Online luxury consignment is an interesting business. Sellers are able to make a profit from their used or depreciating assets and buyers are able to purchase desired items at a discount to the original retail price (And they can call it vintage…as Mugatu from Zoolander would say, “Vintage is so hot right now”). The idea of buying someone else’s previously owned and worn shoes may not appear appealing and can even be considered insulting to high-fashion as it is the exact opposite of haute couture, or custom-made and fitted, high fashion women’s clothes. Despite this notion, the demand for secondhand goods is growing and a number of online luxury resellers have emerged to provide a marketplace for pre-owned merchandise. Studies have attributed the increasing demand and growth to the economic recession, in which individuals turned to secondhand luxury goods instead of full-priced, new luxury goods. According to First Research, the pre-owned merchandise store industry in the U.S. includes about 18,000 stores with combined annual revenue of approximately $13 billion, and of that about 25% of sales are from clothing, 13% from antiques and 10% from furniture and collectibles. According to America’s Research Group, 12% – 15% of Americans will shop at a consignment/resale shop during a given year. While there are few statistics available for online luxury resellers, one can infer that they are achieving impressive user acquisition and top-line growth.
Although luxury consignment is an attractive concept, there are many challenges facing this business. First, given the business model is fee based, in which a small fee is received for every transaction, large scale is needed to be financially sustainable. The low barriers of entry in this market have resulted in a highly competitive space that can make it difficult to achieve the scale needed to be profitable. Additionally, online luxury resellers will be challenged to differentiate themselves from the many other consignment sites. And how are they able to differentiate themselves so that they aren’t steamrolled by Amazon or ebay? ebay also offers a lower transaction fee than many of these newcomers. Ebay’s transaction fee is between 8% – 12% compared to the 20% fees charged by most of the online luxury resellers. Many also boast their ability to provide a quick, easy and liability-free shopping experience as their point of differentiation, but that is already the norm and has been adopted by the majority of e-commerce sites as well. The other major challenge is online luxury resellers’ sensitivity to concerns around quality and authenticity of the products as well as vendor trust. Any reason to doubt the credibility of the products or sellers would result in a loss of members. As a platform or peer-to-peer marketplace, it is impossible to verify the authenticity of a product without incurring additional costs to facilitate the products for sale and requiring a fashion expert to confirm that a piece is an original and not from a Chinese street market (e.g. Xiushui Silk Street…but definitely visit here in Beijing because it’s very popular among tourists!).
There are a few things setting apart some of the existing online consignment sites from the others. The most obvious is visual design. An effective visual design is simple and helps the user easily navigate the site. The ease of browsing, filtering options and presentation of products on a page are essential to the user’s experience (Check out Vestiaire’s).
And if you’ve read my previous posts, you already know what I’m about to say next…Yes, the need for sharing features that provide an engaging, real-time social experience for the users (I also discuss this in Like Prada, Repin Prada then Shop Prada). For example, Threadflip allows its users to share its products on Facebook, Twitter and Pinterest as well as comment or “love” the product. Users are also able to follow sellers. These features transform the marketplace into a community.
Poshmark’s Posh Parties take an innovative approach to providing its users an engaging, real-time social experience while shopping. Posh Parties are virtual buying and selling parties. To give you a better idea, it is similar to Gilt in that it features products under a specific category or brand for users to shop. Digital curation makes it easy for users to shop online because it provides for an easy way to navigate through items that the individual likes or doesn’t like. The “parties” are organized by Poshmark users or hosts and are posted in real-time.
These Posh parties create a sense of curiosity and urgency with its users, bringing them back to check on upcoming parties (every party is different and are created every day) and possible brands or categories that they like. Posh parties also increase user activity for sellers as sellers look to collaborate with other sellers to sell more of their items and create new categories to attract buyers. Moreover, parties increase visibility of products compared to a single product that will most likely be lost in the feed.
Finally, there must be an app for the site. Individuals need to be able to access the site from their phones and tablets so that they are able to check for their favorite products and brands and compare prices at any time. So much of the buying on these sites are driven by impulsive behavior (I can confirm this); therefore, it only makes sense to find a trigger for that behavior…
Check out a few of the leaders in this market who have successfully met the challenges discussed above.
Poshmark received $12M Series B last year led by new investor Menlo Ventures, bringing the total amount invested in Poshmark to $15.5 million since 2011. Poshmark has been focused on expanding its mobile fashion marketplace beyond iOS. On iOS devices alone in the United States, it has ~250,000 women with active personal “boutiques” to sell items of their own closets and more than 1 million items have been sold on Poshmark since the start of this year.
Vaunte is a luxury consignment platform with a fashion editorial element. The site features celebrities, designers and socialities and allows its users to shop various products from those individuals’ closets. Vaunte takes a 30% commission for photographing and shipping seller’s items.
