New fashion retail channels: how consumers will be buying clothes – forecasts to 2016
2010 edition
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© 2010 All content copyright Aroq Ltd. All rights reserved.
New fashion retail channels: how
consumers will be buying clothes –
forecasts to 2016
By Malcolm Newbery
September 2010
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Page iv Table of contents
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Table of contents
Single-user licence edition .......................................................................................................... ii
Copyright statement ............................................................................................................... ii Incredible ROI for your budget – single and multi-user licences ............................................. ii just-style.com membership .................................................................................................... iii
Table of contents ........................................................................................................................ iv
List of figures .............................................................................................................................. vi
List of tables .............................................................................................................................. vii
Chapter 1 Executive summary .................................................................................................... 1
Report theme and contention ................................................................................................. 1 Traditional channels of fashion retail distribution .................................................................... 1
Online retailing ....................................................................................................................... 2 Social networking (sometimes referred to as Web 2.0)........................................................... 2
Estimates of channel share, 2010 .......................................................................................... 3 Why emerging channels threaten the existing retail order ...................................................... 5
Chapter 2 Introduction ................................................................................................................ 6
Chapter 3 Traditional retail channels and their historical evolution ........................................ 7
Retail channels of distribution: a definition ............................................................................. 7 Pre-industrial revolution person to person trade ..................................................................... 7 Early clothing markets ............................................................................................................ 8
Fashion retail shops, pre-organised distribution ..................................................................... 8 Fashion retail shops, post-organised distribution .................................................................... 8 Mail order catalogues ............................................................................................................. 9
General traders (Woolworths to Walmart) .............................................................................. 9 More detail on traditional bricks-and-mortar channels .......................................................... 10
Chapter 4 Channel evolution: The internet since 2000 ............................................................ 11
How it started ....................................................................................................................... 11
The dotcom bubble .............................................................................................................. 11 The second phase ............................................................................................................... 12 Social networking (Web 2.0) ................................................................................................ 13
The success of business on the internet .............................................................................. 14
Channel 5 New retail approaches and new channels to market ............................................. 15
Social networking as a medium for attracting traffic .............................................................. 17 Young-adult fashion and apparel sites ................................................................................. 18 New social networking retail approaches ............................................................................. 19
Chapter 6 Evaluation of channel evolution, 2000-2010 ........................................................... 20
Retail channels in 2000 ........................................................................................................ 21
Page v Table of contents
© 2010 All content copyright Aroq Ltd. All rights reserved.
Retail channels in 2007 ........................................................................................................ 21 Retail channels in the current downturn, 2010 over 2007 ..................................................... 22 Estimating channel shares by region .................................................................................... 23
Channels of distribution: Likely future scenarios ................................................................... 25
Chapter 7 The USPs and characteristics of emerging channels ............................................ 26
The USPs of traditional fashion retailing channels ................................................................ 26 Emerging channels and the internet ..................................................................................... 28 The USPs of emerging fashion retailing channels using the internet .................................... 29
Personalisation ............................................................................................................ 30 Swapping and swishing ................................................................................................ 30
Q&A with Rani Ghosh-Curling of London Frock Exchange ................................... 31
Q&A with Karin Sjosten of iSwish ......................................................................... 33
Chapter 8 Retailers’ current obsession with multi-channel .................................................... 35
Multi-channel has grown up ................................................................................................. 35 Multi-channel: Four key questions for retailers ..................................................................... 35 Multi-channel: Nirvana for brands and retailers? .................................................................. 36
An evaluation of multi-channel in 2010 (Martec) ................................................................... 37
Chapter 9 Cross-channel ........................................................................................................... 39
Multi-channel and cross-channel, what’s the difference? ...................................................... 39 How do shoppers find product in the age of cross-channel?................................................. 40
Chapter 10 Selling through social networking sites ................................................................ 42
The latest multi-channel format is social networking ............................................................. 42 What makes a social company? ........................................................................................... 44
Chapter 11 Evaluation of future channels ................................................................................ 46
Retail channels in 2007 ........................................................................................................ 46 Retail channels in the current downturn, 2010 over 2007 ..................................................... 47 Retail channels in the future 2016 over 2010 ....................................................................... 47
Chapter 12 Why emerging channels threaten the existing retail order .................................. 51
Page vi List of figures
© 2010 All content copyright Aroq Ltd. All rights reserved.
