Archive for January, 2011
One of the challenges for such a business model is procurement.
Two years ago, Gilt did 3 sales a week and now it does about 70 sales in each week. When Gilt started, its aim was to just move the sample or private sales to the virtual world; they soon found that these were few and far – flung. They lucked out due to the financial crisis that hit the US (and the world) in 2008-2009 when loads of designer goods remained unsold and fashion houses were more than willing to liquidate their inventory.
But now, with the economy bouncing back, Gilt has adopted a new approach for procurement, utilising the relationships they have built. Now that there is far less overstock to go around for all these flash sales, it’s obvious that liquidation alone won’t suffice for the business growth. So while last season goods and liquidation stock makes up about 60% of the merchandise sold, 35-40% of the merchandise sold is acquired through specially commissioning or manufacturing merchandise to be sold through this route.
As membership keeps growing, the companies have had to work frantically to keep pace with new appetites, and to come up with creative ways to expand their pipeline. So now, Gilt acquires its merchandise directly from the fashion houses instead of buying from wholesalers (as most discounters do). For instance, the company is now sending buyers to place orders with designers at the beginning of the season. Closer home, ‘Fashion and You’ has partnered with Lakme Fashion Week, where they propose to sell the prêt lines of participating designers “fresh off the ramp”.
Some designers are reported to be creating special lower cost lines for such websites by using slightly poorer quality fabrics, locally sourced fabrics, less detailing, lesser stitching, and leftover or sample fabrics from earlier seasons. Typically, neither designers nor flash sale sites disclose that there are certain products have been made especially for the websites since this would dilute the retail price that is quoted on the products and the feeling of getting a steal. (Source: New York Magazine)
That said, this is a win-win situation for both the flash sale sites and the designers because when designers reach a certain production threshold, their cost per unit goes down, while the sale price remains the same. Therefore, they make relatively higher margins on the merchandise that sells at retail and make up for the margins lost on the merchandise sold through flash sales.
Other advantages it provides to designers and manufacturers is larger geographical presence, liquidation of last season stocks without diluting the brand, increased brand presence, alternative sales channel with minimal marketing and holding costs as well as opportunity to interact more closely with customers through blogs and advice sessions on such websites.
(Sources : News Reports – Indian Express, Outlook India, NYT, etc)
According to AT Kearney’s India Luxury Review Report of 2008-09, the market for luxury products in India will be in the US$25-30 billion range by 2015 and non-metro India would account for at least US$10 billion of that.
Some quotes given below are ample proof of buying power in non-metros…
“Our clientele can basically be divided into three categories. The metros, the tier 2 – tier 3 cities and then the clients from abroad. The second category has the highest number of members,” said Nilesh Saxena, the director of the luxury portal, ‘Brandmile’.
“Before Valentine’s day, we received a big order for Victoria’s Secret lingerie from a place outside of Patna. One of our most regular clients is from Bhatinda. In the small towns of India, there are plenty of people who can afford the brands but don’t have access to them, and that is where our website steps in,” said Ishita Swarup, CEO and founding partner, ‘99 Labels’.
Meghna Reddy from ‘DesiCouture’ says “I was overwhelmed with the response in the first few months from places like Coimbatore, Vizag and Ludhiana.”
“To our surprise, we have orders coming from places such as Bhubaneswar, Jalandhar, Ludhiana, Guwahati, Jammu and Lucknow. Sites like ours are making luxury brands more accessible, as most of these brands don’t have stores in non-metros,” says Pearl Uppal, CEO of ‘Fashion and You’.
Recently, when ‘Fashion and You’ had a high-tea event during the Lakme Fashion Week, they invited their most valuable members to attend the event and their highest spender turned out to be a very fashionable lady from Guwahati!
These shopping clubs are an excellent example of e-tailing particularly targeting ‘middle India’ for well-known premium brands. They provide fodder for the aspirational yearnings of small-town India which have no outlet for fulfilment, until of course, online flash sales redefined how fashion and designer goods were marketed and distributed in India.
Data Sources: News Reports – Indian Express, Outlook India, New York Times, etc.
