8 ms·

Building a Fashion Company on the Internet? Stop. Just stop.

122 points by rokhayakebe 15y ago

chime 15y ago
> My guess is that the “back-end” supply chain / software / inventory management problems are just not as sexy as the “front-end” consumer-facing problems, or maybe the consumer-facing problems are just more intuitive. Absolutely! I wrote MRP systems for a pharma manufacturing in Florida and the kind of stuff I had to do on a daily basis far surpassed the complexity of your breathtakingly-beautiful but typical project-management webapp or customized T-shirt webstore. Let me be clear, complexity has absolutely nothing to do with the merit of one product vs. another. KhanAcademy code could be simple as 2nd grade math but nothing I ever write will ever be as beneficial to the world. However, complexity is expensive, takes time and dedication, and rarely pays off in the short-term. There is a reason most supply chain software installations run in the millions to tens of millions. Here's an example of something I wrote while ago: A drag & drop scheduler in JS, kinda like Google Calendar that lets you schedule production jobs on different equipment, across different labor teams. When you change a single job on the schedule, it auto-calculates the entire requirement for the entire company. Moving one production job up (say shampoo for customer A) could end up in the company losing $500k because one of the ingredients that went into shampoo for A also goes into conditioner for customer B. This particular item has a lead time of 3m from China. And since order for B is significantly larger in amount, every single day of delay is money actually lost because you bought all the other raw materials for B on credit from the bank and now have to pay interest on it, while it just sits in the warehouse waiting for the raw material to be flown in from China. Of course, this is something you want to avoid in the planning stage itself. And that's what the software does and warns the user within seconds of making any changes. One tiny bug in the code, say it doesn't correctly factor in the internal lead time from QC (this particular chemical needs to be sampled for microbiological contamination) and you just delay the project by a week. Putting up a pretty website is hard work but it is nothing compared to hiring 20 people to spend 3 months mapping out the multi-stage routings for 500 different SKUs. No tech-VC wants to invest in businesses that require a tremendous amount of operational labor. That's what banks are for.
- astrofinch 15y ago
  Working on a project like that sounds like a lot of fun. I guess there must not be very much money in it though because every company requires custom software, eh?
  - arethuza 15y ago
    There is actually a huge amount of money in that space - think Oracle, SAP and many others.
    - nickpinkston 15y ago
      *If you're good at direct enterprise sales... Most startup guys I know prefer PR, metrics, A/B testing, etc. over this type of meat and potatoes type of work.
  - pointyhat 15y ago
    Having done a LOT of work in that space (historically), I can assure you it's all SAP, Oracle, PeopleSoft, AS400 and epic quantities of turds. The largest turd being EDI and all sorts of nastyness. It's not fun. It's actually painful. It takes a special kind of person to do it: Someone who doesn't care about what they do, just the money.
    - chime 15y ago
      > It's not fun. It's actually painful. It takes a special kind of person to do it: Someone who doesn't care about what they do, just the money. In large companies, absolutely. But for rapidly growing companies, this is one of the most challenging jobs out there and you really start to care about it on a personal level. I can make one change on the barcode scanners that saves the six warehouse guys over two hours a day. It actually improves their quality of work life by reducing potential for conflicts and blame. You won't get mentions on TechCrunch but you will help out individuals on a personal basis and the company on an efficiency basis. Unfortunately the money is way better everywhere else for someone with skills to do this right.
switch 15y ago
Not really a well thought out article. Here's why - 1) Why should anyone care about solving the problems that the writer of this article wants to see solved? 2) She fixates on the 3-8% that affiliate sites make without considering a few things: a) Sites make that regardless of where the user actually buys. So if someone comes to your site and decides to buy a jacket you make money whether they buy it from Retailer A or Retailer B. b) It's usually 10% for fashion sites and once you are driving larger volume you can cut deals for 15%. c) If you become the decision engine (something Google and Bing are trying to do with their Flight Search and other initiatives in various verticals), then you can easily take over the entire business. If people are coming to you and you help them decide what to buy - then you can start selling them that stuff. 3) The costs and barrier to entry is much lower if you are trying to fix the discoverability problem. 4) The real problem, and the most important thing, is the role of fashion. What fashion really does. That can be tackled completely in the online world through a website. 5) Fashion is a market that is going to make a lot of startups a lot of money. Things that signal status (such as special electronic brands and designer bags and Grey Goose vodka) are never going to go out of style. Instead of listening to this writer's advice, any company going into fashion should look at how backward thinking most people in the industry are, how little they understand technology, and how they are unwilling to admit the core purpose of fashion. The easiest entry is discoverability and influence and that's also the most powerful element of the fashion ecosystem. If you become the discovery engine and the decision engine then it's game over for everyone else. All those VCs funding fashion startups are not idiots.
- sliverstorm 15y ago
  For criticizing her article for not being "well thought-out", you sure didn't write a well thought-out reply. I don't see how your reply actually disproves anything she said; you've basically just said, "no, she's wrong... because she is wrong."