List of figures
Figure 1: Nasdaq share index, 1995-2010 ................................................................................... 12
Figure 2: Most popular websites in all categories, ranked by visits, 2010 (% of total hits) ............. 13
Figure 3: Sources of traffic to Retail 500 (the top 500 US retail sites) ........................................... 17
Page vii List of tables
© 2010 All content copyright Aroq Ltd. All rights reserved.
List of tables
Table 1: Channel evolution trends at retail prices, 2010 over 2007 and 2000 ............................... 20
Table 2: Market value by region at retail prices, 2010 (US$bn and %) ......................................... 24
Table 3: USPs (unique selling propositions) of traditional fashion retail channels ......................... 28
Table 4: Channel evolution trends at retail prices, 2016 over 2010 and 2007 ............................... 48
Table 5: Market value by region at retail prices 2016 (US$bn and %) .......................................... 49 Note: data in tables may not sum due to rounding.
Page 1 Chapter 1 Executive summary
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 1 Executive summary
Report theme and contention
The theme of this report is that the manner in which retailers sell fashion
products to consumers is changing. It is changing at a faster pace than ever in
its history. There has been as much change, as a result of the internet since
2000, as took place in organised retail distribution in the century that preceded
it. Within the next ten years, the entire balance of the conventional structure of
retail shops could be changed significantly. At just-style, we believe that this
could be a seismic shift in the retailing of fashion products, not just a short-
term blip.
Traditional channels of fashion retail distribution
To comprehend what could be happening consumers’ approach to shopping, it
is important to understand how retail distribution has evolved. There have
been seven stages, each characterised by a dominant, or at least important,
way to getting the clothing to the consumer. These are:
1. Pre-industrial revolution person to person trade. If you wanted to
procure clothes in the 18th century, you went to a skilled artisan and
negotiated a price for him or her to make it for you. The garments were
unique to you, a bespoke trade.
2. Early clothing markets, such as Petticoat Lane in London. Clothing
markets were a magnet for groups of people, often immigrants to
create what in today’s jargon would be termed a cluster of skills and
experience.
3. Fashion retail shops, pre-organised distribution. Around the same
period as the Huguenot immigrants were turning Petticoat Lane and
Spitalfields into an apparel manufacturing and trading centre,
individual shops selling made-to-measure clothing started to appear.
4. Fashion retail shops, post-organised distribution. The 19th century saw
the rise of apparel mass production, and with it the start of what is
called ‘organised distribution’, modern retailing as we know it.
Prestigious retailers stared to sell ‘off-the-peg’ standard-sized
garments in numbers as well as made to measure.
5. Mail order catalogues. The same period saw the beginning of ‘new’
organised retail distribution approaches. One that soon became big
Page 6 Chapter 2 Introduction
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Chapter 2 Introduction
The theme of this report is that the manner in which retailers sell fashion
products to consumers is changing. It is changing at a faster pace than ever in
its history. Within the next ten years, the entire conventional structure of retail
shops will be changed significantly.
In order to address, analyse and forecast these cataclysmic changes, this just
style report reviews the traditional channels of distribution over the last 300
years in Chapter 3, and then considers the internet selling revolution of the last
decade in Chapter 4.
The nature of these new retail approaches is considered in Chapter 5, and an
estimate made of their various scales for 2010 in Chapter 6. Inevitably, this is a
subjective estimate but one that is based on a wide expanse of anecdotal
evidence.
In Chapters 7-10, the main emerging channels of fashion distribution are
discussed in depth, considering particularly the unique selling propositions of
multi-channel, cross-channel and social networking methods of reaching the
elusive and fickle consumer of 2010. This is followed by an evaluation of the
future scale of traditional and emerging channels by 2016 in Chapter 11, and a
considered opinion in Chapter 12 on whether this is a seismic shift in the
retailing of fashion products, or just a short-term blip.