After sales and promotions through websites, facebook and blogs, the next online phenomenon in the fashion world is FLASH SALES. Flash sales (sales that come and go in a flash!) offer branded merchandise at compelling prices (as much as 70% discounts) only for a limited time (typically 2 days).
My first tryst with the websites offering these occurred when I suddenly got a flurry of emails from friends in the US inviting me to join the ‘Gilt Groupe’. At first I ignored them since they didn’t ship goods to India, but over the next 6 months I received more such invitations to join other shopping clubs and curiosity got the better of me. I joined the original, Gilt.com and was completely hooked – although I couldn’t really shop, it kept me abreast of trends in the market and lusting after those luxuries; all I prayed for then was either for them to start shipping to India or for someone to start a similar website for Indians. And soon enough, ‘Fashion and You’ came about….
But, a little bit of history first:
The originator of the concept – ‘Vente-Privee’, started in 2001, is over US $1 billion in revenue in 2009 and present across France, Germany, UK, Italy and Spain. Inspired by this highly successful venture, the ‘Gilt Groupe’ was established in the US in 2007 and brought about a revolution of sorts. Starting off with women’s apparel and accessories, the ‘Gilt Groupe’ has also launched ‘GiltMan’ and ‘Jetsetters’ to sell different product ranges such as menswear, children’s clothing, home furnishings, gifts and travel packages.
Following the success of the ‘Gilt Groupe’, many others – ‘HauteLook’, ‘TheOutnet’ (a net-a-porter initiative), ‘RueLaLa’, ‘Ideeli’ etc. – have joined the flash sale bandwagon. The latest product lines to be sold through flash sales are high-end personalised skin care and pet fashions.
Their popularity is reflected in their membership figures – ‘Gilt’ today has over 2 million members; ‘Ideeli’ has 1.3 million members; and all growing rapidly.
A similar trend set foot in India in end-2009 with the likes of ‘Fashion and You’, ‘99 labels’, ‘Brandmile’ & ‘DesiCouture’ which make available both Indian and Western brands for the Indian markets, while ‘Exclusively.in’ sells Indian designer goods in the US market.
‘Fashion and You’ got about 528,000 members within the first 100 days of operation and registered a 50% month-on-month growth in revenue; ‘99 labels’ has over 2 lakh members already and still has about 500-1000 people registering on their website each day. ‘Fashion and You’ ships out almost 1,500-2,000 products a day while ‘99 Labels’ boasts of 600-1,200 transactions per day.
Surprisingly though, given that Gilt is US based and has been around for longer than its Indian counterpart, Gilt has only about 65,000 followers on Facebook while ‘Fashion and You’ has a whopping 375,000 followers!!! This difference could be due to the large number of flash sale sites in the US which have fragmented the market, while the availability of fewer options in India has allowed ‘Fashion and You’ to have a larger fan following.
The success of such websites, both in India and abroad, isn’t surprising, they cater to every woman’s (and almost every man’s – although they may hate to admit it) two basic instincts – to look good, trendy and fashionable and to get it all at a hefty discount.
Our name ‘Escape Velocity’ derives from the speed which an object must achieve to overcome the constraint of the Earth’s gravity. This reflects what we do for our clients as well - we help firms discover and implement the optimal strategy that boosts their business to higher growth orbits. Our logo, the ‘growth spiral’, embodies this focus on growth.
Some interesting trivia about the ‘growth spiral’:
This spiral often appears in nature and is visible in many growing forms such as the arrangement of seeds in sunflower heads, nautilus shells, etc., hence the name ‘growth spiral’.
It is a special kind of spiral curve in which the size of the spiral increases and the distances between the turnings increases in geometric progression. Spira mirabilis, Latin for ‘miraculous spiral’, is another name given to this curve by Jacob Bernoulli, because he was fascinated by its unique mathematical properties.
Now you know why we at ‘Escape Velocity’ just had to have this as the visual representation of our identity – a logo that represents ‘growth’ is so right for a Business Strategy and Marketing Consulting firm, isn’t it?
The Escape Velocity Team