Vaunte has also expanded to provide new items and is looking to grow its consignment platform to include “non-starlet” users.
I also talked a little more about Vaunte in my previous post Like Prada, Repin Prada then Shop Prada.
Vestiaire Collective was launched in 2009 as a place for consumers to buy and sell pre-owned, authentic luxury goods. Currently, the site has a network of approximately 1.5 million members worldwide and has a number of product categories such as women, men, kids and life and living.
Condé Nast announced at the beginning of this month a $20 million investment in Vestiaire Collective.
Threadflip boasts that its sellers make between $400 to $2,200 a month. Threadflip takes a 20% cut on all transactions and 40% on its White Glove transactions. The White Glove service involves Threadflip helping assess, professionally photography and post the seller’s product on the site. The service also handles shipping and customer service. The average White Glove seller makes approximately $500 per shipment.
Threadflip has raised $8.1 million in seed funding from First Round Capital, Baseline Ventures, with participation from Dave Morin, Forerunner Ventures, Greylock Discovery Fund, and Andreessen Horowitz Seed Fund.
As of the first quarter of 2013, The RealReal was growing by 1.5 million visitors a month and had about 750,000 members. The company also shipped more than 20,000 luxury items to customers and was growing by 20 percent month over month. The average consigner at the RealReal, meanwhile, is raking in about $6,000 a year.
In April, the online shop raised $14 million in a Series B round of funding.
Most importantly, check out Tom Haverford’s (from tv show Parks and Recreation) Rent-A-Swag! If you haven’t seen the episode (Season 5, Episode 6) or the show already and are dying for a good laugh, check it out. Here’s an awesome clip from the episode: http://www.youtube.com/watch?v=DBcgtEW3KCk
Share with me your thoughts on online luxury consignment @tiffanydstone or comment below!
Sources: http://techcrunch.com/2011/06/15/google-ventures-backed-copious-launches-a-social-marketplace-for-the-facebook-era/, http://techcrunch.com/2012/12/04/poshmark-nabs-12m-series-b-led-by-menlo-ventures-to-expand-its-mobile-fashion-marketplace-beyond-ios/, http://venturebeat.com/2013/08/01/threadflip-gets-more-social-to-sell-the-billions-of-dollars-hiding-in-womens-closets/, http://techcrunch.com/2013/09/22/poshmark-growth-downloads-sales/, http://www.betakit.com/27perry-launches-consignment-marketplace-to-bring-local-merchandise-online/, http://www.bizjournals.com/sanfrancisco/blog/2013/08/threadflip-online-consigners-chase.html?page=all, http://www.luxurydaily.com/conde-nast-invests-20m-in-online-luxury-resale-site/, First Research, NART
Last Thursday, I attended the Decoded Fashion Meetup: Hot Tech Connecting Shoppers Offline & Online event. This was a great event with a huge turnout, and I was excited to meet individuals with all types of backgrounds, from a developer interested in cosmetic startups to a VC at Greycroft Partners.
Startups featured at the event:
Nomi – Nomi is a real-time marketing optimization platform that lets retailers track and analyze customer data across multiple channels, including in-store, online and mobile. Nomi utilizes Wi-Fi signals on smartphones to track the duration and frequency of shoppers in a store as well as other metrics such as conversion rates, device type and revenue by location. Below is a snapshot of the Nomi dashboard:
Styloola – provides a mobile solution to help shoppers navigate the streets in search of the perfect item nearby. Its founder will be revealing a hardware-based solution launching in Q4.
Shopkick – is an app that lets users search for products and find discounts at retail locations. Shopkick allows its users to redeem “kicks” or points for walking into a store and then use those kicks to redeem different rewards. You can get restaurant vouchers, iTunes gift cards, Best Buy, Target, Macy’s, Sports Authority or American Eagle gift cards, movie tickets, or even a cruise around the world. You can also donate them to your favorite cause. The startup also launched in-app purchases, starting with 30 major stores, including Target, Macy’s, Best Buy, Old Navy and Anthropologie.
Snapette – a mobile shopping tool to help shoppers find designer fashion currently in stores near them. Snapette has previously worked with Jimmy Choo to send push notifications to its users about a nearby sample sale. The company announced this month the acquisition by PriceGrabber.
Summary of Takeaways:
-Effective online to offline retail strategy
Omni-channel retailing allows the user to utilize all shopping channels, including physical, online and mobile channels, simultaneously to shop anything, anywhere and anytime. The omni-channel approach evolved as a solution to showrooming, which involves consumers browsing products in a physical store and comparing product prices, inventory availability and reviews online via a mobile device/tablet/computer. Showrooming resulted in product purchases outside of the physical stores and from another retailer or online retailer with a lower price. Omni-channel aims to create consistency in selling across all channels and increase the interaction between stores and consumers.
