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Let’s take a look at the overall Online Retail Market Revenue & Growth Rate:
One of the main segents of E-Commerce that is prime for disruption is Apparel & Fashion. Historically (i.e. before 10 years ago), if a fashion-savvy teenager wanted to purchase an item from Abercrombie & Fitch & there wasn't one located in the local mall - there were two options: 1. purchase via mail order catalog or 2. wait until they took a vacation to a location that had an Abercrombie retail store. The web ostensibly flattened the playing field by enabling anyone in the contiguous US to purchase any item from an online retailer. This article is going to focus on fashion and brands driving the next waves of innovation in E-Commerce:
Rationale for Focusing on Fashion & Brands Driving of the Next Waves of Innovation in E-Commerce Social Facilitated the Generation of Economies of Scale of Users: Prior to '07, it was inordinately challenging to generate sufficient online traffic for most E-Commerce startups, brands, and online retailers in general. In order to generate traffic, an online retailer had to build significant customer mindshare, to even have, the customer "think" to go to their website to check out a brand or product & make significant investments to put online retailers in the workflow process of the user (i.e. sending an email with product information relevant to the users). In addition, the technology, required to power these systems, was expensive, specialized, and young/immature. Over the past 5-years, we have seen 850m+ people join Facebook, a massive boom in tech startups building & refining solutions for workflow process problems (i.e. email marketing), and a drastic reduction in the cost of implementing these solutions. Hence in 2011, the process to generate significant audiences and thereby acquire new customers is much easier. As such, E-Commerce is one of the pillars to building a modern brand & a significant monetization tool for consumer web products.
In Q3 '11: Online Sales up 13.1% (to $36.3b from $32.1) 22% Increase in the # of buyers in the marketplace (diffusion & tech. assimilation) 74% of ALL web users made a purchase online in Q3 '11 Powerful Relationship between Individual & Product - One of the most important aspects of fashion is that it is a highly emotional experience for purchasers of the products & the payoff of it’s use. Humans are inherently social animals & have a powerful desire to be accepted by the herd (i.e. social & professional networks) - thereby, your choice of what you wear is a direct reflection of who you are as an individual (or how you want to be perceived as a member of the herd). Over several hundred thousand years of evolution, humans have learned to draw immensely on visual cues as a means of assessing character risk about the people we interact with &, therefore, leveraging apparel as a means of establishing an individual's “similar to me” visual references (i.e. if I wear tight pants + gingham check collard shirt = SOMA startup hipster). Fashion is one of the main external manifestations of whom we are as individuals and serves as the impetus for visual feedback to observer about our personalities. Recognizable Transition - The purchasing of apparel online represents a systemic behavioral change from the old way of doing things (i.e. purchasing apparel from a limited assortment at a physical retail location). Everyone pretty much associates purchasing of apparel with physicality of being in a store, engaging in an economic transaction (i.e. purchasing product), and immediate satiation of the desire to purchase (i.e. walking out of the store with the product in hand). We were able to try on clothing prior to purchasing and we received immediate satisfaction from the transaction (we walked out with the product immediately following the conclusion of the transaction). Thereby, purchasing online separates the transaction from the satiation of the desire (i.e. the impetus for engaging in an economic transaction). Direct Communication - Brands have embraced the web & social media with voracious enthusiasm. Before the social revolution, brands had a tertiary relationship with the customer, whereby the customer had dealt with the retailer & the brand served as the product of the retailer. If the customer loved the brand, the retailer received the customers goodwill/happiness as the provider of the garment (versus the brand as the producer of the product - it's a level of abstraction away from a direct relationship between product & consumer). The retailer controlled the relationship and therefore is the recipient of the customer's projected satisfaction or enjoyment of the product (as opposed to the brand that created the product). Social media transformed the ability of a brand to communicate with their target demographic - from a proxy relationship (brand -> retailer -> customer) to a direct relationship (brand -> customer -> retailer). Strategic Focus on Building E-Commerce - More so than most other areas of consumer products (aside from books, music, & video), brands have started to strategically focus on building their direct business with customers. Currently, direct business (brands selling product directly to the customer (via it’s website) has been an ancillary consideration to most brands (i.e. the direct business took the back seat to wholesale (Major retailers like Nordstrom & Bloomingdales). A couple of reasons behind this are: Lack of Experience - One of the main reasons for this was that it was E-Commerce was relatively new and most CEOs didn’t have enough direct experience to champion investments in E-Commerce as a strategic priority. Based on this inexperience with this channel as a significant revenue driver, most CEOs have not devoted significant financial resources to cultivating this revenue channel. Conversely, the maybe stymied from investments in E-Commerce in the '04 - '05 boom that didn't generate miracle returns (that's a combination timing (just too early), technology assimilation (pre-Facebook & Pre-iPhone), and artificial macroeconomic growth incorrectly supporting dying business models).
