meaning 8,760 hours a year. Makes an Endless Summer seem prosaic. And, believe it or not, it is today’s new reality when you come to think about it. We have entered the era of the shop that never closes or: The Endless Store.
Driving the experience is the world’s biggest luxury Internet emporium: Yoox Net-a-Porter – or YNAP, the 2015 merger that has created a behemoth that today has three million active customers. Though, as we shall see, there are multiple business models in such a rapidly evolving phenomena, from Farfetch to Zalando all of them growing at double digit levels, and going to extraordinary lengths from paid-for membership programs to same day delivery services to providing customized personal shoppers or the pickup of returns on demand. They used to call Manhattan the city that never sleeps, now fashionistas don’t either. The sheer figures are astounding.
“Digital is seven to eight percent of the luxury market worldwide, which is about 250 billion.” Federico Marchetti, YNAP CEO
All things considered, in a world that is still struggling to shake off the global recession, luxury shopping on the worldwide web is booming.
“In the latest quarter we had 200 million visits. Which makes us the biggest company with the highest traffic in luxury e-commerce,” smiles YNAP CEO Federico Marchetti when we met in Milan this summer. “Last year we had ten million orders, and our business is growing between 17 and 20 percent and our strategic plan is being respected.”
A key element in YNAP’s success is making things easy for consumers. Far too often shoppers are quite simply intimated from actually going inside high-end boutiques. Self-conscious about their appearance, concerned about sniffy sales staff or just fearful of sticker price shock. YNAP with its price transparency soothes all those fears. The fact is when a client has bought once, their e-mail address is recorded and they are registered. After that, they can just scan their credit card and any item they want goes out.
Arguably, YNAP’s biggest rival is Farfetch. Essentially, it has operated by taking the unsold stock of hundreds of multi brand boutiques. Unlike YNAP, Farfetch does not control its sales prices, as they operate on the simple busi- ness model of selling the inventory of many boutiques. Historically, Farfetch grew by selling the products coming from mainly Italian multi brand boutiques at mostly Italian prices.
This has been a godsend to scores of Italian luxury boutiques – family business in medium- sized provincial cities like Arezzo. Names like Sugar, Dell’Oglio or Stefania Mode. Smart and savvy merchants with great taste that buy for Italian consumers in their hometown but now – thanks to Farfetch – make the large majority of their revenues selling to global consumers. In effect, the web has globalized Italian taste to fashionistas that have never been to Italy, and would not know how to locate Como or Capri on a map or Arezzo for that matter where legendary Beppe Angiolini has established his destination store.
Some may accuse Farfetch of creating a parallel market, but in ten years they have grown their business incredibly quickly. At a time when bricks and mortar department stores are in free fall, consumers are flowing over to the Internet in record numbers. Today, YNAP has lots and lots of competition like Matches Fashion, mytheresa.com, Moda Operandi, though only YNAP has broken the one billion revenue ceiling for a pure luxury player. Farfetch, however, should break that barrier within the next year. Farfetch, which offers same day delivery in ten cities including Miami, Los Angeles and London, has even acquired its own physical boutique – buying Browns, the famed Mayfair store – partly to carry out direct retail experiments.
Talk about unexpected fashion winners and meet Michael Kliger, president of mytheresa.com. Actually, Mytheresa was a luxury boutique in Munich before it went online to focus strictly on luxury fashion for women. It only carries a very focused portfolio of less than 200 brands. The business is at 250 million euros and growing by double digits per year. Their point of difference? Close partnerships with brands to produce capsule collections and unique content, for example with fashion leaders like Prada, Valentino and Dolce & Gabbana or with social media stars like Alexa Chung. “We believe in modern story-telling as the driver for desirability and this means digital content for the smartphone. The product remains King or better Queen but you need to work hard to break through the clutter in a world of overwhelming noise and ever-decreasing attention spans,” explains Kliger to Achtung Mode. “One other secret ingredient you need is operational excellence. The type of customers we serve are not accepting anything less but perfection in terms of speed, quality and service. We measure this constantly and are on a continuous improvement mission.” Surely, when you are based in Munich and your country stands for precision and timeliness this gives mytheresa.com a clear competitive advantage.
“Most of our rivals are about 200 to 300 million euros in annual sales. I respect them all, as it shows there is a lot of growth in the industry,” explains Marchetti the new power play. “Our industry is growing by 15 percent online. But, we are the leader and growing a little faster. Plus, our market share grew by one percent last year. Today, it is eleven percent out of a 20 billion euro market. Digital is seven to eight percent of the luxury market worldwide, which is about 250 billion,” argues Marchetti.