Page 7 Chapter 3 Traditional retail channels and their historical evolution
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 3 Traditional retail channels
and their historical evolution
Retail channels of distribution: a definition
We think we all know what retail channels of distribution are. However the last
decade has witnessed an enormous change to the old and traditional methods
of reaching the market, in the case of this report taking clothes from the
manufacturer to the consumer. Retail has a B2C (business-to-consumer)
basis, but there have been many ways historically by which that approach has
been executed.
It would be possible to produce a list of retail channels in a multitude of
different formats. Each would be ‘correct’. The list chosen for this report casts
light on why the channels have developed the way they have. This is vital to
understand in order to see the dynamics that are changing the way that retail
channels operate now, and how they may well develop in the future.
The list chosen is:
1. pre-industrial revolution person-to-person trade;
2. early clothing markets;
3. fashion retail shops, pre-organised distribution;
4. fashion retail shops, post-organised distribution;
5. mail order catalogues;
6. general traders (Woolworths to Wal-Mart);
7. minor traditional channels.
The chosen list effectively covers three centuries of the fashion retail industry,
from 1700 to 2000.
Pre-industrial revolution person to person trade
If you wanted to procure clothes for yourself or as a gift in the 18th century,
you went to a skilled artisan and negotiated a price for him or her to make it for
you. The deal was person-to-person. The garments were unique to you, a
bespoke trade. The richer you were, the more flamboyant you could be in the
styling of your clothing, which was immediately recognised as a mark of your
Page 11 Chapter 4 Channel evolution: The internet since 2000
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 4 Channel evolution: The
internet since 2000
How it started
Online shopping pre-dates the PC, Microsoft and Apple, and started without
the benefit of the internet. The first systems were probably as fast as 2010
internet shopping systems but were restricted to dial-up and leased telephone
lines. There was no broadband.
In 1990 Tim Berners-Lee created the first World Wide Web server and
browser. It opened for commercial use in 1991. In 1995 Amazon expanded its
online shopping service, and in 1996 eBay appeared.
The dotcom bubble
Online mushroomed and clothing companies such as boo.com expanded
exponentially, were valued by the stock market at amazing share prices, but
never made a profit. Front-ends and advertising were glitzy and very
expensive. Back-end fulfilment (delivery to the consumer) was sadly wanting.
The dotcom bubble car hit the wall in 2000, as the data given in Figure 1 show.
Page 15 Chapter 5 New retail approaches and new channels to market
© 2010 All content copyright Aroq Ltd. All rights reserved.
Channel 5 New retail approaches
and new channels to market
The biggest issue concerning new retail approaches is whether social
networking offers a new retail opportunity for retailers. Moira Benigson,
managing partner of The MBS Group, a retail executive search firm writing in
The Times on 20 April 2009 clearly thought it did.
She wrote: “There are some bright people who are changing the way that we
in retail do business. Most are young and virtually all use Facebook, YouTube
or LinkedIn. Many also use Twitter, which has more than 6m users. Starbucks
and Nike are two of a growing number of brands that „tweet‟.”
The author is aware that many of us are also ‘making friends’ with brands on
our social networks. When he last looked, Marmite, a beef-based UK spread
topping designed to eat with bread or toast had 231,093 ‘friends’ on Facebook.
According to Rachel Bristow, marketing, communications and buying director
at Unilever, when interviewed in Internet Retailing, Spring 2010 “Consumers
are actively showing their loyalty to the brand. It‟s like wearing a virtual badge
and belonging to a very large loyalty group. For Unilever, it means that they all
chat together, share comments about their Marmite experiences and compare
sandwich filling combinations. It also gives Unilever the chance to entertain a
captive audience.”
There is no definitive answer as to whether these groups have a direct impact
on sales, but Bristow feels confident that it is adding something. Proving it,
however, is a challenge. “Social networking will never take the place of
advertising,” she says.