  - switch 15y ago
    No she is wrong because of this: c) If you become the decision engine (something Google and Bing are trying to do with their Flight Search and other initiatives in various verticals), then you can easily take over the entire business. If people are coming to you and you help them decide what to buy - then you can start selling them that stuff. * If you become the decision engine for Fashion you can decide everything else. I think perhaps it's not very clear until you consider what WalMart has done and what Amazon is doing. And what Google is trying to do. You start off as the starting point and then you start taking over more and more until you start producing the products you were originally only linking to.
jfarmer 15y ago
So, I'm going to toot my own horn here, because this article is extremely well timed. (Note: her site is down now, thanks HN! :P) This line of reasoning is exactly why we decided at Everlane to start manufacturing our own apparel. You just don't capture enough of the value if you exist as a pure discovery layer unless you (somehow) get everyone and their uncle visiting you, looking to purchase, i.e., Google. The internet does afford you the opportunity to redefine how people shop, but sorry: you're probably going to have to really sell things. If that sounds rad, come join us and send me an email at jesse@everlane.com Edit: Just noticed the article is about a month old. So, well-timed, but not timely.
- brianbreslin 15y ago
  Jesse, Interesting approach, who are YOUR target customers though? What is their shopping profile? I signed up out of curiosity, but never spend $120 on a shirt (I do spend $75 maybe on a dress shirt). I'm not in fashion, just a fan of e-business in general.
- robozome 15y ago
  PS - if your site demands this: Access my basic information: name, profile picture, gender, networks, user ID, list of friends, and any other information I've shared with everyone. Send me email Post status messages, notes, photos, and videos to my Wall Access my data any time Everlane may access my data when I'm not using the application [and more....] I instantly discard the possibility of ever signing up for an account.
  - colinloretz 15y ago
    Agreed, I was very interested until I discovered the only option to sign up for future notification was nearly complete access to Facebook. I would love to get future invites but it would be great if there were alternatives for signing up.
  - jfarmer 15y ago
    We've tested the page, and this converts no worse than the alternatives.
badclient 15y ago
What companies is she even talking about? Because the best fashion-related startups that I am aware of are super revenue and retail focused. I am talking about renttherunway, or this other startup that sells subscriptions to product trials etc.
- jfarmer 15y ago
  She's talking about sites like Pinterest, Svpply, TheFancy, etc.
kariatx 15y ago
"In fashion, trust me, that are MANY problems that need to be solved: a highly antiquated supply chain, non-standard, un-linked computer systems, non-standard sizing that varies even within the same line, inefficient pricing methods." I don't see why internet fashion companies couldn't take a crack at solving / mitigating at least some of these. For example, there are some sites (like zafu.com - no affiliation) that help women find jeans that fit. They can't change the sizes on the jeans, but I'm not holding my breath for the fashion industry to make sizing any easier any time soon. I also disagree with her claim that discoverability is not a problem. A lot of people are trying to solve it, but I don't consider it solved for myself (or other women I know). I find the choices in women's fashion to be overwhelming (to say the least), and I'm still looking for the more efficient ways to find clothes I like. I agree with her overall point that the number of trendy affiliate fashion sites is getting tiresome, but that doesn't mean that they couldn't be developed in interesting ways. It may be true that affiliate sites need to sell a ton more in order to compete with "click-and-mortar" fashion companies, but I'd argue that affiliate sites can also be more innovative, flexible, and forward thinking. If you're not shipping or manufacturing, you can iterate more quickly.
- melanie_io 15y ago
  I was actually discussing this very point with a good friend of mine who also runs a fashion startup the other day. To refine what I said: it's not that discoverability is not a problem, it's that all of the new fashion apps (from Lyst to Fashism to Inporia to Svpply to Google Boutiques) seem to have only increased the "noise" versus decrease it. In fashion, customers pay for the edit: a small, curated collection of products that an editor has determined best fits her customer's profile. To argue that we can somehow replace this very right-brained activity with crowdsourcing or algorithms is untenable.
  - chime 15y ago
    > To argue that we can somehow replace this very right-brained activity with crowd-sourcing or algorithms is untenable. For now maybe. Ten years ago if you asked me if I'd spend 2 hours watching a movie because a computer said so, I'd laugh. Netflix recommendations, while not perfect, are still very good. Had I not told Netflix that I loved District 9, it would not have suggested Torchwood: Children of Earth to me. Had it not suggested Torchwood, I wouldn't have discovered that Doctor Who was back on air. Right now I get about 50% of my entertainment discovery done via algorithms. Sure, fashion is difficult and subjective but I don't see it as being any different from music or entertainment in the big picture sense. Btw, that was a very well-written article. Thanks for sharing.
Hisoka 15y ago
I agree with her ideas for the most part. You need tremendous scale to make something like ShopStyle profitable. But even if you sell stuff, it's hard to differentiate yourself from the crowd as well.. and if you do software for the back-end.. ugh.. maybe it's because I'm into consumer web, but I can't imagine how to market to those type of companies who have age-old processes that are incredibly hard to overthrow.
shaanbatra 15y ago