Let's take a look at how this can impact margin.Signs that tell you that this trend is in motion: • Since Facebook Fan Pages/Like pages were introduced. most brands finally “get it” & have made building their direct businesses as a core new growth opportunity. In an effort to understand where the next waves are going to be.e.e. the ability to harness a direct dialogue and engage the customer in a long term relationship (through the massive adoption of social media) means that this represents a huge opportunity for most brands. it’s the current wave . the Brand’s website (and subsequently the ECommerce business) had insufficient traffic to signal an area of material concern.leveraging online tools to craft a relationship with customers that facilitates & fosters dialogue and aspirational affinity for the brand (99% of brands are aspirational in one form or another regardless of the market segment). with the huge cost pressures that fashion is under fire from (See Secondary themes) along with retail pricing pressure .brands are turning to the 6570% margins from their direct businesses as a huge opportunity. In addition. Fashion Brands were socializing their marketing efforts to facilitate E-Commerce (i. engaging in a direct relationship with a brand required a fairly substantive investment on behalf of the customer to find the brand. we need to understand the current waves that are driving the market. Nordstrom) and was accustom to. ================= ========================================= Three Forces that are Fueling Future Innovation ========================================================== Fashion is also the industry that leads tech trends in terms of marketing & branding .anything that basically promotes a user action). and meta-tagged as going to that retailer for the brand. Supporting the previously mentioned Direct Communication trend. reading a news article) to interactive engagement (commenting or sharing .Prior to the social media revolution. 1. the customer associated a brand with a particular retailer (i.Inability to Gain Considerable Audiences .that is driving the current wave of E-Commerce 2. Social (primarily Facebook) transformed web behavior (in the aggregate) from receivers of information (i. comfortable with. After years of languishing in the single-digits. Social is hands down one of the most significant influencers of the next wave of E-Commerce .0. Therefore.e. Furthermore. As incredibly important & transformative as Social is. . “Check out our new collection”).
We are in the early adopter stage of this trends evolution .so that means this trend (by 2016) will be in motion for 10 yrs. When a brand makes the decision to market itself purely on price (i. over the past two years. but it is forecasted to represent ~5% of Online Retail’s revenue in 2015 . HauteLook) conditioned the customer to trade cost savings for product delivery. By virtue of focusing on the price.and that’s after ~10 years! (let’s say that the social trend really kicks off in ‘06 when Facebook is released to a wider audience .$14B is fairly muted when compared to overall theme). Forrester Research predicted that Social Commerce would reach $14b by 2015.Competing on price is one of the most challenging positioning decisions in business.The most incredible development in E-Commerce was that Private Sales sites (al la Gilt Groupe. Before this.it’s new. it’s a current trend in motion. purchase these items at 50% discounts). For example. Think about Google was after 10 years and the contribution they made to Online Sales development over the period .it’s just something that is a logical extension of the technology. but it’s definitely not the “next” wave.it's happening now. Price is a Deadly Value Proposition . Zappos was setting the expectation of Free Shipping & Gilt Groupe (primarily) fundamentally transformed this expectation. has been quickly commoditized with 100s of players jumping into the space. This trend truly represents a wave because of it’s voracious growth over the past 4 years and subsequent crashing of this industry as a business model as 100s of competitors have ostensibly commoditized the industry out of existence. Plndr. then there is no place to go but down (citation Wal-Mart stalled growth as prices have continued to increase). . 2.and major retailers are currently running major campaigns around informing the Retailer's Facebook followers about the channel and developing the revenue channel Startups are currently being built around Facebook Commerce (Social) Commerce. ranging from white label stores (al la Payvment) to analytics (al la AddShoppers) . you are inherently devaluing the product the Private Sales Site is purveying. • This isn’t really a new wave or an innovation . Granted.an ecosystem rising around trends supports it's current position in the product lifecycle and state of diffusion . The retailer is in a falling knife market environment that is extremely challenging to navigate and almost always ends up in a bad place. Private Sales are a glorified email marketing fad that exploded onto the retail landscape and.• Retailers like ASOS. Rue La La. Private Sale Sites and their corresponding incredible growth rates have imbued some profound developments in the marketplace: Time Value of Economic Value . JackThreads. et al have Facebook Shops open .e. Urban Outfitters.
So stay tuned to a lot more on this front. Let's take a look atForrester's estimate: .] 3.I am writing a follow-up about the industry and the state of the game . • M-Commerce .on the go (away from their desk/laptop) The smartphone revolution championed a new world of the internet as a physical manifestation of the digital world (al la foursquare led by the brilliant work of the laudable Tristan Walker).consumers began interacting with the web in a fundamentally new way .but more on this later) . Mobile / Location is one of the most powerful tsunami’s that was introduced in the marketplace in ‘07. 90% of the time this is going to be a Private Label play that will support a blended margin near the levels of those Gilt enjoyed when it still held it's first mover advantages. Forrester Research predicts that M-Commerce will grow to $31 Billion over the next 5 years in the US thereby doubling Social Commerce.The Pivot Out of Deals .a new interaction with the “on the go” lifestyle of most consumers to earn rewards and receive discounts based on the interaction of the real world and the digital world. The pervasive adoption of smartphones (lead by theiPhone's introduction in ‘07) . [NOTE: To update & expand my most successful Quora article(Matthew Carroll's answer to Gilt Groupe: How does Gilt's business model work?) . There are two major factors to this wave: • Check-ins .(Mobile Commerce) was an entirely new genre of E-Commerce whereby a user is enabled to purchase products regardless of geographic proximity to a computer.something that all of the Private Sales players need to figure out their pivot out of the deadly margin game.Gilt Groupe has been the only player to being the transition (pivot) out of pure Daily Deals (into Park & Bond .
