Can Failed Retail Fashion Brands Find An Afterlife Online?
Failed fashion brands might think they’ve died and gone to heaven if they buy the promise that Onestop Internet is offering, as reported in Wall Street Journal. The WSJ article maps out a plan for failed retail brands to remain viable by closing stores and “transition to online-only fashion labels,” by partnering with Onestop.
The Compton, California-based company offers “end-to-end commerce solutions” and in its thirteen years of operation reports servicing more than 120 brands to launch e-commerce capability. Apparently bankrupt American Apparel and BCGC Max Azria believe their brand can go on in the digital afterlife that Onestop promises.
Onestop’s compelling case for this online-only tactic is made by the numbers. They breakdown the costs and profits for a sample pair of $150 jeans, showing that profits soar to 30% using its online-only model, as compared with 16% for a sale made at retail. Can’t you all hear the calculator keys clicking among the investment firms that have picked up so many of these brands in bankruptcy proceedings?
Frankly, I’m a bit skeptical about the cost/profit breakdown Onestop reports, but it is clear that by cutting out the high costs of physical stores, with its staffing requirements and premium rental fees, which the company estimates at $120/square foot, an online-only model is more cost-effective. That is, if the fashion brands can actually generate sales online, which is a variable that isn’t really addressed in the model. If people don’t want to buy the brand in the store, what makes anyone think they will want to buy it online?
While I am not sure that failed fashion brands can actually be resurrected online, I think that the Onestop approach might offer hope to those that are failing, but not completely dead , brands like J. Crew.
The retail apocalypse calls all store-bound retailers to confront the drag that excess, unproductive retail space represents. If they took dramatic steps right now to close underperforming stores and spruced up those locations that still have life in them, investing in both the physical environment and even more toward training and developing the service staff, they could buy time by amping up their e-commerce presence for customers left behind in areas where stores are closed.
Maybe that means a brand might right size from 300 locations to a dozen, but those dozen stores will really sing. If we’ve learned nothing else from the retail apocalypse, it is that bigger isn’t better. Better is better and this could be a way for fashion brands that still have some life to find revival.
In following such a course, the company that remains will learn two lessons that will be critical for success in the evolving retail landscape. By focusing on developing the human capital, service side of their retail operation, instead of spreading it so thin as in the current overstored environment, they will learn how to exploit the incredible power of person-to-person retail, something they’ve lost sight of today.
And by depending so heavily on e-commerce for sales, they will no longer operate in silos where retail is handled by one team and internet by another. The company will be compelled to learn the new business model described as “unified commerce,” by omni-channel consultant Steven Dennis.
While I don’t think an internet-online solution can give new life to dead fashion brands, I think a complete operational overhaul is needed for brands with some life left in them. They need to cut the losses in poorly performing store fronts and rely more heavily on e-commerce for sales. Once they make such dramatic moves, when it is time to start to open new stores, which hopefully they will do judiciously next time, they will be ready to compete in the brave new world of omni-channel fashion retail.