"In the end, Fashion 2.0 is really not that much different than Fashion 1.0, in order to win, one must focus intently on building a better product that solves a real problem – you know, just like every other successful business in the world…." So true. People are so focused on 'social' that they are ignoring the real problems.
astrofinch 15y ago
Wouldn't you want to solve the customer acquisition process 1st and then re-factor your supply chain once your customer base is large enough to warrant the effort?
- jfarmer 15y ago
  Now you have to build two successful products: one to acquire customers, and one to sell to them.
  - astrofinch 15y ago
    You mean one to acquire customers and one to do customer fulfillment. And customer fulfillment is useless if you don't have any customers. This seems obvious.
    - jfarmer 15y ago
      No, I meant what I said. Why spend time and energy building a huge consumer success if your goal is to sell things? Name some successful online commerce companies that started that way. Most (I won't say all) started as pure commerce, e.g., Gilt. If you're ShoeDazzle selling shoes for $40/month, your customer acquisition problem is fundamentally different than a site like Svpply. If you want to sell things, sell things. Don't try to play 3d chess.
      - astrofinch 15y ago
        Could you provide support for your assertion that the customer acquisition problem is fundamentally different?
        jfarmer 15y ago
        1. ShoeDazzle can afford to pay for customers 2. ShoeDazzle needs far fewer customers to generate significant revenue 3. ShoeDazzle's value proposition is much clearer -- either you want shoes to buy Kim Kardashian shoes, or you don't 4. Users join a site like Svpply vs. a site like ShoeDazzle for very different reasons. There's just so much evidence that you can build a successful online retail presence without going through the first stage that it honestly seems stupid to me. Warby Parker, Bonobos, Gilt, One King's Lane, Jack Threads, BeachMint, ShoeDazzle, BirchBox, Rent the Runway, etc., etc., etc. just opened a f(*&ing store.
reinhardt 15y ago
The start-up I am contracting for is in a similar business (homeware and interior design) and has recently made the same decision to shift focus from a low margin, high volume affiliate model to a low volume, high margin "boutique" model. Curious to see how it pans out.
- OWaz 15y ago
  The low volume & high margin fashion site probably has a good chance of being successful as long as it carries recognizable and fashionable brands. The reason I say that is that sites like Net-a-Porter and MrPorter (which probably are mid volume) seem to be doing quite well based on the few articles I've read. Below is just one in case anyone is curious. http://www.nypost.com/alexa/p/the_top_shop_2HqqVcU4pRZJisg0NinioK http://www.nypost.com/alexa/p/the_top_shop_2HqqVcU4pRZJisg0N...
  - reinhardt 15y ago
    Recognizable fashionable brands such as John Lewis do fine on their own and are not going to give up a large chunk of their margin to a middleman. The biggest challenge for the new business model is try to discover and push less known brands or brands with little/no online presence with high quality products.
diolpah 15y ago
This is a good read, and the author hits on some solid observations about the online apparel industry. That said, I am shocked about the claim that a single VC has funded an apparel retailer recently. I am in this industry, and I can assure you that it is about as unsexy as one could get from a VC perspective. I would love to know who all these recently funded apparel businesses are.
- jfarmer 15y ago
  Uhhh, what? Not all apparel, but: ShoeDazzle, BeachMint (StyleMint/JewelMint), Rent the Runway, Warby Parker, Gilt, One King's Lane, Send the Trend Anyhow, the list goes on, and it includes us at Everlane (http://www.everlane.com http://www.everlane.com). Some of these (including us) are vertically integrated.
  - diolpah 15y ago
    It seems I'm completely out of the loop, having heard of none of these except for Gilt. Thank you.
    - jfarmer 15y ago
      I forgot Trunk Club http://allthingsd.com/20110908/trunk-club-raises-11-million-to-shop-for-men-who-hate-the-mall/ http://allthingsd.com/20110908/trunk-club-raises-11-million-...
      - diolpah 15y ago
        That article is just incredible. $11MM raised, assuming 25% dilution, giving them a ~$44MM valuation on only $1MM in revenue? I had not the faintest idea there was a huge valuation bubble in my own industry. I am a little bit shocked.
- epicviking 15y ago
  Gilt is VC funded I believe
colinloretz 15y ago
The best example of a fashion startup I've seen is Indochino (www.indochino.com). They were faced with many of these issues and have gone and taken full control of their end to end supply chain. They are selling "physical fucking product" but they are making it more personalized and custom tailored (pardon the pun), direct to the customer. I don't have much need for wearing a suit these days, but the moment I do, they will be the first and only place I go. In the beginning they even offered education to their customers around things like 1) selecting the right suit for the occasion 2) various types of ties/ways to tie a tie 3) type of cuffs, etc. They seem to have gotten rid of the education aspect of the business but I found it really helpful as someone who like fashion but doesn't know much about it.
- epicviking 15y ago
  I actually think Indochino is an example of someone focusing too much on the "physical fucking product" and missing some chances to do some real innovative stuff. They could potentially offer some really neat customizations, possibly even a full "internet bespoke tailor experience" kind of thing, but they avoid that in favor of more dumbed down aspirational product that tries to sell itself as something it isn't. As for wanting to learn more, I'm currently teaching a university of reddit course on menswear customs, history, and how tos. Its under menswear 101. Go check it out.
  - viraptor 15y ago
    I don't really agree. Maybe it's "dumbed down" experience comparing to a private tailor. But at that price range just getting out of the "standardised sizes" and getting details you want is worth it. Kind of like what http://www.tailorstore.co.uk http://www.tailorstore.co.uk provides. Barely anyone has actually heard about online stores like that. Amazon is the default. Why offer more customisations when people are not really ready for the basic customised experience?