Made in USA will become increasingly important (as it was for 150 yrs prior to 1950s. • Collapse of Inexpensive Foreign Goods & Increasing Input Costs . the US is strongly positioned to champion a manufacturing boom over the next 5 -7 years (pretty much all the good t-shirt & jeans factories in LA are at full capacity. Let's take a look at how they predict the next 5 years will evolve: This wave of E-Commerce where an individual's physical location facilitates purchasing of goods or services in three main forms: • Purchase Online & Pick-up in Store • • Geographically Targeted Discounts Mobile Check-Ins for Loyalty Points & Discounts However. when it's a wave that's already in motion) by 2016.With rising Chinese RMB and a depreciating US Dollar. Some of the most salient secondary themes are: • Experiential Development of Web Users . when we GDP per capita (PPP) rapidly appreciated).The era of cheap manufacturing is quickly dying with 20% YoY wage inflation in China compounded by BRIC's ascension into the middle class. nearly double their forecast for Social Commerce (Hence why I am not very big on it becoming the Next Wave. . Tertiary Trends [Note: There are some fairly profound secondary / tertiary trends that support my position on the next waves of innovation. the Mobile / Location wave is currently underway diffusing in through the marketplace and does not represent the “next wave”. but these will be discussed in a later post.Forrester Research estimates that M-Commerce will grow into $31b industry. like Social. • Rise of US Manufacturing .as people gain more experience with the internet. they will become more competent and willing to more fully integrate E-Commerce into new aspects of the their lives. Competition for input commodities in all products will systemically change how we all purchase goods & services.
Retailers Driving Content Creation: I first noticed this at the beginning of the year with a Carnival Cruise Web Commercial about a family on a holiday. Netflix. the consumption medium has been set and the next waves will not be an entirely new means of interacting with or engaging in E-Commerce .it is a major theme that could enable the US to realize something similar to what we are seeing with Germany's GDP in Early . The next wave of E-Commerce will be services that fundamentally leverage the massive data sets in conjunction with expert curation . the next waves of innovation will be built upon these three trends. Smaller E-Commerce Fashion Sites should be focusing on a deeper. a labor force (look at what happened to Alabama's tomato crop after the immigration legislation). Private Label: I have a REALLY long post on Private Label and why it's becoming a critical aspect of the Revenue Development of a Fashion Brand.thereby leveraging the power of the subscription . [More on this later (when I flush it out more but it's pretty interesting). In addition.the order is fairly arbitrary 1.but more on this later. Therefore. This next wave of innovation will involve the connection of various data sources into a central platform that delivers more insight into the product selection.] 2. & merchandising process. recommendation of products pretty much sucks. These tertiary themes will be discussed in excruciating detail in a subsequent post . Subscription as a Business Model: The first time that I really noticed subscription gaining product/market fit (in online fashion) was ShoeDazzle.These three trends lay the foundation for the next waves (all of which would not be possible without at least 1 of these trends.Mid 2011.Although this trend is in its infancy & has considerable hurdles (lack of vertical supply chain. In addition. and infrastructure) to overcome . is only moderately insightful. for purposes of looking forward. tonight I read about Karmaloop (a street ECommerce player that I reference a lot in my posts) having users upload vids to create a new web series. procurement. but have failed to see an implementation of recommendation algorithms on a product basis (although Hunch is getting pretty close) that present a substantively compelling recommendation that compelled me to purchase a product. Amazon Recommendation Engine is useless (maybe it’s just my experience .most of the time they are not even being connected. There are three salient aspects of this model: Leveraging of Data: Online Retailers of all shapes and sizes have vast treasure troves of data that are currently not fully being employed . more personal relationship with the customer . Curated Personal Style Subscription Over the past 6-years social and E-Commerce have evolved into a way of life for the vast majority of internet users. However. 1.to drive purchases by introducing the product to the customer that presents a clear value proposition.I’ll update with links] Summary .the next waves of innovation will be within the same context (web-based & mobile).but every single recommended item I have either purchased or a competing product that I have decided against purchasing) & the best in the business. There are two really important themes that are necessarily Innovations in E-Commerce right now. For example. ========================================================== Three Waves of Innovation in E-Commerce ========================================================== All three of these trends are fairly independent . I am fairly well versed in machine learning & NLP. I would go so far as to say that it's going to be one of the main pillars of brand strategy over the next 10 years .
