The global economy of on demand fashion

A fascinating feature of Net-a-Porter’s website is the live commentary that runs across the screen, showing you the sales as they ping in—who is choosing what, anywhere in the world, at the exact moment that they hit the “buy” button.

So riveting is it to watch what they’re buying and spending in Berlin, Baku and Beijing that it can distract from the urgent business of replenishing one’s own wardrobe.

The rolling sales view is the consumer equivalent of the famous world map in the company headquarters, where locations flash up as sales happen and which was installed when the company moved in back in 2010, illustrating just how global online shopping had become.

Net-a-Porter is the pioneer of upmarket fashion e-commerce—it was valued at £350m when the Richemont group bought it three years ago and must be worth far more now—but it is not alone in this burgeoning and exciting field.

Luisa Via Roma and The Corner, both in Italy, My Theresa in Germany, Prestigium in France and My Wardrobe in London are just some of the sites that have built global reputations for picking the best and latest in designer wear and delivering it fast, anywhere in the world.

Rather than doing its own buying, Farfetch does what it says—links innovative, independent stores around the world to a central site with a delivery structure that allows selling to a much wider market. The customer searches by designer or item and is then directed to the website of the store selling it. 

All this sounds like consumer heaven. In theory, anyone, anywhere with a computer now has access to the best, most exclusive designer clothes—it’s just a matter of putting in your order on those rare, almost one-off items, before someone on the other side of the world does.

However, there is always a “but”, and in this case it’s the highly complex business of negotiating orders, sales and deliveries across continents and cultures, which can make life tricky for retailers, designers and customers alike.

In the digital age, sophisticated, global fashion may seem like a level playing field, governed by the twice-yearly international collections and trends, but nothing could be further from the truth.

Designers and buyers have to think not only about climate and season across the hemispheres but also about cultural and physical differences: the prevalence of smaller sizes, for instance, in the Far East, or the preference of Middle Eastern customers for more covered up designs, which has resulted in a refreshing global trend for more demure eveningwear.

Varied pricing in different areas, and the differing times that markets go on sale, are extra headaches for whose who run the sites. Then there is the minefield of regulations in different parts of the world—from internet control and the need to work with a local partner in Asia, to differences in import tariffs and VAT, especially in the Americas, which can make exporting and importing there uneconomical for retailers and customers, and may mean, on some sites that the final price is considerably more than the one initially quoted.

For sites with a global delivery reach like Net-a-Porter or Farfetch, creating consistency is not only essential but takes time to achieve, as unforeseen anomalies often crop up.

For instance, Farfetch has recently changed from adding duty for importing items from the USA to Europe after the price is shown, to adding it upfront, so that what you see is what you pay, as it already is for transactions in the reverse direction and intra-Europe.

With many American sites, duties are charged on delivery—a nasty surprise. José Neves founded Farfetch five years go with an idea as brilliant as that of Natalie Massenet, founder of Net-a-Porter, who had the vision to realise that getting people to part with thousands of pounds for clothes unseen would be no problem provided the items were beautiful and special enough.

Rather than creating a buying infrastructure, as aforementioned, Neves’ genius was to link with independent shops selling carefully curated, interesting designer ranges, wherever they were situated.

A great idea, but Neves admits that running it successfully has proved more challenging than he ever imagined. “We launched with shops in five countries, using several languages, added a joint venture in the States a year later and in 2010 went to Brazil to tackle the South American market,” he says. “I was aware from working in Italian shoe wholesaling that there is now a knowledgeable global consumer intent on tracking down the special pieces they want, and thought we could serve that market in a wider way than the department store and luxury brand sites that were already tackling it.” 

However, as he says, “there are as many cons as pros. Fashion retailing is traditionally built on territorial distribution—shops view having exclusivity on certain designers in one area as a huge asset. The web demolishes that. Not everyone in the industry is prepared to look at it in a new way, yet the consumers they depend on are driving this.

They want access to their favourite labels, anywhere, and no company can fight that.” The dilemma, he says, “is how to preserve an aura of luxury and yet be able to deliver these goods consistently, anywhere.”

The answer for him is geo-pricing—making sure their member stores stick to the recommended retail price in that territory. Discounts are also a problem for a global site because of different start dates for sale seasons in each area—the USA first, the UK much later, with European countries on dates set by law.

“We do geo-discounting, which means all stores in one area go on the same date,” he says, “which perhaps makes us uncompetitive in the USA, where most stores start earlier.” He seems unworried as 80 per cent of Farfetch’s $200m sales last year were at full price.

The only market that has been slower, though he says it is coming good after three years, is Brazil. “It’s a special case where customers buy in installments even at the top level,” he says, “so retailers have to pay designers before they get all the money from the customer, though, of course, there is interest.”

In each area, Farfetch has a curating team which researches and understands the local and wider market and relays their findings to the stores. “We help stores maximise their business. They may know their own customers but online is different,” says Neves. “And we have to adapt to local technology. For instance, Russia is changing its search engines so our strategies must alter and we’re only just establishing in China because the system is different.” 

By contrast, Net-a-Porter is well placed in China, but, as it buys its own range, has the major challenge of adapting designs to each market, and here again customer feedback is key. “Designers going global need to be aware of key market needs while defining their own aesthetic,” says fashion director Holli Rogers. “We encourage designers selling online to see what can be done to cater to the needs of certain markets.

We receive phenomenal customer feedback, which may influence the sizes or colour palette a designer offers. I always tell them to be open to suggestions yet stay true to their vision and have a clear point of view, that is what our customers look for.”

Juggling such needs makes business complex for designers. As a Southern hemisphere designer, Brazilian eveningwear specialist Patricia Bonaldi is ahead of the curve, already delivering spring 2014 styles at home while sending autumn 2013 models to the north.

“Strategically that helps because production is consistent and established when we export,” she says. “We make adjustments for markets such as the Middle East—less sheer and slit, more long skirts—without losing our uniqueness and handmade detail.”

A worry is keeping consistent competitive prices worldwide in the face of punitive Brazilian duties and taxes. “It’s not simple,” she says.

“Local taxes everywhere influence prices and we need consistency in a global online market. So we are seeking incentives in Brazil to reduce import taxes, and we also have our own distribution centres in other countries to facilitate the sales process.”

For Lama El-Moatassem, whose generously hand-embellished Toujouri eveningwear brand is based in Qatar, but sells online and in top stores round the world, varying taxes and duties play an important part in pitching the collection at the right price.

“We work towards target prices based on our position in the market and customer needs,” she says. “We then have to work backwards to decide on fabric and suppliers, ensuring that we simplify the practical elements and supply chain without compromising on aesthetic. We have a recommended retail mark-up but certain markets are off-limits because of high import taxes and duties.”

Online designer fashion has had an annual growth rate of up to 14 per cent for the past five years and shows little sign of slowing down. This could leave physical stores in a tricky position, but not necessarily, according to Neves. “As a site, we depend on physical stores that do well,” he says.

“People increasingly go to stores when they’re looking for something special and then they want a memorable retail experience. However good online is, it cannot give you that.” In a global culture obsessed with shopping, there is undoubtedly room for both.