    - epicviking 15y ago
      I think Indochino would benefit from pushing the customization angle though. As it stands now they are simply offering a product not unlike Banana Republic with a bit more customization in the lining and a bit in the sizing. I think the number of people who want custom suits is a lot higher than you think (not to mention, Indochino's business model is highly dependent on return customers) and aiming more for the market currently only filled by traveling Hong Kong tailors might be in their better interest. I do think they are going in that direction though.
andreasklinger 15y ago
I run a fashion startup involving sampling, serial production and fulfillment. I couldn't agree more with Melanie. The risk aspect sizing and inventory management is a bit downplayed imho. Stocking breaks necks. Good merchandising is more important than breathing oxygen. Btw i would also appreciate HNs feedback on my company: http://www.lookk.com http://www.lookk.com - if there is interest i could do a "show hn" post.
- epicviking 15y ago
  You really would benefit from sorting the items you have for sale. At the least Man and Woman.
  - andreasklinger 15y ago
    Thanks for the feedback. The shop is yet very MVP-like. We are currently working on it.
    - amac 15y ago
      Interesting. Why did you decide to re-brand as Lookk from Garmz may I ask? (I took about 12 months to find the Lifemall name for my site)
- melanie_io 15y ago
  Huge fan of what you guys are doing. It speaks volumes that Carmen choose you as one of her first investments post Net-A-Porter. The products are really well-curated and it is one of the few sites I have seen that might actually have a shot at closing the 4-6 month production gap and reducing remnant inventory. As anyone in the apparel business knows, you have two businesses: one full-price business and one remnant inventory business. The key to success is keeping your remnant inventory business as small as possible by closely matching production with demand, this balance can be difficult for an emerging designer with no experience, so I applaud you for trying to fix this problem and make it easier for a new designer to start a business. Good luck with everything!
ig1 15y ago
This article misses a huge point, it assumes <10% affiliate fees are the end game for these startups. If one of these startups manages to get significant market share, what stopping them from building a supply chain down the line (or acquiring someone who has a good one) and using that to tripple profit margins. It sounds to me that these startups are thinking "lets not waste a lot of money investing in a supply chain (ala webvan)". The quality of your supply chain might help you drive down costs, but it's going to do little to increase your market share. The marketing and shop-front are the biggest factors that are going to impact market share, so it makes much more sense to focus the investment in those areas and outsource everything else until you're ready to expand. VC's aren't stupid, they're looking at the bigger picture.
bermanoid 15y ago
Take, for example, a traditional retailer such as Opening Ceremony. After shipping, merchant fees, packaging, and COGS, they produce an average gross margin around 40% (the industry standard) – after accounting for photography expenses (which most affiliate sites do not have), let’s say the margin is around 30%. Whereas a fashion site that generates revenue mainly from affiliate fees will collect only 3-8% of the revenue on each sale. That means that the new, lightweight fashion site must sell 4x-10x more inventory than Opening Ceremony in order to produce similar profit margins. On the hierarchy of risk, figuring out a way to sell 10x more than your competitor in order to just stay in the game is a much larger risk than the inventory management issues of a traditional retailer. We're seriously comparing B+M company with gross margins of 30% to a lean startup receiving affiliate fees of (let's take the worst case, even) 3% on a product and suggesting that the affiliate has to sell 10x as much "in order to stay in the game"? Plain and simple, you cannot compare these numbers, they have absolutely nothing to do with one another. That 3% affiliate fee is as close to pure, unadulterated gravy as you can get in business - it's profit practically from day one, regardless of volume. It's probably being chopped up between three dudes working out of a garage somewhere, whose entire set of business expenses comes down to some electricity, a few meals a day, and a $0.34 / hour large EC2 instance. If their volume went up by a factor of 10, then maybe they'd need to add another few servers (each of which is probably making them thousands of dollars per hour, if it's pegged). With affiliate marketing, if you've got high volume, your margin approaches 100%, since your expenses are pretty much independent of your sales (unless you're reliant on advertising, which to be fair is another matter altogether) - would it then make sense to say that traditional retailers need to sell 3x as much product to stay above water? No, because it's an apples to oranges comparison. Now, if you wanted to claim that in order to have similar total profits to the traditional retailer the startup would have to move 10x as much product, we can start talking. But the point is, they don't need as much profit to compensate everyone involved at the same level - that traditional retailer probably has at least 10x as many people employed per unit sold as the startup does, and the startup's advantage there scales much better with increasing volume. It certainly may be the case that pure-online fashion sites are fundamentally doomed to fail for some reason, but if so, the article offers no real evidence. All we've seen is an argument that would also imply that Amazon, Netflix, iTunes, and most other online product sales businesses should fail, because they all have much smaller profit-per-unit figures than traditional brick and mortars.
girlvinyl 15y ago
One of the three cited examples of success in the article - One King's Lane - isn't a fashion/apparel retailer at all. It's a home decor and furniture flash sales site.

