Businessoffashion.com

Op-Ed | Sleeping Through the Next China

2015-04-05

LONDON, United Kingdom — As the digital revolution gathers pace, it has become fashionable to criticise the fashion industry for its temperamental relationship with technology. Indeed, drawing comparisons to other industries often paints an unfortunate picture. But while it’s easy to scoff at the handful of top fashion companies who are still unwilling to sell their products online, branding them luddites or laggards, what a lot of people don’t do is ask why. Why do these brands abstain? Maybe because they can. Maybe because, right now, nothing is forcing them to change.
This is in sharp contrast to the dynamics seen in the music industry. Today, we live in a world where the majority of music is consumed digitally — on iPhones, YouTube, Spotify and Facebook. None of these products existed 10 years ago, so how did that industry change so quickly? The first mp3 was played in 1995 and a few years later Napster launched, effectively bringing free music to millions. Almost overnight, the record labels’ largest revenue stream — album sales — went into decline, forcing them to buy into the technology revolution. They inked deals with iTunes, YouTube and Spotify, while at the same time altering their business models by placing more emphasis on 360-degree deals and live music. For the most part, they were not prescient, they simply had no choice. The market changed around them and they either adapted to the new reality or went out of business.
Essentially, it is the market that dictates the pace of technology adoption. With music — as well as travel — the market drove industries to change 15 years ago. With art, we are yet to see that shift, but it’s anticipated to occur in the next 15 years. For fashion, the transition is underway now.
The founders of <a href="/net-a-porter" class="kws_link bof-track imp clk profile_id_1460" data-e="profile.link" data-id="1460" profile-popover title="Net-a-Porter" subtitle="London, United Kingdom" img="uploads/media/header_image/0001/02/8fc5c0c4e712bd268fa51e004c72b2ada9555584.jpeg" content="Launched in 2000 by Natalie Massenet, the e-tailer was the first to offer designer womenswear and an editorial point of view.">Net-a-Porter</a>, <a href="/asos" class="kws_link bof-track imp clk profile_id_984" data-e="profile.link" data-id="984" profile-popover title="ASOS" subtitle="London, United Kingdom" img="uploads/media/header_image/0001/01/f6917805b44bdc2a445e9e9a44d6b991188a708c.jpeg" content="Founded in 2000 by Nick Robertson, this online-only fast fashion retailer has grown a customer base of 7 million consumers.">ASOS</a> and Yoox, who all started their businesses in 2000, were not responding to market forces. They were visionaries who correctly anticipated that the market would change. But it has been a long journey for them: only 10 years ago, each of them was posting sales under £20 million. These levels were hardly attractive enough to make the rest of the fashion industry take notice. But today, each of those businesses is worth over £1 billion.
In addition, department stores in the US have significantly grown their online businesses. Nordstrom alone made $2.4 billion online last year. In a matter of years, the market has changed irreversibly. Customers are increasingly buying online, so retailers and brands are faced, more and more, with the same choice the record labels were forced to confront in 2000.
Most have adapted — but what about those who haven’t? Why do a very select group right at the top of the fashion hierarchy control their digital presence so strictly? <a href="/chanel" class="kws_link bof-track imp clk profile_id_613" data-e="profile.link" data-id="613" profile-popover title="Chanel" subtitle="Paris, France" img="uploads/media/header_image/0001/02/07e873b97aa16d3fa88c6161a143a1333f989f84.jpeg" content="Helmed by Karl Largerfeld and owned by the Wertheimers, this French luxury label is known for its powerful brand iconography.">Chanel</a>, for example, only joined Instagram last year. <a href="/celine" class="kws_link bof-track imp clk profile_id_973" data-e="profile.link" data-id="973" profile-popover title="Céline" subtitle="Paris, France" img="uploads/media/header_image/0001/02/a85249e2e92af85c4addcd45ae262aca7a4f76ca.jpeg" content="Owned by LVMH, this luxury womenswear brand has been transformed by creative director Phoebe Philo's understated refinement.">Céline</a> has no official social media presence and neither brand sells their core products on the web (Chanel sells only beauty products online; Céline sells nothing). To really understand what’s going on here, it’s worth asking how the business of fashion differs from other industries.
To a certain extent, music is a commodity like books or films. “I like that song, I want to listen to it again, how can I do so as easily and cheaply as possible?” Whereas the fashion industry does not just sell clothes. Fashion sells a dream, an idea of the kind of man or woman you want to be. The harder that ideal is to achieve, the more we want it. Just look to the catwalk for proof.
And what could be more exclusive in our increasingly connected world than to make people wait? What is more rare now than patience? And in the world of high fashion, rarity is desirable. But let’s not get carried away, this is not real rarity. Chanel has 10 retail outlets in London alone. This is the merely the aura of exclusivity. In truth, the far more powerful driver of exclusivity is the price point.
If we look at luxury hotels, for example, they have no problem taking bookings online — increasingly the preferred method of their customers — because it is the price of their rooms that ensures exclusivity.
So why are a handful of fashion brands holding out? It’s because the market isn’t forcing them to change. The luxury market has been thriving in recent years, so brands like Chanel and Céline haven’t needed to adapt to the online ecosystem to drive growth — yet.
But times are clearly changing. Last week, Chanel announced that it will launch its first fashion e-commerce platform in 2016. According to Bruno Pavlovksy, Chanel's president of fashion, the platform will be, "more e-service than a pure e-commerce approach.” Chanel’s first transactional fashion site will undoubtedly be a game-changer.
The vast majority of fashion brands and retailers are fast adapting to the realities of the Internet and when compared with dwindling (and increasingly expensive) retail space, online growth has a much larger potential with more enticing economic incentives.
Only a few years ago, launching e-commerce was very hard to justify financially. But today, ignoring online is like ignoring the largest, fastest growing country in the world. It’s like ignoring the next China. And, indeed, as the luxury market in China falters, e-commerce is widely seen as the next engine of growth.
<a href="/chris-morton" class="kws_link bof-track imp clk profile_id_1743" data-e="profile.link" data-id="1743" profile-popover title="Chris Morton" subtitle="Co-Founder & Chief Executive, Lyst" img="uploads/media/header_image/0001/08/9afe05c9dc97b1e5e65cbf3210e2c78c98acc22c.jpeg" content="Before co-founding the fashion curation engine, he was an investor in consumer internet companies.">Chris Morton</a> is CEO and founder of e-commerce platform <a href="/lyst" class="kws_link bof-track imp clk profile_id_1428" data-e="profile.link" data-id="1428" profile-popover title="Lyst" subtitle="London, United Kingdom" img="uploads/media/bof_company_logo/0001/07/3a23a5bb647541481087459706792bc2d9bac458.jpeg" content="Fashion's favourite way to shop - Lyst brings the greatest brands and stores together to create your world of fashion.">Lyst</a>.
The views expressed in Op-Ed pieces are those of the author and do not necessarily reflect the views of <a class="kws_link bof-track imp clk" style="font-weight: bold; color: #000000;" href="http://www.businessoffashion.com/the-business-of-fashion" target="_blank" data-e="profile.link" data-id="1161">The Business of Fashion</a>.