Ideally, omni-channel will allow the retailer to communicate with the consumer at every point in the shopping experience, from the time of product research to the point of transaction and even after the transaction. For example, a customer would view the company’s lookbook online at home and receive a notification on their phone about the latest promotion offer and will walk into the store to redeem the offer at the time of purchase. This approach centralizes the customer as depicted in the below diagram.
The challenge with omni-channel retailing is the ability to integrate and analyze data collected at different points of interaction with the customer and use this data to communicate information and provide services relevant to the customer’s preferences. Additionally, new metrics focused on measuring customer behavior (i.e. visit duration, store zone popularity and bounce rate) will have to be adopted as the traditional Four-Wall Analysis cannot be used to understand individual consumer behaviors, and therefore will not be useful in helping retailers create a personalized shopping experience for their customers. Adoption of the omni-channel approach will also require retailers to achieve the convergence of the physical and digital worlds through consistency in pricing, policies and fees, promotional offers, inventory availability and customer experience. Channel-specific coupons and inconsistencies in product descriptions will encourage customers to prioritize where they will purchase goods, resulting in showrooming.
Effective Online to Offline Strategies
Today, we are seeing many online-originated businesses open up their own brick-and-mortar stores. The most popular example has been Warby Parker. Warby Parker is an online eyewear retailer that allows its customers to sign up and shop online for stylish frames, receive free home try-on kits and purchase the frames on the website. This past year, the company has opened showrooms and stores in various cities across the United States. The same frames are also offered in the Warby Parker stores, where Warby Parker representatives are on-site with iPads to help process your purchase instantly. Its stores are also distribution centers. The consistency in experience, pricing, branding and offerings has allowed Warby Parker to successfully execute its online to offline strategy.
Other Examples: Apple, Jo-Ann Fabric, Restoration Hardware, Walmart, Macy’s
By the Numbers
- More than 60 percent of consumers who like to interact with brands do so through multiple channels
- US online retail is expected to reach $262 billion in 2013 and grow to $370 billion by 2017
- Three-quarters of U.S. Internet users research grocery and personal care products online
- Over 80 percent of shoppers make their purchase decision before leaving their home
- Over 50 percent of smartphone owners use the device while in stores to guide their purchases
-Pop-Up shops: a temporary store ro event
-POS systems for omni-channel
Share with me your thoughts on omni-channel retailing/online-to-offline strategies @tiffanydstone or comment below!
Sources: http://www.forbes.com/sites/maribellopez/2012/10/22/can-omni-channel-retail-combat-showrooming/, http://maosuit.com/stores/omi-channel-retail-101/, Rising to the Omni-Channel Challenge-August 2013
Beauty Army knows what you want and lets you pick.
Beauty Army (https://beautyarmy.com/) is a personalized beauty sample subscription service that allows you to select up to six luxury beauty samples each month for $12. The company launched in January 2012. Unlike other beauty subscription services (e.g. Birchbox, NewBeauty TestTube, GLOSSYBOX, Beauty Box 5, Ipsy) that deliver the same variety of beauty products to all of their customers, Beauty Army tailors each box of samples to its customers’ beauty needs and tastes. Some services, such as Birchbox, now include a few samples that are selected based on the user’s preferences in addition to the pre-selected samples chosen for a wide range of styles, skin types, and colorings; however, these other offerings still do not offer their customers the full luxury of choice as Beauty Army does. Additionally, many services would have to alter their unique selling proposition in order to transition to a choice-based subscription. For example, Birchbox defines itself as a discovery service, in which experimentation of different brands and various products is at the heart of the business. To rid the surprise aspect of its boxes would be equivalent to Facebook charging its users to be on its site.
How Beauty Army works:
1. Complete a personal profile using basic questionnaire
2. Based on a customer’s responses to the questionnaire, a set of 9 personalized beauty samples are populated and displayed for him or her to select up to 6.
3. The customer can update his or her profile for new selections or choose to skip a month whenever he or she wants.
Beauty Army’s value proposition is its use of big data to personalize product recommendations and allow its customers to choose his or her samples.
Why does big data analytics offer a competitive advantage for Beauty Army?
Big data analytics is the process of identifying unknown correlation or hidden patterns by analyzing large data sets. Not only will big data analytics allow Beauty Army to personalize the customer’s subscription experience, but also allow the company to improve its accuracy of product recommendations over time based on the attributes gathered from the customer’s prior subscription preferences and the brands. Additionally, big data analytics can be used to improve future sample offerings by identifying the more popular brands and the favorable brand attributes. Another general advantage from being able to understand large data is the ability to provide transparency of the selection process and order status of a subscription as well as help a company and its brands optimize their marketing spend.