122 points by rokhayakebe 15y ago

chime 15y ago

> My guess is that the “back-end” supply chain / software / inventory management problems are just not as sexy as the “front-end” consumer-facing problems, or maybe the consumer-facing problems are just more intuitive. Absolutely! I wrote MRP systems for a pharma manufacturing in Florida and the kind of stuff I had to do on a daily basis far surpassed the complexity of your breathtakingly-beautiful but typical project-management webapp or customized T-shirt webstore. Let me be clear, complexity has absolutely nothing to do with the merit of one product vs. another. KhanAcademy code could be simple as 2nd grade math but nothing I ever write will ever be as beneficial to the world. However, complexity is expensive, takes time and dedication, and rarely pays off in the short-term. There is a reason most supply chain software installations run in the millions to tens of millions. Here's an example of something I wrote while ago: A drag & drop scheduler in JS, kinda like Google Calendar that lets you schedule production jobs on different equipment, across different labor teams. When you change a single job on the schedule, it auto-calculates the entire requirement for the entire company. Moving one production job up (say shampoo for customer A) could end up in the company losing $500k because one of the ingredients that went into shampoo for A also goes into conditioner for customer B. This particular item has a lead time of 3m from China. And since order for B is significantly larger in amount, every single day of delay is money actually lost because you bought all the other raw materials for B on credit from the bank and now have to pay interest on it, while it just sits in the warehouse waiting for the raw material to be flown in from China. Of course, this is something you want to avoid in the planning stage itself. And that's what the software does and warns the user within seconds of making any changes. One tiny bug in the code, say it doesn't correctly factor in the internal lead time from QC (this particular chemical needs to be sampled for microbiological contamination) and you just delay the project by a week. Putting up a pretty website is hard work but it is nothing compared to hiring 20 people to spend 3 months mapping out the multi-stage routings for 500 different SKUs. No tech-VC wants to invest in businesses that require a tremendous amount of operational labor. That's what banks are for.

astrofinch 15y ago
Working on a project like that sounds like a lot of fun. I guess there must not be very much money in it though because every company requires custom software, eh?
- arethuza 15y ago
  There is actually a huge amount of money in that space - think Oracle, SAP and many others.
  - nickpinkston 15y ago
    *If you're good at direct enterprise sales... Most startup guys I know prefer PR, metrics, A/B testing, etc. over this type of meat and potatoes type of work.
- pointyhat 15y ago
  Having done a LOT of work in that space (historically), I can assure you it's all SAP, Oracle, PeopleSoft, AS400 and epic quantities of turds. The largest turd being EDI and all sorts of nastyness. It's not fun. It's actually painful. It takes a special kind of person to do it: Someone who doesn't care about what they do, just the money.
  - chime 15y ago
    > It's not fun. It's actually painful. It takes a special kind of person to do it: Someone who doesn't care about what they do, just the money. In large companies, absolutely. But for rapidly growing companies, this is one of the most challenging jobs out there and you really start to care about it on a personal level. I can make one change on the barcode scanners that saves the six warehouse guys over two hours a day. It actually improves their quality of work life by reducing potential for conflicts and blame. You won't get mentions on TechCrunch but you will help out individuals on a personal basis and the company on an efficiency basis. Unfortunately the money is way better everywhere else for someone with skills to do this right.

switch 15y ago

Not really a well thought out article. Here's why - 1) Why should anyone care about solving the problems that the writer of this article wants to see solved? 2) She fixates on the 3-8% that affiliate sites make without considering a few things: a) Sites make that regardless of where the user actually buys. So if someone comes to your site and decides to buy a jacket you make money whether they buy it from Retailer A or Retailer B. b) It's usually 10% for fashion sites and once you are driving larger volume you can cut deals for 15%. c) If you become the decision engine (something Google and Bing are trying to do with their Flight Search and other initiatives in various verticals), then you can easily take over the entire business. If people are coming to you and you help them decide what to buy - then you can start selling them that stuff. 3) The costs and barrier to entry is much lower if you are trying to fix the discoverability problem. 4) The real problem, and the most important thing, is the role of fashion. What fashion really does. That can be tackled completely in the online world through a website. 5) Fashion is a market that is going to make a lot of startups a lot of money. Things that signal status (such as special electronic brands and designer bags and Grey Goose vodka) are never going to go out of style. Instead of listening to this writer's advice, any company going into fashion should look at how backward thinking most people in the industry are, how little they understand technology, and how they are unwilling to admit the core purpose of fashion. The easiest entry is discoverability and influence and that's also the most powerful element of the fashion ecosystem. If you become the discovery engine and the decision engine then it's game over for everyone else. All those VCs funding fashion startups are not idiots.

sliverstorm 15y ago
For criticizing her article for not being "well thought-out", you sure didn't write a well thought-out reply. I don't see how your reply actually disproves anything she said; you've basically just said, "no, she's wrong... because she is wrong."
- switch 15y ago
  No she is wrong because of this: c) If you become the decision engine (something Google and Bing are trying to do with their Flight Search and other initiatives in various verticals), then you can easily take over the entire business. If people are coming to you and you help them decide what to buy - then you can start selling them that stuff. * If you become the decision engine for Fashion you can decide everything else. I think perhaps it's not very clear until you consider what WalMart has done and what Amazon is doing. And what Google is trying to do. You start off as the starting point and then you start taking over more and more until you start producing the products you were originally only linking to.

