The European online fashion business is fierce. Just ask backers of one-time highfliers. Like boo. com, the urban sportswear retailer that tanked last year, and dressmart, com, the struggling men’s wear specialist. Those once stellar online brands expanded too fast, spent much more than they earned, and then lost their investor support after Internet stocks began plummeting last April. The markets sent online fashion stores a tough message: come up with business models that generate revenues.
A few firms have shown that not all online fashion shops are Internet disasters. Copenhagen-based haburi, com, the online designer-label discount store, Sweden’s sportswear vendor Sportus and the Italian shirts store Marco Bracci are doing well in a very tough environment.
Haburi’s distinctive business model is an Internet version of the factory outlet where brand manufacturers sell directly to consumers at lower prices from huge out-of-town shopping malls. A concept used in the U. S. far more than in Europe, and Haburi wants to fill the gap. Michael Vad, Haburi’s CEO, says that Europe’s apparel factory outlet sector could yield $10 billion in sales annually.
According to Vad, national regulations that limit malls outside city centers have hampered the development of this sector. "For the consumer, there is the two-hour drive to the mall, and when you get there, you don’t know whether you will get the size or color you want," says Vad. By going online, Haburi aims to cut the retailer’s costs, save consumers the long drive, and deliver orders within two or five days. Haburi splits net revenue 50-50 with the brand manufacturers.
Apparel is difficult to sell online because people like to feel and touch the clothes they buy. For the online retailer, acquiring the items, inspecting them, cleaning and storing them can be expensive. "The cost of customer service in the apparel business is much higher than selling books or even furniture," says Matthew Nordan, a retail analyst at Forester Research’s Amsterdam office.
Unless linked to a major established operation, an online retailer needs a competitive edge. For example, Italian shirt-maker Marco Bracci sells expensive goods for high profits and has cornered a niche market. Dressmart, on the other hand, tried to do too much too soon. Originally it planned to sell only shirts and to make the original Swedish operation profitable before branching out. But within months it tried to go pan-European and sell everything including ties, shoes and sportswear, and to rent physical outlet at airports. Dressmart, on the verge of bankruptcy and searching for a backer, has now scaled back and operates only in Sweden. |