‘Push’ marketing is easy – the costs of an advertising campaign are finite and
methods of establishing return on investment are proven – but ‘pull’ marketing
is more difficult, because generating ideas and keeping websites refreshed
takes huge effort.
Blake Chandlee, commercial director for Facebook, agrees: “Progressive
brands are seeing social networking as an opportunity to connect with
Page 20 Chapter 6 Evolution of channel evolution, 2000-2010
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 6 Evaluation of channel
evolution, 2000-2010
The year 2000 marks a watershed in the evolution of retail channels. Before
2000, the internet as a sales vehicle was restricted to a few trail-blazing
companies such as eBay and boo.com. They were small, mostly loss-making
and ludicrously overvalued. After most of them collapsed, the second phase of
the internet started properly from around 2001.
The historic trend figures explained and discussed in this chapter are given
below as Table 1.
Table 1: Channel evolution trends at retail prices, 2010 over 2007 and 2000
Date
of
esti
mate
s
Tra
dit
ion
al
reta
il s
ho
ps
Ma
rkets
Cata
log
ue
m
ail o
rde
r
Cata
log
ue
on
th
e
inte
rnet
So
cia
l
ne
two
rkin
g
an
d o
the
r
ch
an
nels
All
dis
trib
uti
on
ch
an
nels
tota
l
Distribution US$bn values at retail prices
W as 2000 xxx xxx xx xxx xxx xxx
W as 2007 xxx xxx xx xx xx xxx
Is 2010 xxx xxx xx xx x xxx
Growth in US$ 2010 - 2007
xxx x xx x x xxx
Growth in % 2010/2007
xxxx xxx xxx xxxx xxx xxx
Growth in % 2010/2000
xxx xxx xxx xxxxxxx xxxxxxx xxxx
Distribution % share at retail prices
W as 2000 xxx xxxx xxx xxx xxx xxx
W as 2007 xxxx xxxx xxx xxx xxx xxx
Is 2010 xxxx xxxx xxx xxx xxx xxx
Change in % 2010-2010
xxxx xxx xxx xxx xxx
Source: just-style
Page 26 Chapter 7 The USPs and characteristics of emerging channels
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 7 The USPs and
characteristics of emerging
channels
The USPs of traditional fashion retailing channels
Towards the end of Chapter 5, some of the more well known emerging
channels were listed. They included:
o charity e-tail sites (donate and buy);
o retro and vintage e-tail sites (buy but also share the experiences);
o reusable sites;
o swishing sites (swapping with a social and moral conscience).
However, before looking at these in more depth, it is valuable to restate the
USPs of traditional fashion retailing. This is so because emerging channels
need to provide the consumer with a reason for switching from the traditional
offer.
Bricks-and-mortar retailers with shops come in a variety of guises, including
the main ones which are:
o independent retailers ‘indies’ selling brands;
o chains selling own label;
o department stores doing both;
o supermarkets selling clothing;
o discounters offering low prices and/or ends of ranges.
Each has their own set of USPs for consumers that relate to those values:
o A consumer shopping at an independent boutique will be offered:
o a limited range of brands, but brands which attract and then keep
the loyalty of the customer;
o a specific look and feel to the shop itself;
o attentive, specific and strongly personal customer service;
o deep knowledge of the benefits of the specific brand to the
consumer.
o In contradistinction, a consumer shopping at a multiple chain will be
offered:
Page 35 Chapter 8 Retailers’ current obsession with multi-channel
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 8 Retailers’ current
obsession with multi-channel
Multi-channel has grown up
Ten years ago, in the very early days of the second phase of e-commerce after
the collapse of the dotcom bubble, multi-channel retailing was almost unheard
of. But it has grown and developed within every retail product category,
including fashion apparel. “Today, in the developed world, xx% of organised
retail (this excludes independent retailers and market stalls) have transactional
websites,” wrote Jason Shorrock, BT Expedite’s business development
director, in the 30 April 2010 edition of Retail Week. “For most,” he continued,
“their online store is their largest shop, acco unting for about x% of total sales .”
