A Guide to Selling Fashion Around the World Online

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FASHION

A guide to selling fashion around the world online

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A GUIDE TO SELLING FASHION AROUND THE WORLD ONLINE

CONTENTS

Introduction ........................................................................................................ 3 Fashion by numbers ....................................................................................... 4 How do consumers buy online? ............................................................... 7 Being discovered in new markets ......................................................... 14

Getting your clothes to international customers ........................ 19 Looking after your international customers .................................. 21

Focus on China ................................................................................................ 25 Interview with Lei ......................................................................................... 27

INTRODUCTION

The opportunities available to retailers within the fashion industry are enormous.

As the world becomes increasingly connected, it also becomes easier and cheaper to sell clothes, footwear and accessories to consumers in new countries. At the same time, as more people buy products online, the more sophisticated, streamlined and cost-effective the associated logistics become, making it faster and cheaper for sellers to reach their customers, wherever they may be.

The first section of this whitepaper takes an in-depth look at the statistics associated with the fashion industry and the size of the opportunity available to brands willing to take advantage of both the digitalisation and internationalisation of consumer culture.

The following sections address some of the questions that a fashion retailer must consider before selling their products online to multiple countries. We examine the habits of online consumers, the best way to market your online products in new regions, the different means of getting your products to your customers, and how to look after your international customers after purchase. The information provided should give retailers an idea of the various options available to them and how to choose the best ones for their business.

The final part of the whitepaper focuses on China, which is quickly becoming the most significant market for the fashion industry. The world’s most populous country also acts as an indicator of worldwide sales of clothes, footwear and accessories in the years to come.

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FASHION BY NUMBERS

The fashion industry, consisting of clothing (or apparel), footwear and accessories (e.g. bags, watches, jewellery, eyewear, and cosmetics and fragrances) was valued at an estimated $2.5 trillion making up 3% of global GDP in 2017. ¹In the same year, clothing and footwear accounted for 7.25% of total worldwide retail sales, valued at $1.7 trillion.

These numbers demonstrate the wealth of opportunity available for fashion retailers, with approximately 7 billion

Where will growth emerge?

McKinsey predicts 3.5-4.5% growth in global sales within the fashion industry in 2019 (down from 4.5-5.5% growth in 2018), with emerging markets in APAC, Europe and Latin America forming the fastest growing regions. customers using their products every day. But which sectors and regions are expected to grow fastest over the next few years, and how is the consumer landscape changing within the industry? A look at some specific numbers can provide some clues.

Percentage sales growth in the fashion industry worldwide in 2019, by region

8%

8.0%

Low estimate

High estimate

7%

7.0%

6%

6.0%

5%

5.0%

4%

4.0%

3%

3.0%

2%

2.0%

1%

1.0%

0%

0.0%

APAC Emerging Europe Emerging

Latin America

Total fashion

industry

MEA

North America

APAC Mature

Europe Mature

1

The State of Fashion 2018, Link Statista, Link The State of Fashion 2018, Link

23

4

In 2019, China is expected to overtake the US as the largest fashion market in the world, with apparel sales reaching $335.5 billion.⁴Growth is predicted to remain high at an average of 7.5% until 2021.⁵

In the US, growth is expected to decelerate from 2.7% in 2017 to just 2.0% in 2021.⁶Apparel sales in the US are forecast to reach $334.2 billion in 2019, according to Statista’s Consumer Market Outlook, with growth averaging 2.2% over the next three years.⁷However, some experts suggest there has been a decline in apparel sales in recent years, with some reports estimating a 2% decline between 2016 and 2017.⁸Each of these reports measures slightly differing categories, but the overriding conclusion is that growth in the world’s largest fashion market is slowing dramatically.

Americans are also spending less on fashion. From 1977 to 2016 the percentage of consumer expenditure on apparel and related services has fallen by half, from 6.2% to 3.1%. The average US consumer now spends more on technology (3.4%) and “experiences” such as eating out, travel and other leisure activities.⁹

The trend outlined above is indicative

The growing importance of e-commerce

of a more significant overall trend in fashion spending.¹⁰By 2025, McKinsey expects revenue from outside of Europe and North America will make up 55% of all fashion spending. With APAC, Latin American and African economies continuing to stabilise, and greater individual engagement with the internet, this trend is unlike to reverse any time soon.

E-commerce is a critical force for growth in the fashion industry. In 2017, e-commerce accounted for $450.7 billion of global fashion sales.¹¹In 2019, the amount is expected to grow by
14.1% year on year, reaching just under $600 billion over the 12-month period.