jfarmer 15y ago

So, I'm going to toot my own horn here, because this article is extremely well timed. (Note: her site is down now, thanks HN! :P) This line of reasoning is exactly why we decided at Everlane to start manufacturing our own apparel. You just don't capture enough of the value if you exist as a pure discovery layer unless you (somehow) get everyone and their uncle visiting you, looking to purchase, i.e., Google. The internet does afford you the opportunity to redefine how people shop, but sorry: you're probably going to have to really sell things. If that sounds rad, come join us and send me an email at jesse@everlane.com Edit: Just noticed the article is about a month old. So, well-timed, but not timely.

brianbreslin 15y ago
Jesse, Interesting approach, who are YOUR target customers though? What is their shopping profile? I signed up out of curiosity, but never spend $120 on a shirt (I do spend $75 maybe on a dress shirt). I'm not in fashion, just a fan of e-business in general.
robozome 15y ago
PS - if your site demands this: Access my basic information: name, profile picture, gender, networks, user ID, list of friends, and any other information I've shared with everyone. Send me email Post status messages, notes, photos, and videos to my Wall Access my data any time Everlane may access my data when I'm not using the application [and more....] I instantly discard the possibility of ever signing up for an account.
- colinloretz 15y ago
  Agreed, I was very interested until I discovered the only option to sign up for future notification was nearly complete access to Facebook. I would love to get future invites but it would be great if there were alternatives for signing up.
- jfarmer 15y ago
  We've tested the page, and this converts no worse than the alternatives.

badclient 15y ago

What companies is she even talking about? Because the best fashion-related startups that I am aware of are super revenue and retail focused. I am talking about renttherunway, or this other startup that sells subscriptions to product trials etc.

jfarmer 15y ago
She's talking about sites like Pinterest, Svpply, TheFancy, etc.

kariatx 15y ago

"In fashion, trust me, that are MANY problems that need to be solved: a highly antiquated supply chain, non-standard, un-linked computer systems, non-standard sizing that varies even within the same line, inefficient pricing methods." I don't see why internet fashion companies couldn't take a crack at solving / mitigating at least some of these. For example, there are some sites (like zafu.com - no affiliation) that help women find jeans that fit. They can't change the sizes on the jeans, but I'm not holding my breath for the fashion industry to make sizing any easier any time soon. I also disagree with her claim that discoverability is not a problem. A lot of people are trying to solve it, but I don't consider it solved for myself (or other women I know). I find the choices in women's fashion to be overwhelming (to say the least), and I'm still looking for the more efficient ways to find clothes I like. I agree with her overall point that the number of trendy affiliate fashion sites is getting tiresome, but that doesn't mean that they couldn't be developed in interesting ways. It may be true that affiliate sites need to sell a ton more in order to compete with "click-and-mortar" fashion companies, but I'd argue that affiliate sites can also be more innovative, flexible, and forward thinking. If you're not shipping or manufacturing, you can iterate more quickly.

melanie_io 15y ago
I was actually discussing this very point with a good friend of mine who also runs a fashion startup the other day. To refine what I said: it's not that discoverability is not a problem, it's that all of the new fashion apps (from Lyst to Fashism to Inporia to Svpply to Google Boutiques) seem to have only increased the "noise" versus decrease it. In fashion, customers pay for the edit: a small, curated collection of products that an editor has determined best fits her customer's profile. To argue that we can somehow replace this very right-brained activity with crowdsourcing or algorithms is untenable.
- chime 15y ago
  > To argue that we can somehow replace this very right-brained activity with crowd-sourcing or algorithms is untenable. For now maybe. Ten years ago if you asked me if I'd spend 2 hours watching a movie because a computer said so, I'd laugh. Netflix recommendations, while not perfect, are still very good. Had I not told Netflix that I loved District 9, it would not have suggested Torchwood: Children of Earth to me. Had it not suggested Torchwood, I wouldn't have discovered that Doctor Who was back on air. Right now I get about 50% of my entertainment discovery done via algorithms. Sure, fashion is difficult and subjective but I don't see it as being any different from music or entertainment in the big picture sense. Btw, that was a very well-written article. Thanks for sharing.