But in those early days, and in the case of some retailers, even today, the
customers’ shopping experience can be very different. It’s not just the look of
the website offering as against the High Street store; it can be elements as
basic as:
o pricing;
o stock availability;
o ease of payment;
o returns policy.
These are areas that all retailers are now grappling with, because the
consumer expects the same experience from a fashion retailer, whatever the
channel that is being used.
BT Expedite’s Shorrock also states that, from BT research, it has found that
onl y xx% of retailers already have a cross -channel order m anagem ent s ystem ,
in spite of the fact that it is central to managing stock, and providing any form
of click-and-collect service.
Multi-channel: Four key questions for retailers
Most online retailers believe expansion of their sales and marketing efforts
across multiple online channels is critical to their future growth. The wide array
of channels used includes:
Page 39 Chapter 9 Cross-channel
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Chapter 9 Cross-channel
Multi-channel and cross-channel, what’s the difference?
pod1 in a white paper of early 2010, stated that “basically cross-channel is
multi-channel joined up. It is where today‟s shopper does not have to register
three times for the same company across its channels, and be counted as a
„different‟ shopper at each”.
According to pod1, a multi-retail consultancy and software provider, some
fashion retailers have started down that joined-up road. UK retail giants such
as Marks & Spencer and John Lewis are investing heavily to create a
seamless cross-channel customer experience. Both are encouraging the
consumer to buy, collect and return goods through any one of the different
channels they offer.
They believe that “such policies not only offer greater convenience to
customers but also educate them to experience the brand seamlessly in their
preferred way. Not every customer interacts in the same way. Indeed, whilst
some consumers will only ever search and buy in stores, others will research
online before heading to the store to buy, or they‟ll buy online or over the
phone and collect in store. Some customers will only ever buy on the phone, or
online, or in the shop but they are using those three areas to interact with the
brand”.
To support this, a brand’s stock system must be central, as just-style argued in
the last chapter and this should also lead to a change in accounting
procedures. At present for most retailers, the marketing and store managers
for the website, for the catalogue, and for the stores are separate and are
unlikely to want to work together.
pod1 add that “John Lewis has recognised that an online sale should be based
on where a person – a customer – is. The company records online sales to the
nearest store to where the item is being delivered. That means that in-store
personnel are beginning to understand and advocate the importance of the
online channel. They know that if it‟s not in stock in store but is online then that
sale will be allocated to them. Just that one piece of accounting policy means
that John Lewis is immediately thinking in multi-channel terms.”
Page 42 Chapter 10 Selling through social networking sites
© 2010 All content copyright Aroq Ltd. All rights reserved.
Chapter 10 Selling through social
networking sites
The latest multi-channel format is social networking
In Chapter 5, a reference was made to an article by Moira Benigson, chief
executive of MBS, who stated: “There are some bright people who are
changing the way that we in retail do business. Most are young and virtually all
use Facebook, YouTube or LinkedIn. Many also use Twitter, which has more
than xm users. Starbucks and Nike are two of a growing number of brands that
tweet. Many of us are also making friends with brands on our social networks.
In Chapter 4, just-style commented that today, eBay and Amazon remain the
most visited retail websites in the UK, even although they now face much
stiffer competition from both online and multi-channel retailers than they did
ten years ago. Social media has definitely been the big winner over the past
ten years but whether that is just as media or whether it includes business also
remains a moot point.
There are a number of arguments that say that retailers that ignore social
networking marketing are seriously missing today’s hottest trend. Gone are the
early days of social media, when employees at the office were busy adding
friends to their Facebook page rather than doing any work. A recent (early
2010) surve y b y dotCommerce of 100 UK retailers found that xx% had som e
kind of social media presence, but that only one-third with a Twitter or
Facebook account actually promoted it on their website. Paul Dunay, global
managing director of services and social marketing at Avaya, finds this
astonishing: In an article published in a spring 2010 edition of Internet Retailing
he stated that: “Facebook has xxxm users, half of whom show up every day.