their scale is an inherent weakness to the personalized approach that a curated personal stylist subscription model could offer for men. The majors like Mr. this evolution was not possible until probably 2011.Mr.Buy the Look . So I have added a full business model with screenshots & financials to showcase what a curated fashion site would look like.The Look & The Story). for example.no one has fundamentally implemented this process into a product.most of you know how I really hate it when authors give copy-blogger generics to shorten the post . The ability to transform actionable analytical insights into demand-responsive product compositions presents the core strategic value proposition for fast fashion & the driving factor that will revolutionize the industry as a whole (we are moving to a whole new level above the prompts “innovation” mandate). Why is this the next wave: People Want Cool Stuff: The web will progressively become more individualized as users find their niche. Porter. Tech. However. Analytical Demand Signaling & Planning Fast Fashion (Zara & H&M) has fundamentally revolutionized the fashion-industry by upending the traditional “seasonal” approach* for retail primarily through their analytics driving a modern. these major players are positioning themselves to compete with the Bloomingdale’s of the world with expensive items . Enjoy! Feedback. Expert Curation --> Personalization: As I mentioned before. As you’ll see in the startup model. the relationship is paramount in delivering a subscription fashion service. Here’s the real kicker . pure algorithmic recommendations suck . The Social Web needed to mature (and an ecosystem built on top of it). However. This wave fully embraces this trend and delivers a service to monetize the relationship. Porter. There has been loads published in the last 6 months about the coming revolution in Men’s fashion ECommerce into style curation (a la StyleBop . and discover new ideas/products/art etc. In addition. and the analytical environment to build a better web needed to mature as developers tailored their offering into the appropriate Product/Market Fit. It is well understood that men purchase fashion very differently than women and want to buy style that is “put together” or curated (Man Shops Net . Personal Relationship: The web will become increasingly personal and E-Commerce must respond to deliver products and services that feel like they are “made for the user”. Gilt Man. form new relationship. users needed to mature and gain more experience (and sophistication) with the web and interacting with it (versus being receivers of the web al la Web 1. ========================================================== FULL Startup Business Model Analysis at the end of this overview . has most of their items at $500+ and there is a huge market for everyone else who simply doesn’t have this kind of disposable income to spend on fashion.then I don't believe that anything is ready for prime time. and Funding (al la me!) available if you are so inclined ========================================================== 2. This transformation is akin to Toyota kaizen (along with the other Asian car manufacturers) that reshaped the automobile landscape in the United States where foreign manufacturers wiped the floor with it’s US competitors. Thus. Vertically-integrated. . Comments. and ShopBop have jumped way out in front with editorialized content. and what the potential revenue would look like.WSJ).and Mr Porter. Maturity & Sophistication: To a certain extent. how it could be implemented. if done correctly.com . Flaming. Open.0).or textbook over-simplifications that don’t really articulate the complexity of the real world. these algorithms could focus the selection criteria. making the work of a stylist / expert easier and more efficient. vertically integrated manufacturing beast.I mean if Amazon's "you would also like" can't produce a decent recommendation so save it's life .model to deliver more product and round out their cash flow cycle.
There must be standardization for the implementation and utilization of demand signals. Layout the How the Solution Works. but having every E-Commerce site build out their own functionality is ridiculous. This is the same thing with proprietary demand signaling products like wants / likes as a proxy for understanding market & audience. I completely understand the need to begin to harness demand signals based on analytics. In an effort to fully investigate this wave. By retailers controlling this data today inhibits brands (vendors to the retailers) from delivering products that maximize the retailer's merchandise offering.the company is evil and can't put something like this together that will actually benefit other companies businesses. the only company positioned to do this is Amazon . this information needs to be distributed to all stakeholders. The current information asymmetries heavily rely on buyers (who let's face it REALLY aren't factoring customer mindshare. COME ON . There is an emerging trend for each E-Commerce site to try and harvest their own proprietary "demand signals" based on like / want data. • • Define the push factors & technical developments that will foster in the next wave of ECommerce.buyers are buying in their overall patterns for the category as a whole). What makes this ridiculous is that no one player has sufficient scale to truly capitalize on these data points to make constructive decisions.do you REALLY think that they would do anything that presents monetary value to other stakeholders? When you take a look around the internets.but it has to be an open standard that: What Does this Innovation Look Like? Distributed System . the brands level of diffusion. The one retailer in the space that I have MAD respect for is Amazon's Vendor Central. Bluefly similarly with a "Want" feature. Individual players in the space are all trying to go it alone . Brands have been significantly inhibited for maximizing revenue & being a true partner in delivering the best product in the correct quantities to the retailer by virtue of the disconnect (and often discord) between the two player. but it still needs a lot of work . production quantities for products.It's Facebook they won't even let the users of their products have their data . or the individual factors of the brand .The traditional way does not work and is ever increasingly augmented by the under-performance of traditional “seasonal” firms and out-performance by those fast fashion market leaders. centralizes and then distributes it to all the stakeholders . Amazon has their yellow "like" button. therefore. In addition. Please don't suggest that Facebook Like Button solves this . They are definitely leading the charge. Bonobos has their new "Want" feature. Traditionally. In the traditional retail model.This wave will be about massive distribution of a service that harnesses demand. For example.to flatten data communication and leverage all parties working together. retailers guard sales data and statistics about product performance. brands have not had access to the retail performance data and have been forced to proxy methods for estimating demand &.which never results in a favorable outcome in the aggregate. we need: • Understand the background as to how industry norms were established as a means to illustrate how disruptive Fast Fashion is.