In fact, the company with the largest turnover is Berlin-based Zalando, albeit with most of its business concentrated in high street labels. In the latest quarter, Zalando scored a 20 percent increase in revenue to some 1.1 billion euros. Its new program, called Zalando Zet, is currently being tested in four German cities (Berlin, Leipzig, Frankfurt and Hannover) where members – who pay 19 euros per year – can try on goods at home before buying. It is the corner stone of the growth strategy of this pure play e-tail giant.
“One other secret ingredient you need is operational excellence. The type of customers we serve are not accepting anything less but perfection in terms of speed, quality and service”. Michael Kliger, mytheresa.com CEO
The latest major player to enter The Endless Store is LVMH. As a group, LVMH has over 5,000 boutiques when one includes its fashion brands like Louis Vuitton, Christian Dior, Kenzo and Givenchy, along with duty free stores and the conglomerate’s biggest chain, Sephora. So it already has stores operating somewhere 24 hours.
This June, LVMH debuted its spanking new luxury website 24 Sèvres in Paris, both online and in the corporation’s famed department store Le Bon Marché located at 24, rue de Sèvres in the 7th arrondissement. The opening salvo of 70 products were all limited edition, blending a mix of top level fashion brands like Miu Miu or Chloé, avant-garde stars like Rick Owens and populists like Acne and Kenzo, with some ten brands from within the LVMH stable.
Nearly all are based on iconic products from each fashion house, though customized in collaboration with a fine artist. Courrèges developed an emblematic Space Age jacket in vinyl done in images of half eaten apples and old roses, courtesy of artist Chloe Wise. Rabih Kayrouz teamed up with Lamia Ziadé for ten exclusive coats, embroidered with mysterious lovers kissing. Each idea is limited to between ten and 30 examples, some as few as just five, like a striking Hammock tote from Loewe made with art directors M/M, which featured a large pencil drawing of what looks like a disgruntled student. This retails for a whopping 3,800 euros.
“It’s not so much limited edition as the personalization of fashion and luxury. Limited edition is great but it is one shot. But personalization, where you give the customer the opportunity to create something unique to them, we believe in that very much.” Patrice Wagner, Le Bon Marché President
Not all looks were worked on by artists: Miu Miu’s Lady bag was revamped as a mini bijoux with crystals and ornamentation, while Fendi’s modern classic Peekaboo bag was re-imagined with Plexiglas geometric motifs. Chloé produced not one but three bags in green and red stripes, oddly reminiscent of Gucci’s signature colors.
The new site also mingles in hipster new brands like Gauchère, the house founded by German-born Marie-Christine Statz, which has won instant critical acclaim in Paris, or Roseanna, a fresh new French gal with a cool Parisian sophistication.
The site will grow the number of brands to 150, occasionally staging other installations in Le Bon Marché. LVMH’s two mega brands Vuitton and Dior are not yet present, but a gift for editors at the launch breakfast included a Vuitton business card carrier with an image of the Eiffel Tower bearing a 24 Sèvres balloon.
24 Sèvres is named after the location of Le Bon Marché store, which opened in 1852. It’s also, blatantly, a play on the English term 24/7.
But who is the real consumer driving this explosive growth? According to Marchetti: “Net-a-Porter and Mr. Porter have the most valuable customer out there. The top two percent. And they account for 40 percent of our total revenue. A group of VIPs, extremely important people. We have a score of customers who spend more than one million euros per year. Nice people!”
The whole structure of Net-a-Porter is to make sure these customers are well served, with growing teams of personal shoppers. This year in London, they launched a program where personal shoppers visit UK clients to style them in their own homes. Starting in September, it is called Net-a-Porter at home. Already in the UK capital, Net-a-Porter delivery cars are ubiquitous – and starting this fall they will include personal shoppers on styling missions.
And, instant service has been extended into luxury hotels. In London’s hottest new destination, The Ned, located in the City, guests can order a bow tie, swimming togs or shirt from Net-a-Porter and expect delivery within five minutes of checking in to their room.
Yoox, by contrast, is all about accessible luxury where the entry price point is about 100 euros and the average ticket is 400 euros.
And it’s not just shoppers who are surfing 24 hours. Buyers are as well, and in all sorts of unexpected ways.
This June in Pitti, Tommy Hilfiger essentially extended his leadership into see-now, buy-now by extending the concept in wholesaling. In Florence, Hilfiger’s stand was located deep within the walls of the 16th century Fortezza da Basso, but packed with his tech wizardry and state of the art customization. On the walls, giant touch screens reading “Shop the Look” with ads and looks for men and women, where retailers can place orders directly – in different sizes and colors.
