Business models experiments for fashion e-commerce dominance

In my last blog post, I argued why fast fashion e-commerce is poised to take off. While that is something most of us could agree with, the difficult part is pointing our finger to a strategy that we all agree will succeed. The level of experimentation with business models that is going on to find the secret sauce is just fascinating and that is what I intend to talk about here.

For the sake of convenience, I will define fast fashion again. As per Wikipedia, “Fast fashion clothing collections are based on the most recent fashion trends presented at Fashion Week in both the spring and the autumn of every year.”. The pyramid below shows where fast fashion is placed in the broader fashion world.

To make sense of the business models at work in fast fashion e-commerce, we need to first align on the levers that can make fast fashion attractive. In my mind, there are three levers:

1. Build trust: Fast fashion purchase is inherently a social experience because there is a level of style and fit experimentation involved on the part of the shopper while making the purchase. Finding some way to build that trust online can go really far.
2. Reduce price: Fast fashion is expensive for majority of the shoppers. If e-commerce players can figure out any way to increase the ‘value for money’, it can work wonders.
3. Inspire: Fast fashion purchase is about feeling special and getting inspired. Anything that makes it simple of find that inspiration will naturally lead to a jump in conversions.

Now let’s take a look at the business models and see how they move these three levers. I think of these models being of five types:

• Collector led
• Curator led
• Brand led
• Platform led
• Ad led

Collector led

Lever(s) impacted: Build trust

Collectors are people who bring interesting inventory onto a platform. They do the end-to-end work from sourcing goods to putting them up for sale to shipping them. While a lot of platforms have collectors, the first being eBay, there are only a few which are designed to encourage a strong community of collectors and shoppers to form. Poshmark is one such platform. It is defining social commerce in fashion, allowing shoppers to follow collectors, thereby taking them through a journey in which their confidence in collector’s offerings continues to rise. This confidence is not only about trusting the collector’s sense of style but also about knowing their fit. A surprisingly high percentage of clothing on Poshmark has the collector as the model. So once you know their fit, you are more confident about how the clothing will fit you.

Scanon’s candid modeling for her collection on Poshmark

Curator led

Lever(s) impacted: Inspire

Curators are people who curate the inventory on a platform in a way that improves discovery for shoppers. Curation is the holy grail for retail but with the advent of online commerce it has become significantly more expressive and diverse. The Net Set and I PS You are redefining curation, allowing shoppers to follow curators who inspire them and can bring to them style ideas that they wouldn’t have imagined otherwise. These styles obviously link to items that shoppers can then purchase, making curators commission on each sale they drive. With mobile filling up an increasing share of empty moments in our life, the option of browsing through such inspirational content is something a lot of us would love to have.

Curators on I PS You (left) and The Net Set (right)

Brand led

Lever(s) impacted: Reduce price, Inspire

We all love brands but we don’t really get to explore a large number of indie or local brands and also don’t really get to engage with iconic brands as often as we would like. Brands are the masters of merchandising (presenting their goods in the most effective way) but as shoppers have moved away from stores, these brands have struggled to replicate that skill at a scale that reaches thousands of shoppers. Spring is helping brands do exactly that. It aims to be the shopping mall that gives brands the control of their brand image (through brand managed photography) while taking up responsibility for driving footfalls. What is more interesting is that by eliminating the middlemen (retailers/ vendors) and allowing shoppers to engage with the brands directly, it can promise to offer goods for cheaper than what they would have been otherwise, thereby making fast fashion more affordable.

Kenneth Cole store on Spring

Platform led

Lever(s) impacted: Reduce price

The second hand clothing market continues to explode primarily because income disparity has been rising steeply. The rich just have a lot of money to spend on clothing that they sparsely wear and can afford to dispose off for cheap. So, it is now possible to find pre-owned goods from great brands and in great shape at substantial discounts. The only thing that was needed was to present these goods in a manner that makes shoppers feel good about buying them. thredUP is doing exactly that. Claiming itself to be a consignment store, it photographs and washes pre-owned merchandise sourced from consumers and offers them at steep discounts, in the process making fast fashion more accessible.

Discounted blazers on thredUP

Ad led

Lever(s) impacted: Build trust, Inspire

This one is interesting and I am not completely sure how this will evolve. No brownie points for guessing who the key player here is: Facebook. While this might seem like an obvious case of social commerce, leaning towards the Collector led model I described earlier, there is an inherent conflict of interest here because of which I am putting it separately. The conflict is that Facebook makes money off ads and it won’t give up any opportunity to make more ad money. So, it is not going to allow you to simply follow Shops and then not charge Shops any money to get your eyeballs. It would rather charge zero commission/ fees for a sale unlike other e-commerce platforms but charge Shops ad dollars to advertise their goods to the right audience. It remains to be seen whether the cost of advertising turns out to be more or less than the commissions/ fees sellers pay on sale but that is another story. One advantage with Facebook is that it understands you (the shopper) very well, so irrespective of how it monetizes its e-commerce push, it will show you stuff that you can trust and will find inspiring but it won’t fit squarely into any of the models described above. That makes it an interesting business model to watch.

A shop on Facebook with 2.2 million likes

I personally think that all the business models described above have a lot of potential and we will see great companies come out for each or a combination of models. However, if I had to place a bet on one model, I would say the Collector led model with a strong focus on social will see the greatest traction.

Irrespective of what happens, these are interesting times and it is fascinating to watch the experiments in search of a dominant business model.

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