» HADOUKEN « we're having a fire...sale!
"Oh my God...the burning! It burns me! Evacuate the children!"
Arrested Development was a popular show, and it still is. If you are unfamiliar with the above quote, I suggest you give the link a click and have yourself a good laugh. (And then proceed to binge watch each of the original 53 episodes as soon as humanly possible. Like, don't even go into work today.) And if you are unfamiliar with the Gang Starr pun, I suggest you ignore it because early '90s hippity hoppity rap music is about as unrelatable today as 19th century Russian literature has always been. Hot take!
I digress. How does any of the above make sense in the context of fashion? Simple: when I woke up on this past Friday morning (and Wednesday, Thursday, Saturday, Sunday and Monday...), I had a vision. A vision of David Cross screaming into the camera, squirming on the floor and generally making a mockery of himself about some fire...sale. Let's keep it really real, Black Friday is no longer "a thing." Instead, we should just call it "Black Last Week of November."
In the continual race to the bottom that is e-commerce--no doubt accompanied by the inventory problems brought on by relentless and disturbing climate change (among other things)--retailers are in the 9th inning of a game they can't win. A game whereby each year even less astute online shoppers are learning that paying full price for fungible fashion (e.g., non-exclusive, non-runway and non-hyped goods) is, in plain English, fucking stupid. Above that, retailers have destroyed their own margins by trying to outdo one another on the customer service front. Free shipping, free returns, free everything. Bottom line be damned, we're gonna sell, sell, sell baby! More revenue. More acquired customers. Bigger AdWord spends. Bigger discounts. More, more, more, MORE!*
Earlier this year, The Corner, a designer and luxury e-tailer operated by Yoox Net-a-Porter Group, shuttered its URL and (rather quietly, really) rode off into the sunset. The Corner, together with Shoescribe (another site YNP shut down this year), reportedly represented 2.4% of YNP's EUR 1.7 billion in revenue in 2015. That's about EUR 41 million--not a small number, and a number that is much larger than 99% of most e-commerce players. The Corner, while it had its flaws, was a great e-commerce site by all traditional metrics. Easy UX, strong branding, solid product (a little Euro-Drippy for my liking, but hey, there's a customer for that), top-notch product photography--the works. On the surface, it was a well-oiled e-comm machine. To boot, it was powered by Yoox, perhaps the strongest e-commerce logistics operation in the world outside of non-fashion pure plays like Amazon, Jet and Alibaba. And it failed. Why? It succumbed to the cookie cutter mould and indulged the race to the bottom without properly building a brand and developing loyalty (something that is increasingly lacking in today's dog-eat-dog digital landscape). Heck, the only time I ever bought anything on The Corner was when they beat another site I preferred on price.
That's just a single example of designer/luxury e-commerce failure. The examples in the contemporary and emerging space are even more biting. I say that because in this market segment brands that have failed usually do a fantastic job in building brand awareness and customer loyalty. Instead, they simply suffer from increased competition, poor management and exorbitant digital marketing spends. Take Karmaloop, for instance. At its peak, the site generated over $100 million in revenue. The brand was airtight, from voice to content. Karmaloop filed for bankruptcy protection in May 2015. Or how about the more recent example of Nasty Gal? In 2015, Nasty Gal surpassed revenue of $300 million. With a brand that screams "déclassé mais je m'en fous," with a social media following over 2 million strong and strong ties with the influencer community, Nasty Gal seemed to have it all together. Two weeks before "Black Last Week of November," however, Nasty Gal filed for bankruptcy and is currently in a 363 sale bid with basement dwelling fast fashion e-tailer BooHoo. Reports cite a terrible lack of leadership and outrageous spending habits with respect to both brands (not surprisingly, most of which are tied to customer acquisition and retention).
If Karmaloop + The Corner + Nasty Gal = fashion e-commerce's version of Bear Stearns, I think it would be safe to forecast that we are not that far away from our version of Lehman Brothers. As a retailer, it hurts me enormously to write this, but we've brought it upon ourselves. The discounts have to stop and the commoditization of brand lists needs to go away. Retailers need to develop, and stay true to, a unique point of view and stop spending outrageous sums to acquire customers. Supply chains need to get smarter and more efficient. Brands need to cultivate a voice and disseminate it in engaging ways. And the industry needs to right-size itself before it can begin administering digital methadone to the fiends that are hooked on their discount heroin.
* Footnote: This race to the bottom resembles the Jimmy Carter 1978 airline deregulation in some ways. This resulted in the price wars of the '80s and '90s which in turned resulted in 47 bankruptcies in less than a decade in the early 21st century. For a good read, check out this 2011 article from The Atlantic.