“The big message is the technology. And how to go B to B in a very sophisticated way. So, we have created the showroom of the future. Now, any buyer can come in and put the whole collection together, do the size runs and basically e-mail it to themselves. And, not to have to sit in a showroom with someone showing them a garment at a time.” Tommy Hilfiger
The designer expects many retailers to stay in their own city and place wholesale orders directly from their own office. However, he cautioned: “The experience of going into the showroom is quite exciting as you can see and touch the actual clothes.”
“We wanted the space to be clean and modern and we wanted to be able to focus on the looks,” says Tommy about the actual collection. It included smart multiple striped puffer vests; dandy red satin baseball jackets and light seersucker suits for men – a huge trend in Pitti.
Tommy led the whole see-now, buy-now movement with his linkup with Gigi Hadid, where fans could literally buy the whole collection as it hit the runway for the first time last September on a pier on New York’s Hudson River. The next Tommy Hilfiger x Gigi show will be presented in London during the UK runway season in September, as the designer works extra hard to keep his demographic young.
“Other obvious brands have not evolved and got stuck in a trap. To them go back and attempt to reset the brand is quite a feat. So, I am being proactive rather than reactive,” he smiled, too polite to make the obvious inference that someone like Ralph Lauren is in trouble precisely because he appears to have lost the millennial generation.
According to Hilfiger’s CEO Daniel Grieder, already in June the house started producing the collections that Tommy will show in the iconic Roundhouse in London.
“It’s an enormous logistical headache, but by making all our departments – design, manufacturing, logistics and communications – work together we can make it happen,” Grieder said.
He added that they will create 300 to 1,500 examples of each piece, a substantial commitment, even before any orders have been made at the show.
“Right now no one can beat Zara in terms of speed. They see something they like in a designer’s runway show and they can bring it to market in six weeks. But as we will have our collection ready for the day of the actual show, we can be ahead of them by six weeks. Which is great, believe me,” concludes Grieder.
Another exciting mover in the Endless Boutique is Ordre, a pathbreaking luxury Internet showroom that is connecting retailers to brands in some very novel ways. This past season at Haute Couture, we ran into Ordre’s founder Simon P Lock at Proenza Schouler, who staged a beautiful and important show inside the courtyard of Lycée Jacques-Decour on a dank Sunday morning.
Jack McCollough and Lazaro Hernandez had been spending lots of time in Paris this year, working on the first fragrance, due to be launched by L’Oréal in February 2018.
Their courtyard catwalk show also marked a new step in technological terms. Forward-thinking Ordre recorded the show in 3D. Allowing buyers to subsequently view the whole collection via virtual reality Oculus goggles and order any look they wanted with a tip of the finger.
“It’s bringing the Paris front-row to anywhere in the world,” explained Lock, who is sending scores of goggles to Ordre’s major retail clients, so they can access all the major shows in the big four cities this September.
So, it’s not just The Endless Store, it’s the Endless Buying Meeting. From runway via virtual reality to an electronic boutique and delivered into the consumer’s hands by a smiling DHL delivery man without anyone ever going to an actual show or showroom to shop.
However, it has not all been plain sailing. Just ask Condé Nast. This June, the mighty owner of Vogue was forced to close down its luxury e-commerce portal style.com overnight as it struck a new deal to commercialize its content via fast-expanding farfetch.com.
It was an ignominious end for a much-publicized operation that had style influencer Yasmin Sewell as its front-woman and that ate some 100 million dollars of Condé Nast’s cash in barely 18 months. A letter to staff in the company said the business had fallen very far short of expectations. There was no mention of whether any style.com staff would survive the transition to the new operation. But we did discover that Jonathan Newhouse, Condé Nast’s chairman, would take a seat on Farfetch’s board. The new partners predicted that the partnership will include a seamless technology connection to easily enable Farfetch product integration into Condé Nast’s content; shopping guides created by its publications, highlighting products from Farfetch; and distribution of shoppable content across its digital and social platforms.
However, to most industry observers, the decision to end style.com’s role as Condé Nast’s flagship home for runway content, and rebadge that as Vogue Runway back in 2015 now looks like an enormous blunder. Since style.com ended up being too slow and too late to arrive at the Endless Boutique’s Internet party.
Photography by Jana Gerberding
This article appeared first in Achtung Mode Nr. 34, Depesche der Mode column (September 2017).