-------------------------------------------------------------------------------------------3.Vertical Integration .Why Software is Eating the World).** Now as the incredible technical developments of the web gave rise to Amazon EC2.e. Integrated into workflows .Spring/Summer & Fall/Winter.bnet.) Urban Outfitters Prepares to Grow Online .000. Zappos has 312 Men’s Footwear brands ALONE and Walmart has something in the order of 50.Internet Retailer http://www.. /iPhone controlled Apple AppStore for quality . The demand signaling product should push to Google Analytics (the fairly universal tool that everyone uses. better financed. The way that this tool is going to create value is by making data widely available and located in a place where people can actually see it & use it. For example.com/blog/retail-. This is a big limitation of Bitly in the fact that they aren't making data analysis easy for me by controlling my analytics within their product ... This is ostensibly the same thing that is still happening in Online Retail & retail in general.pushing development to take on the “Man”. Infrastructure as a Service . Although the 2011 prevailing tech theory revolves around Apple Inc. Macys Breaks Ground on Fulfillment Center in WV . The world before Amazon EC2. In order to compete with larger. .This wave embraces the spirit of the internet .http://buswk. tech startups were forced to engage in a massive CapEx build out. Now these retailers have hundreds (and in some cases thousands) of different brands. * The “traditional seasonal” approach is where product available for purchase at retail (i.co/nhJ7dz & (B-Net Article http://www.don't make me log into another dashboard. easily implemented solution for the brands that the retailers sell..10 yrs.. There needs to be a scalable.this simply won’t exist in the web as a whole for the better part of 8 .internetretailer.internetretailer. even if they have more advanced analytics tools).(http://www. An article that beautifully illustrates this is Marc Andreessen’s Wall Street Journal OpEd . The Major’s are building out the infrastructure: Walmart Takes over Supplier Logistics .com/. and highly efficient teams . the huge growth ofE-Commerce will push the backend infrastructure to innovate.The Missing Link This gilded age of the consumer/mobile web has it roots in the commoditization of technical infrastructure that Amazon championed stemming from their CapEx investments from the early/mid-00s (what ultimately becomes Amazon EC2 through Amazon's excess server capacity). what you see at the stores) is produced in two main production cycles .I'll use your product more if you give me the data to put to work.. Retailers need to communicate better with suppliers to maximize capitalizing on demand based on supply-based opportunities & brands need to leverage marketing & promotion to drive the retail & brand businesses together.the web needs to pull partners together and build a better ecosystem.com/.Internet Retailer .
then this could be in the innovation that the industry desperately needs.in every city there are 3PL (third-party logistics) warehouses that will store.W00T!). There needs to be a player that delivers order fulfillment & inventory management (remember we already established how much larger E-Commerce is going to become) in a capacity that enables leveraging of economies of scale through services only an aggregated player can provide.Think about how beautiful Amazon EC2 load balances and effectively responds to traffic spikes. but it’s not dialed and it’s pretty expensive. Amazon Fulfillment Services (Fulfillment By Amazon (Amazon FBA) . It also is extremely easy to implement . . but all things considered it’s a good start. the entire ecosystem derives cost efficiencies from scale. They need to drop prices considerably and flush out their model. and opening 4 more (as of the week of Sept. 2. Shipwire Fulfillment . Here is what the solution to this wave will look like: Load Balancing Inventory Between Warehouses: By virtue of clarity in the demand signals. the new service can shift inventory from Warehouse A to Warehouse B (that’s located closer to the demand source) to drive cost efficiencies. The killer part about this is that there is already the physical infrastructure built . Long Haul Injection Shipping: The main profit center for United Parcel Service & FedEx is the volume of packages driven to any one location on any given day that allows them to combine hundreds of shipments into one large container. With Amazon operating 13 Fulfillment facilities in the US. If the server infrastructure buildout of the early 00s is emblematic of Amazon's future fulfillment capabilities in 5 years.Amazon is currently operating a fulfillment service. Although they are small and relatively new. By virtue of aggregating hundreds of brands and coordinating the logistics.Shipwire is a specialized E-Commerce Fulfillment company that lead the industry in formalizing a pricing structure & delivering 3rd party logistics services as a service. 12 Amazon made in-roads to opening fulfillment facilities in CA . However.even a pretty JV coder like me can get an instance up and running without much fuss. they are hands down one of the market leaders in the space and on the right track. they don’t solve the critical aspect of inventory management. Now there are two main players that kinda do this: 1. pick-n-pack your orders.
26 BILLION in CapEx for these 30 new planes .wsj. 2011 • ~10.the math & algorithmic complexity of conquering something like is perfectly geared for Google .6 million shipments shipped on Dec 17.com/tkRuAl ========================================================== Wave 1: Deep Dive Investigation into Curation ========================================================== [Note: I want to define a couple of terms so we are all playing on the same level .wsj. 2006 Source: http://on.Great Clarity into the Supply Chain: A system like this will reinforce Wave 2 in that all players will better understand where their supply is and how to structure product promotion strategies accordingly. 2010 • 12 million shipments on Dec 15.26%+ in shipment volume in 2011 from 2010 • 15.6 million shipments on Dec 16.here are some definitions that I am going to use: • Demonstrates the strategic priority of E-Commerce Illustrates market opportunity for new players with the resources and strategic alignment to get into the industry This problem is 'insanely' logistically complex . Social Proof: Here are some recent developments that support this becoming a major wave: Google Targets Amazon's 'Prime' with 1-Day Delivery .co/uGfXMg) $5.http://on.com/tvrhbq • • • • FedEx Said to Plan Order of 30 Wide-Body Boeing Freighters (http://buswk. 2008 • 10.FedEx is a finance wiz and would not take a major order on like this if it did not forecast an even larger increase in volume • 17 million packages will be shipped on Dec 12.