Hisoka 15y ago

I agree with her ideas for the most part. You need tremendous scale to make something like ShopStyle profitable. But even if you sell stuff, it's hard to differentiate yourself from the crowd as well.. and if you do software for the back-end.. ugh.. maybe it's because I'm into consumer web, but I can't imagine how to market to those type of companies who have age-old processes that are incredibly hard to overthrow.

shaanbatra 15y ago

"In the end, Fashion 2.0 is really not that much different than Fashion 1.0, in order to win, one must focus intently on building a better product that solves a real problem – you know, just like every other successful business in the world…." So true. People are so focused on 'social' that they are ignoring the real problems.

astrofinch 15y ago

Wouldn't you want to solve the customer acquisition process 1st and then re-factor your supply chain once your customer base is large enough to warrant the effort?

jfarmer 15y ago
Now you have to build two successful products: one to acquire customers, and one to sell to them.
- astrofinch 15y ago
  You mean one to acquire customers and one to do customer fulfillment. And customer fulfillment is useless if you don't have any customers. This seems obvious.
  - jfarmer 15y ago
    No, I meant what I said. Why spend time and energy building a huge consumer success if your goal is to sell things? Name some successful online commerce companies that started that way. Most (I won't say all) started as pure commerce, e.g., Gilt. If you're ShoeDazzle selling shoes for $40/month, your customer acquisition problem is fundamentally different than a site like Svpply. If you want to sell things, sell things. Don't try to play 3d chess.
    - astrofinch 15y ago
      Could you provide support for your assertion that the customer acquisition problem is fundamentally different?
      - jfarmer 15y ago
        1. ShoeDazzle can afford to pay for customers 2. ShoeDazzle needs far fewer customers to generate significant revenue 3. ShoeDazzle's value proposition is much clearer -- either you want shoes to buy Kim Kardashian shoes, or you don't 4. Users join a site like Svpply vs. a site like ShoeDazzle for very different reasons. There's just so much evidence that you can build a successful online retail presence without going through the first stage that it honestly seems stupid to me. Warby Parker, Bonobos, Gilt, One King's Lane, Jack Threads, BeachMint, ShoeDazzle, BirchBox, Rent the Runway, etc., etc., etc. just opened a f(*&ing store.

reinhardt 15y ago

The start-up I am contracting for is in a similar business (homeware and interior design) and has recently made the same decision to shift focus from a low margin, high volume affiliate model to a low volume, high margin "boutique" model. Curious to see how it pans out.

OWaz 15y ago
The low volume & high margin fashion site probably has a good chance of being successful as long as it carries recognizable and fashionable brands. The reason I say that is that sites like Net-a-Porter and MrPorter (which probably are mid volume) seem to be doing quite well based on the few articles I've read. Below is just one in case anyone is curious. http://www.nypost.com/alexa/p/the_top_shop_2HqqVcU4pRZJisg0NinioK http://www.nypost.com/alexa/p/the_top_shop_2HqqVcU4pRZJisg0N...
- reinhardt 15y ago
  Recognizable fashionable brands such as John Lewis do fine on their own and are not going to give up a large chunk of their margin to a middleman. The biggest challenge for the new business model is try to discover and push less known brands or brands with little/no online presence with high quality products.

diolpah 15y ago

This is a good read, and the author hits on some solid observations about the online apparel industry. That said, I am shocked about the claim that a single VC has funded an apparel retailer recently. I am in this industry, and I can assure you that it is about as unsexy as one could get from a VC perspective. I would love to know who all these recently funded apparel businesses are.

jfarmer 15y ago
Uhhh, what? Not all apparel, but: ShoeDazzle, BeachMint (StyleMint/JewelMint), Rent the Runway, Warby Parker, Gilt, One King's Lane, Send the Trend Anyhow, the list goes on, and it includes us at Everlane (http://www.everlane.com http://www.everlane.com). Some of these (including us) are vertically integrated.
- diolpah 15y ago
  It seems I'm completely out of the loop, having heard of none of these except for Gilt. Thank you.
  - jfarmer 15y ago
    I forgot Trunk Club http://allthingsd.com/20110908/trunk-club-raises-11-million-to-shop-for-men-who-hate-the-mall/ http://allthingsd.com/20110908/trunk-club-raises-11-million-...
    - diolpah 15y ago
      That article is just incredible. $11MM raised, assuming 25% dilution, giving them a ~$44MM valuation on only $1MM in revenue? I had not the faintest idea there was a huge valuation bubble in my own industry. I am a little bit shocked.
epicviking 15y ago
Gilt is VC funded I believe

colinloretz 15y ago

The best example of a fashion startup I've seen is Indochino (www.indochino.com). They were faced with many of these issues and have gone and taken full control of their end to end supply chain. They are selling "physical fucking product" but they are making it more personalized and custom tailored (pardon the pun), direct to the customer. I don't have much need for wearing a suit these days, but the moment I do, they will be the first and only place I go. In the beginning they even offered education to their customers around things like 1) selecting the right suit for the occasion 2) various types of ties/ways to tie a tie 3) type of cuffs, etc. They seem to have gotten rid of the education aspect of the business but I found it really helpful as someone who like fashion but doesn't know much about it.