It‟s a very engaged audience. If I could offer you a billboard in Times Square,
New York or Piccadilly Circus, London for free, you would jump at the
opportunity, so why not take advantage of this?”
Retailers cannot afford to shy away from this medium, according to Hedley
Aylott, managing director of retail and digital marketing agency Summit Media.
In Internet Retailing in Spring 2010, he stated that: “Social media is happening
whether they (retailers) like it or not, but most retailers are not even aware of
Page 46 Chapter 11 Evaluation of future channels
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Chapter 11 Evaluation of future
channels
Retail channels in 2007
It is worth repeating the point that by 2007, there had been a sea change in
channel shares. The world total apparel market at retail prices for 2007 had
grown to US$xxxbn (growth of xx%). The channels of distribution of wearing
apparel (clothing) had been revolutionised by the internet. Within the apparel
market in 2007:
o Traditional retail shops (bricks-and-mortar on the High Street)
accounted for US$xxxbn. This was dollar growth of US$xxbn but a
loss of alm ost x% of m ark et share (down from xxxx% to xxxx%).
o Mark ets accounted for US$xxxbn. This represented dollar growth of
US$xbn, but a fall in m arket share from xxxx% to xxxx%. Mark ets are ,
of course, far more important in the developing world. Nevertheless,
their share should not be overlooked in developed countries. In the
UK, m ark ets are believed to account for x% b y value, m aybe xxxx% b y
volume of apparel sales. In Italy, it is rumoured that markets account
for xx% by value.
o Catalogue m ail order accounted for US$xxbn (xxx% as against xxx%
in 2000). Paper catalogues had been in decline since 2000, when the
second wave of internet offers arrived.
o Catalogues on the internet accounted for US$xxbn (xxx% share). This
is a cautious estimate. The hype surrounding internet sales is
deafening, and the reality may be lower, but, there is no doubt that this
has been the channel to market of growth. The percentage growth
figure (xxxxx%) look s im possible, but what it actuall y represents in a
little less than a doubling of size each year; companies such as eBay,
Amazon and ASOS have exceeded that growth rate.
o Social network ing and other channels accounted for US$xxbn (xxx%).
Although this was a small percentage, as a growth percentage since
2000, it is a m ind-bogglingl y enorm ous xxxxxx%. This effectively
means growing by comfortably over two times each year.
Page 51 Chapter 12 Why emerging channels threaten the existing retail order
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Chapter 12 Why emerging channels
threaten the existing retail order
The theme of this report has been that there are dramatic, seismic, even
cataclysmic changes about to happen in the retail industry. They will affect its
channels of distribution models. These are models which, until 2000, only
changed slowly and under controlled conditions.
Today we are nearer a state of anarchy, in which entire business models
collapse swiftly and spectacularly, much like the unpredicted collapse of Soviet
communism in Eastern Europe around 1990. The author has personally
experienced two much smaller, but equally dramatic business collapses, in a
company in which he was responsible for product, supply and distribution:
o The company manufactured pen nibs, the pens you used to dip into
ink to write with. Most of the pen nibs were sold to the developing
world, although many went to banks in the UK, which at that time, had
pen nibs and ink on the counters to encourage customers to write
cheques and paying in slips. A Hungarian, named Biro, invented... the
Biro. Within two years, the company’s pen nib business in both the UK
and for export was finished.
o The company held a licence for the Faber-Castell (German) slide rule.
This was a clever device that allowed complex mathematical
calculations to be done physically using a logarithmic scale on a ruler.
Casio came out with the first pocket calculator. Slide rules were in the
dustbin of history within a year.
People tend to always believe that nothing dramatic will change their world.
The author is sure that retailers would like to believe in the permanence of
bricks-and-mortar shops. However, he is equally sure that a generation that is
too young to even understand that there was life before the mobile phone, are
ready to embrace alternative ways of shopping.
So:
o The author’s head goes with the careful forecasts for 2016.
o His heart is concerned about dramatic change.
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