To get an idea of their scale: Independents: These are the Online Retail / Fashion sites that are primarily focused on being boutiques -> they mainly sell the new. Back in the mid-00s the Major’s were still riding high on engendered brand positions & established customer mindshare (from the last 40 years of evolution . Portable & Effective Data Extraction Best Suited for the Smaller Players Traditionally speaking. The main players in this space are RevolveClothing.thereby commoditizing their entire retail segment by virtue of growth aspirations fueling homogenization (and thereby progressively destroying value proposition. (WSJ . most independent online fashion sites are falling victim to this same trend (that Major Department stores did in the mid-00s . and were in the same locations . or Karmaloop) compete with the Majors (Nordstrom. During the Mid-00s consumption boom . et al) were facing a problem . .e.commoditized product offering). high-end consumer fashion. Surprisingly.e. Bloomingdales. Bloomingdales.com.http://on. Saks Fifth Avenue.. etc) 2.Majors: The 800lb gorillas in Fashion E-Commerce like Nordstrom Bloomingdales (Macys). only just maturing with the internet. focused on Jack Welch-Style Efficiencies & Synergies (like cutting customer service to increase profitability . Macys.com/article/SB1000142. Net-a-Porter) .) Currently. not when it comes to High Fashion like Zegna.Penny Introduces New Weaves of http://wsj. Simply put .com. boutiques were a place that the shop owner knew who you were and was “the fashion expert” that provided some value add services (being in the know and having a relationship with the customer to make recommendations about purchases).com/nC98ZM. and Karmaloop Here are the push factors to why this trend will emerge: 1.com or Tobi.offering the same brands and pretty much the same prices.they all sold +/the same brands. Net-A-Porter. JCPenny is leading the charge through a fast fashion boutique approach with their Mango partnership. most fashion E-Commerce sites are in direct competition with the majors .com.Urban Outfitters. The Independents’ (RevolveClothing. still primarily held a mental association that “I go to Nordstrom to buy nice Clothes:). Gucci.customers. In the same manner. Low Competitive Advantage in Product Offering In the mid-late-00s the Majors (i.they have VERY similar product offerings in the consumer fashion space (i. Loutboutin.the Majors all sold the same brands.. eModa (even though they suck and don’t pay their bills). and ultimately destroyed any discernible value proposition that enabled them to be price setters in the industry. at the same price level.they had better product in the right places & the Macys and the Bloomingdales of the world could not compete (and arguably are still only in 2011 beginning to achieve substantive market progress in response to the massive changes in the macro-retail environment.wsj. Most of these Major retailers simply didn’t understand the true threat that Zara & H&M posed to their core businesses instantaneously responding to demand signals that delivers product in the emerging trend and at sufficient quantities that the customers wants. Tobi.
they major fashion sites will simply copy your strategy.to be more effective at reaching them” .The big boys have crazy.use this to your advantage.The Independent Players won’t have the ad-buying budgets. highly specialized Pay Per Click or data analysis staff.000s . Buying Traffic Sucks! Play to your Strengths . or advanced tools to win against the big boys. . .Google AdWords drives significant traffic to the fashion retailers & the smaller guys simply don’t have the financial resources to compete. Even if you do have some of it. 5 “stylists” (who are most likely already on the team as customer service reps) would add build out profiles for each customer • It would take 5-mins a day & be a rather fun exercise for customer service (who have the most customer insights about people) to say “hey we need your help in building out “who you “think” these customers are .Leverage your small scale to have a direct communication strategy that emotionally connects consumers to the E-Commerce channel. For Example. a smaller player has the considerable strength of: • Over the course of 1 month. The smaller chains have the luxury of dealing with 000s of visitors/orders/customers versus the majors like Nordies that has 000. In addition.E-Commerce has exploded in the last 5-6 years as the process matured and more people have experience with it.Just think about it . advanced tools. . some of Internet Retailers most recent estimates have paid Search Taking up a significant portion of ad budgets: 4. like Marin Software’s Pay Per Click Management Solution.The advantage of E-Commerce is the ability to emotionally engage your customer base by virtue of your smaller scale . For example. . Understand Your Position & Embrace Strengths to Maximize Value Proposition .trying to effectively segment an email list to 1m people (like let’s say Nordstrom's) versus an smaller competitor who is segmenting a 4k email list is completely different.it’s a lot easier to apply qualitative customers insights that fosters your customer development strategy 3. they have the staff & the tools to blow the little guys out of the water.