epicviking 15y ago
I actually think Indochino is an example of someone focusing too much on the "physical fucking product" and missing some chances to do some real innovative stuff. They could potentially offer some really neat customizations, possibly even a full "internet bespoke tailor experience" kind of thing, but they avoid that in favor of more dumbed down aspirational product that tries to sell itself as something it isn't. As for wanting to learn more, I'm currently teaching a university of reddit course on menswear customs, history, and how tos. Its under menswear 101. Go check it out.
- viraptor 15y ago
  I don't really agree. Maybe it's "dumbed down" experience comparing to a private tailor. But at that price range just getting out of the "standardised sizes" and getting details you want is worth it. Kind of like what http://www.tailorstore.co.uk http://www.tailorstore.co.uk provides. Barely anyone has actually heard about online stores like that. Amazon is the default. Why offer more customisations when people are not really ready for the basic customised experience?
  - epicviking 15y ago
    I think Indochino would benefit from pushing the customization angle though. As it stands now they are simply offering a product not unlike Banana Republic with a bit more customization in the lining and a bit in the sizing. I think the number of people who want custom suits is a lot higher than you think (not to mention, Indochino's business model is highly dependent on return customers) and aiming more for the market currently only filled by traveling Hong Kong tailors might be in their better interest. I do think they are going in that direction though.

andreasklinger 15y ago

I run a fashion startup involving sampling, serial production and fulfillment. I couldn't agree more with Melanie. The risk aspect sizing and inventory management is a bit downplayed imho. Stocking breaks necks. Good merchandising is more important than breathing oxygen. Btw i would also appreciate HNs feedback on my company: http://www.lookk.com http://www.lookk.com - if there is interest i could do a "show hn" post.

epicviking 15y ago
You really would benefit from sorting the items you have for sale. At the least Man and Woman.
- andreasklinger 15y ago
  Thanks for the feedback. The shop is yet very MVP-like. We are currently working on it.
  - amac 15y ago
    Interesting. Why did you decide to re-brand as Lookk from Garmz may I ask? (I took about 12 months to find the Lifemall name for my site)
melanie_io 15y ago
Huge fan of what you guys are doing. It speaks volumes that Carmen choose you as one of her first investments post Net-A-Porter. The products are really well-curated and it is one of the few sites I have seen that might actually have a shot at closing the 4-6 month production gap and reducing remnant inventory. As anyone in the apparel business knows, you have two businesses: one full-price business and one remnant inventory business. The key to success is keeping your remnant inventory business as small as possible by closely matching production with demand, this balance can be difficult for an emerging designer with no experience, so I applaud you for trying to fix this problem and make it easier for a new designer to start a business. Good luck with everything!

ig1 15y ago

This article misses a huge point, it assumes <10% affiliate fees are the end game for these startups. If one of these startups manages to get significant market share, what stopping them from building a supply chain down the line (or acquiring someone who has a good one) and using that to tripple profit margins. It sounds to me that these startups are thinking "lets not waste a lot of money investing in a supply chain (ala webvan)". The quality of your supply chain might help you drive down costs, but it's going to do little to increase your market share. The marketing and shop-front are the biggest factors that are going to impact market share, so it makes much more sense to focus the investment in those areas and outsource everything else until you're ready to expand. VC's aren't stupid, they're looking at the bigger picture.

bermanoid 15y ago

Take, for example, a traditional retailer such as Opening Ceremony. After shipping, merchant fees, packaging, and COGS, they produce an average gross margin around 40% (the industry standard) – after accounting for photography expenses (which most affiliate sites do not have), let’s say the margin is around 30%. Whereas a fashion site that generates revenue mainly from affiliate fees will collect only 3-8% of the revenue on each sale. That means that the new, lightweight fashion site must sell 4x-10x more inventory than Opening Ceremony in order to produce similar profit margins. On the hierarchy of risk, figuring out a way to sell 10x more than your competitor in order to just stay in the game is a much larger risk than the inventory management issues of a traditional retailer. We're seriously comparing B+M company with gross margins of 30% to a lean startup receiving affiliate fees of (let's take the worst case, even) 3% on a product and suggesting that the affiliate has to sell 10x as much "in order to stay in the game"? Plain and simple, you cannot compare these numbers, they have absolutely nothing to do with one another. That 3% affiliate fee is as close to pure, unadulterated gravy as you can get in business - it's profit practically from day one, regardless of volume. It's probably being chopped up between three dudes working out of a garage somewhere, whose entire set of business expenses comes down to some electricity, a few meals a day, and a $0.34 / hour large EC2 instance. If their volume went up by a factor of 10, then maybe they'd need to add another few servers (each of which is probably making them thousands of dollars per hour, if it's pegged). With affiliate marketing, if you've got high volume, your margin approaches 100%, since your expenses are pretty much independent of your sales (unless you're reliant on advertising, which to be fair is another matter altogether) - would it then make sense to say that traditional retailers need to sell 3x as much product to stay above water? No, because it's an apples to oranges comparison. Now, if you wanted to claim that in order to have similar total profits to the traditional retailer the startup would have to move 10x as much product, we can start talking. But the point is, they don't need as much profit to compensate everyone involved at the same level - that traditional retailer probably has at least 10x as many people employed per unit sold as the startup does, and the startup's advantage there scales much better with increasing volume. It certainly may be the case that pure-online fashion sites are fundamentally doomed to fail for some reason, but if so, the article offers no real evidence. All we've seen is an argument that would also imply that Amazon, Netflix, iTunes, and most other online product sales businesses should fail, because they all have much smaller profit-per-unit figures than traditional brick and mortars.

girlvinyl 15y ago

One of the three cited examples of success in the article - One King's Lane - isn't a fashion/apparel retailer at all. It's a home decor and furniture flash sales site.