The European online fashion business is fierce. Just ask backers of one-time highfliers like boo.com, the urban sportswear retailer that tanked last year, and Dressmart.com, the struggling men’s wear specialist. Those once stellar online brands expanded too fast, spent much more than they earned, and then lost their investor support after Internet stocks began plummeting last April. The markets sent online fashion stores a tough message: Come up with business models that generate revenues.
A few firms have shown that not all online fashion shops are Internet disasters. Copenhagen-based Haburi.com, the designer-label discount store, Sweden’s sportswear vendor Sportus and the Italian shirts store Marco Bracci are doing well in a very tough environment.
Haburi's distinctive business model is an Internet version of the factory outlet where brand manufacturers sell directly to consumers at lower prices from huge out-of-town shopping malls. A concept used in the U.S. far more than in Europe, and Haburi wants to fill the gap. Michael Vad, Haburi's CEO, says that Europe's apparel factory outlet sector could yield $ 10 billion in sales annually.
According to Vad, national regulations that limit malls outside city centers have hampered the development of this sector. “For the consumer, there’s the two-hour drive to the mall, and when you get there you don’t know whether you’ll get the size or color you want,” says Vad. By going online, Haburi aims to cut the retailer's costs, save consumers the long drive, and deliver orders within two to five days. Haburi splits net revenue 50-50 with the brand manufacturers.
Haburi already has about 30,000 online customers. The additional $12 million invested in Haburi last June indicates investors will still back business-to-consumer Internet companies, but only if they have a solid strategic vision and not just a fashionable whim spurred by Internet hype. So where did Dressmart and boo.com go wrong? “They were supposed to run out of money. They were among the companies that only got investment money if they promised very rapid expansion,” observes Ola Ahlvarsson, Stockholm-based CEO of Result Venture Knowledge International, a venture capital firm that controls Sportus. But the rules have changed since Internet stocks dived last year.
Apparel is difficult to sell online because people like to feel and touch the clothes they buy. For the online retailer, acquiring the items, inspecting them, cleaning and storing them before shipping orders, plus handling returns, can be expensive. “The cost of customer service in the apparel business is much higher than selling books or even furniture,” says Matthew Nordan, a retail analyst at Forrester Research's Amsterdam office. Unless linked to a major established operation, an online retailer needs a competitive edge. For example, Italian shirt maker Marco Bracci sells expensive goods for high profits and has cornered a niche market. Dressmart, on the other hand, tried to do too much too soon. Originally it planned to sell only shirts and to make the ordinal Swedish operation profitable before branching out. But within months it tried to go pan-European and sell everything including ties, shoes and sportswear, and to rent physical outlets at airports. Dressmart, on the verge of bankruptcy and searching for a backer, has now scaled back and operates only in Sweden.
Ahlvarsson says one-year-old Sportus, currently trading in the Netherlands, Finland, Sweden and Norway, succeeds by keeping costs to a minimum, unlike boo.com which spent around $125 million in its brief existence. “Boo.com also bought its technology for about $10 million. That’s unrealistic. We spent $300,000 on ours and it works like clockwork,” Ahlvarsson claims. “In the Internet world, they think the guy with the most marketing money will win. It is, in fact, the guy with the best management team and supporting organization.”
Despite its apparent success, CEO Vad admits that the recent shakeout in online clothes retailers has affected Haburi. “We’re going to postpone our Asian launch. We need to build our brands and get the right sales volume and be a lot smarter,” he says. In other words, the successful online fashion retailers are the ones that stick to their knitting.
1. The author says that “Haburi wants to fill the gap”. What does it mean?
2. Which of the following statements is true according to the passage?
3. According to the passage, Italian shirt maker Marco Bracci（ ）.
4. Which of the following reasons contributes to the failure of many online fashion businesses?