They are contributing insights that value a different range of a traditional customer service’s skill sets.Once you have built customer profiles over a couple of months.This model employs a Subscription basis to realize the monthly benefits of recurring revenue from customers as compensation for the costs incurred for stylists time & energy. it would exist on top ofRevolveClothing.com (JYS) is a placeholder name for this prospective business model analysis that flushes out the personalization concept for E-Commerce next wave of innovation.com or Tobi. This is something .The big boys have xx millions of visitors per month & trying to add customer insights requires such a significant investment that it’s really not possible at scale . Summary Just-Your-Style should embrace that boutique/niche position and offer a subscription fashion model for men that replicates a stylist at a local boutique making recommendations for a guy about what to buy. the Men’s aspect of Just-Your-Style has been an opportunity that Just-Your-Style has not completely dialed in. you can have more insights about how to segment an email list to effectively engage & communicate with your customers. This company is intended to be built as a new business line to the 100s of fashion sites out there so for example. Thereby (according to Herzberg’s Hygeniene Principles) will lead to greater job satisfaction & productivity (good for org.As a smaller player you are at a significant advantage to have substantive insights that drive profound impacts on your product offering.Just-Your-Style is a boutique and this model needs to begin at it’s core with a personal interactions between the Just-Your-Style Stylist and the Subscriber. It doesn’t make sense for Just-Your-Style to invest an incredible amount of resources into styling users without them coming back . that I have a personal vendetta against the “big boys” and believe that they scale inherently their ability to innovate. culture!) .Just-Your-Style =========================================================== This is what I see Personalization site / Product line Looking Like: Just-Your-Style Men’s Fashion Subscription Investigation & Analysis Just-Your-Style. we are now just applying that past time to building profiles that will help the company more effectively target customers This approach also engages the EEs of the independents in a new capacity . Just-Your-Style was one of the first fashion E-Commerce sites to fundamentally embrace the boutique atmosphere on the web through the “stylist approach” to fashion E-Commerce. The Big Boys in Online Retail Are Swamped in Data .Many of you know. Here are some of the main goals/aspects for the products design/development: 1. Based on a couple of brief conversations.com or an application of Net-A-Porters Predictive Algorithm. Personally Selected Items . 5. =========================================================== The Startup Model .• • Everyone loves to people watch. .
Utilizing the subscription business as representative samples for the demographic & style preferences of the overall men’s business at Just- . make suggestions. Having a stylist to think about the wardrobe.com). on the simple mock-up on the next page .e.This subscription business line will enable Just-Your-Style to grab deep customer insight that can be directly applied to the main business. Porter & Gilt can’t do . Google &Boutiques.Clicking on the image of a shirt should lock in the selection for the subscriber’s monthly shipment 3.The subscriber is making a trade off when they sign up for this product “I (subscriber) will give you my monthly budget for apparel in return you make me look good without me having to think about it.they simply have too many customers to be able to fundamentally implement a project based on personality like this! Every time fashion is attempted to be recommended programmatically at scale .” A product like this should understand that the guy is not going to log-in otherwise.it consistently fails (i. & engage with the subscribers creates a compelling competitive advantage that will emotionally lock in subscribers 2. For example. Integrated Workflows . they would be making purchasing decisions for themselves. Emails that prompt the subscriber to complete explicit actions should be key. Customer Insight .that the larger players like Mr.
com.Your-Style. Value Proposition for Just-Your-Style .
Markdown Planning (Profit Optimization) I have received 4 emails in the last two weeks from Just-Your-Style about the “Summer Sale” that you guys are pushing pretty hard. A subscription model enables the financial stability provided by the benefits of predictable shipping cycles for lean inventory management 4.1. With this model you can direct inventory that you might be getting long on to their most effective source for acquisition & enjoyment by Just-Your-Style subscribers -only through the deep customer insights that this business generates can allocation & planning optimization be done dynamically as part of the standard workflow process of the company. One of the biggest problems of End-of-Season / Closeout Sales is letting the people know that these markdown items that they would want are available. but mainly as the purveyor of the item that the potential customer was searching for. Example Pricing Structure . Buying Traffic Sucks . In addition. Fashion E-Commerce has become fairly commoditized over the last two years and a great purchasing experience does not carry the same weight as it did 3 or 4 years ago when Zappos was King . 3. Cash Flow Stability A monthly subscription models creates a fairly consistent source of income for Just-Your-Style that is less volatile than strictly relying on Email & Inbound traffic generation. the predictability of shipments means that out-of-stock items can be secured (reducing the opportunity costs of lost sales) weeks in advance and under-performing inventory has a new life to be appropriated to the right customer.now everyone has free shipping & easy returns.A More Effective Revenue Generation Tool Buying traffic through AdWords is an expensive proposition that turns markets the Just-Your-Style. Revenue 2. This subscription model enables you to target people whose taste preferences are best suited for the particular inventory.a virtual boutique that understands the customer & is committed to filling out the whole closet. A stylist-based subscription model builds on the core competencies of Just-Your-Style and can be leveraged into a distinct value proposition .
