Is there a winner in the Fashion E-commerce Race?

"Fashion e-commerce is heating up. In a race between luxury incumbents, ‘pure play’ e-tailers and a slew of upstarts with new business models, who will come out ahead?

On paper, the merger of Yoox and Net-a-Porter is a perfect union of front- and back-end excellence... Yoox, which began by selling discounted, end-of-season merchandise, is a leader in back-end operations and now powers e-commerce sites for several Kering brands, as well as Armani and Valentino. Meanwhile, Net-a-Porter, which began with full-price merchandise, excels at front-end customer experience, with beautiful packaging, same-day delivery and glossy editorial content. “The two businesses can piggyback on each other now,” said Luca Solca, head of luxury goods at Exane BNP Paribas...

For the most part, retailers like Yoox and Net-a-Porter operate a traditional wholesale model, buying and pushing out merchandise to customers. These businesses take on significant inventory risk and have high working capital requirements. Companies like Lyst, on the other hand, are taking a new approach, providing technology platforms that allow certain users (brands and retailers) to display items for other users (shoppers) to consume, without buying and holding inventory... Meanwhile, platforms like Farfetch, Lyst and Spring have yet to turn a profit. What’s more, many of these businesses lack strong brands around which to forge meaningful, non-transactional relationships with consumers...

The omni-channel revolution puts e-tailers which lack physical stores, like Yoox Net-a-Porter, at a disadvantage, while boosting incumbents like Neiman Marcus, which was early to e-commerce, launching online in 1999...

Meanwhile, ‘sharing economy’ start-up Rent The Runway is challenging the idea of owning fashion altogether with a Netflix-like rental service offering items from brands like Balenciaga...

So between incumbents like Neiman Marcus, traditional e-tailers like Yoox Net-a-Porter and platform players like Farfetch and Lyst, who is best positioned to capitalise on the growing market? “I think we can say incumbents stand the best chance, as they can combine physical and digital capabilities,” said Luca Solca. “Online ‘pure players’ like Yoox Net-a-Porter should be next in line, as they have better control on their offer versus alternative business model players like Lyst and Farfetch.” But there will not be one winner-takes-all model for fashion... "

Read the full article at Business of Fashion.

Image Credit: Business of Fashion