How else does Beauty Army compete?
Beauty Army also offers its own eCommerce shop, where customers can purchase full-size versions of the samples that they have received and liked (Good to Know: ~40% of Birchbox’s subscribers will purchase full-sized products on its site). And like Foursquare, Beauty Army offers a badge reward system, in which you are a granted a certain badge and a reward for fulfilling badge requirements. For example, to gain the recruiter badge and a free kit, a user will need to recruit 3 friends. Reward programs are a great way to increase a customer’s involvement with the business and establish stickier customer relationships with individuals who are price-sensitive in a highly competitive industry. See below for a snapshot of the badges available:
Beauty Army also offers gift packages (e.g. $36 gift bundles of 3-month subscriptions) and supports the Beauty Bus Foundation, an organization that provides beauty and grooming services and pampering products to chronically or terminally ill men, women and children and their caregivers.
By the Numbers…
-Members: ~120,000 (Birchbox had ~45,000 members after one year since its founding)
-Paying Subscribers: ~4,500
(According to CEO Lindsey Guest, since launching in January 2012, Beauty Army has been doubling users and subscribers monthly)
-As of May 2013, +125 portfolio brands and accumulated 1.76 million consumer data points
-As of June 2013, revenue of ~$800,000
See Broke Beauty Blogger (http://www.brokebeautyblogger.com/p/subscription-box-list.html) for a list of beauty subscription services and their offerings.
Sources: Beauty Army website, Birchbox website, http://www.crunchbase.com/company/beauty-army#src3, http://techcrunch.com/2012/10/18/beauty-army-health-and-wellness/,
Recently, a number of online retail businesses have emerged to compete with the pioneers of the industry (i.e. Vente-privee, Gilt Groupe, Ideeli, Etsy, Hautelook,…). A few of the new players in the past three years include Fab.com, One Kings Lane, Bonobos, lyst, shoptique, Vaunte, styloko, Nuji and Joss & Main. As a result of the exploding online retail space, my time online has increased, I shop more and I receive more budget alerts from Mint.com.
I typically browse these sites when I’m bored or when I am desperately looking for something at a discount. Recently, I’ve developed an obsession with afternoon tea and have been diligently scanning website after website for a steal on tiered cake stands…But I don’t spend time on these websites the way I do with Facebook or Pinterest, and I’m not engaged in discussion or sharing with my friends what trendy items I’ve just purchased, suggesting that online shopping is not a social activity for me. I believe there is a disconnect between the bloggers/pinners, retailers and customers.
I believe the ideal online shopping experience can be created through a combination of features from Pinterest, Vaunte and Amazon. I’d like to be able to shop the products in the photos that I’ve collected in my photo collages at bargain prices (or even have the option to buy them at retail price) and share my purchases with my friends or followers. Currently, people repinning or liking a photo on pinterest or instagram does not translate into a purchase (most pins are taken from another blog and have no source), and people frequently respond to posts with “where can I get that???” (See the below pictures for examples).
I’ve also included Vaunte in the combo because I like that the company has blended editorial content with an ecommerce platform. Just as you would browse through a fashion magazine for amazing steals and celebrity outfits, you would be able to view these deals and trends via the featured celebrity’s closet on Vaunte. And moreover, you are able to shop the celebrities’ closets. Vaunte bridges the gap between identifying a favorite fashion piece on a celebrity or in a magazine and being able to purchase it.
Finally, I would like to be able to compare the price and quality (used or new) of my favorite handbag across multiple sites like that on Amazon. I believe price comparison helps convince buyers that they’ve found a great deal and eliminates the need to browse other sites, increasing customer retention and activity. And of course, users should be able to share their purchases with their friends and followers so that others can also discover these fashion steals and purchase them. I believe the integration of all these functionalities–follow, collect, share, compare, shop and then share again–would create a more sustainable revenue stream and establish the ultimate online retail platform.
This past week, Pinterest introduced price alerts or “Product Pins”, which is its first step to bridging the gap between pinning and shopping. But Amazon Collections has taken it one step further by allowing individuals to be able to “collect” or “like” and immediately shop the product from multiple sellers. However, Amazon Collections lacks the social network experience, in which I am able to connect with my friends over an item or purchase, view others’ purchases or follow a hashtagged category such as #AfternoonTea (Amazon Collections has limited categories for browsing). Additionally, Amazon Collections looks more like an online outlet, which is not very engaging for the user.
I’m excited to see what these online retail businesses will look like in the next few months!
Share with me your thoughts @tiffanydstone or comment below!