then it is carried over to the next month as a credit OR used to credit the Complimentary Good that is shipped with every order The Up-Sell Model .If the monthly $ value of the shipped item is below the Monthly Subscription Price. In addition. The “Wear it with” items are specifically chosen to be paired with a piece from the current month’s shipment or from the previous month’s (As the service gets off the ground. Subscription Item Complementary Item Jeans → Collard Shirt T-Shirt → Jeans Collard Shirt → Jeans Collard Shirt → Jacket or Outwear Jacket → Collard Shirt 3 Days after the Shipment Arrives. they are going to keep the “Wear it with” complementary item.Notes: . the subscriber receives an email to lock in the order and provide feedback on the .guys are lazy and (I’m willing to make a big bet) the overwhelming majority of the time. How it Works: Every Month the subscriber is sent something that the Just-Your-Style Stylist believes will fill out their profile. the subscriber should be sent an additional item that complements the Subscription Items per their “Level”. an item is selected that “looks good” or complements the subscribed item. the “Wear it with” item should specifically take into account items that the subscriber says are his “all-time favorites”) Here is the beauty of the model .Every Month Receive a “Wear it With” Item with the Shipment Every month. For example.
Zappos experienced a return rate of 37% in 2010 or $374m . Just-Your-Style sends an email to the customer requesting that they rate the complementary item. Subscribed Item Rate It Automatically builds out your customer returns How Did it Fit Add a 3 aspects (like Google is doing with Google Places) Keep It Authorizes Just-Your-Style to charge the subscribers CC for the subscriber price Return it Creates a shipping label & Feedback box for rasons 2. As a direct result of this program.however.items. Complementary Item Rate It Automatically builds out your customer returns How Did it Fit Add a 3 aspects (like Google is doing with Google Places) Keep It Authorizes Just-Your-Style to charge the subscribers CC for the subscriber price Return it Creates a shipping label & Feedback box for reasons Returns: One of the most successful E-Commerce startups of the last 5 years was Zappos . the consumer was incentivize to purchase two items with almost zero risk for the purchaser. customer’s loved the . Feedback & Improvement When the item is delivered.whose free shipping & free returns systemically changed the industry. There are three elements that should be included in this email: 1. By virtue of employing these two policies.
if Just-Your-Style gets these complementary goods “right” over a couple of months. JustYour-Style grabs an incredible new piece of information.as a guy. Discount Market the fact that by virtue of being a subscriber they got this 2nd item at a reduced rate . show a picture of a cute girl introducing herself as his stylist & why she thinks that he will look good in these choices . have people take photos of the stuff that they like on a daily basis (or as they wear them). This also creates a sense of connection and social contract between the subscriber & Just-YourStyle . I can tell you that I will wear whatever a hot girl says that I look good in. .Additionally setup a forwarding email address so that people can forward email order confirmations for the items that are purchased online. Encourage the Subscriber to Photograph the Himself with the Return If the subscriber elects to return the item.The solution to this is easy. On-boarding Process 1.Example trends: Americana Urban Sophisticate Euro-60s Summer Sendagaya-Hipster 2. time consuming. and hardwork. then he should be prompted to take a picture with his phone to show Just-Your-Style what he didn’t like (Also. then a significant level of trust and goodwill will be harvested between the subscriber and Just-Your-Style 2. Select a number that broadly defines where you think your style lies 3. building out the wardrobe of a person is going to be shitty.you increase the probability that the subscriber will keep the item simply because it’s a good deal 3. there are several ways to ideas 1. Sending a complementary good that the customer did not specifically purchase does present significant risks in this model. . Select the number that broadly defines where you want your style to be 4. Building Out the Closet . Select the Looks that you could see yourself . (much like expensify).fact that they got to try before they buy. the “take a photo” to return should be incentivized because the subscriber is having to do extra work & Just-Your-Style is extracting value out of it). However. Guys are Suckers for Hot Girls Approvals On the packing slip.Stealing a page from Expensify. Style Image of What you Would Like to Dress Like Goal: Have the subscriber qualitatively select the trend that they “want” to dress like Defines: Defines the major trend that will be used to make recommendations . build a web app. a visual idea of what the customer looks like making the stylists job easier next shipment.
it implies certain aspects helpful for style recommendations . it’s incredibly useful for style insights)7.have them “Want” the items that they like the best . What items that you have purchased from Just-Your-Style do you love the most! Purchase History . Connect Facebook to personalize your recommendations (We won’t post anything to your profile) Information that is helpful: .Grab Feedback from the subscriber about fit & how much he wears it.Location (If you live in NYC then the clothes for winter we suggest will be different than if you lived in the constant summer of Los Angeles) .Gender (Obviously. if you’re a guy) .wearing 5.Want items will help the stylist to better understand what products appeal to the subscriber & present items that the subscriber is most likely to be stoked . etc .“Fans” (If you like house music.likewise if you listen to Dave Matthews.generally more expensive items that will be gradually added to your subscription) that we should plan into the subscription? 6. you don’t want to see recommendations for girls stuff.If they aren’t a customer.Display Thumbnails of the items that the user has purchased . Jackets. OR “Want/Like” Demand Signaling . Do you have core/staple items (Jeans. list items that fall into the Trends the user selected in Step 1 .
Financial Model .with.
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