4,5

Statista, Link Statista, Link

6,7 8

NPD Group, Link Bloomberg, Link The State of Fashion 2018, Link Statista, Link

910 11

5

E-commerce revenue growth in the fashion industry

Apparel

Footwear

Bags & Accessories

%Growth

$900,000.00

18.0%

16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

$900

$800,000.00

$800

$700,000.00

$700

$600,000.00

$600

$500,000.00

$500

$400,000.00

$400

$300,000.00

$300

$200,000.00

$200

$100,000.00

$100

$-

2017

2018

2019

2020

2021

2022

2023

Already the biggest slice of the e-commerce pie (29.4%), online
In the US, 31% of cross-border online purchases are those of clothing and accessories, but consumers are still concerned about increased delivery times and expensive returns.¹⁶fashion sales are predicted to grow at a compound annual growth rate (CAGR) of 8.7% (faster than the overall e-commerce market), resulting in a

market volume of $836 billion by 2023.¹²

In 2020, China is expected to become

the largest cross-border B2C market, with 200 million consumers receiving goods from overseas, and the volume of imported goods purchased online reaching $245 billion (or 25% of all cross-border e-commerce revenue).¹⁷The main reasons for this include
At the same time, the amount of money spent online across borders is estimated to top $1 trillion by 2020, equating to a 27.5% CAGR since 2014.¹³A survey of consumers across 12 countries revealed that 64% of online buyers purchased from a foreign site in 2018.¹⁴As consumers search for better prices, different brands or speciality products not currently available in their home markets, and they become increasingly comfortable buying online from international websites, the opportunity for retailers to reach new customers around the globe increases exponentially. By 2020, 45% of all online shoppers – more than 900 million people – will purchase products internationally.¹⁵concerns about the quality of domestic products and high-levels of counterfeit products.¹⁸

Forward thinking businesses such as Alibaba’s foresee a merging of the benefits of traditional shopping and e-commerce, heralding a “new retail” in which the distinction between online and offline will become increasingly obscured.

12

Statista, Link McKinsey, Link Pitney Bowes, Link Alizila, Link Invesp, Link eMarketer, Link

13 14 15, 17 16 18

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HOW DO CONSUMERS BUY ONLINE?

As technology continues to develop new methods for people to consume content, the ways in which people purchase changes accordingly.

A few of the resulting channels through which you can now sell your items online include: your own website (desktop and mobile), marketplaces, your own mobile app, various social media platforms, smart devices and crowdfunding campaigns.

Different markets do not only have different preferences when it comes to channels, but they also have different platforms and platform preferences within these channels. For example, Amazon may seem ubiquitous in most of the western world, and while the list of international sites and countries that it now ships to is always growing, it is often not the first choice for fashion consumers in all markets. In the US, customers are au fait with using Amazon to buy clothes, but in the UK it is not most customers first thought.

In 2017, Amazon was the 8th most popular destination for UK fashion e-commerce sales, with companies such as Next, John Lewis and Asos making far more sales.¹⁹In the same year, Amazon was the second largest apparel retailer in the US (overall, not just e-commerce), and was expected to overtake Walmart in 2018 according to a Morgan Stanley report.²⁰

Other factors to consider are the most popular devices within each market and the internet speeds available. In large portions of Africa, people must rely upon slower internet speeds and are more likely to make purchases on smartphones than a desktop computer. As a result, a simple, mobile-first webshop may be your most important channel in these markets.

19

Statista, Link CNBC, Link

20

7

financial affairs, is also a necessity.

E-commerce site

As previously mentioned, in some markets, mobile devices are used most commonly for online purchases, and in those countries your mobile site and user experience must be perfected. Even in regions where purchases tend to be made on a desktop browser, searching for and evaluating products may still occur on mobile devices and mobile sites therefore are a priority.
Making sales directly from your own e-commerce site presents several advantages. You have complete ownership of the platform and the versatility to adapt it as you please. Additionally, you are not required to pay any fees to a marketplace for the privilege of listing your goods on their platform. Further positives include complete control over your customer data, and more control over your shipping/return methods.

There is also an increasing trend for brands to create their own apps, allowing customers to install a mobile shopping experience on their phone or tablet. Apps are very effective in promoting brand loyalty, increasing repeat and regular custom, but can also be very expensive to run, keep updated, and translate and localise to many countries.

Conversely, adapting your website to ensure it drives sales in all your target markets will require significant time and effort. It is not just the cost of translations, but also guaranteeing the website is user-friendly, correctly localised and optimised to drive sales. Deciding if the investment is worthwhile may depend on the importance of brand to your product. If you benefit from having a one-onone conversation with your customers directly through your website, it may be an important sales channel. The creation of partnerships in new markets for warehousing, shipping, returns, payments, customer service and

8

Credit: Casimiro PT / Shutterstock.com

Marketplaces

Customer research shows that customer
Globally, almost 50% of online retail

sales take place on marketplaces and sales grew by 34% last year to $1.55 trillion.²¹The increasing dominance of marketplaces is also evident in e.g. the fact that online shoppers in the USA are more likely to start a search for a new purchase on Amazon than Google.²²choose marketplaces when they are looking for a range of choice, ease of comparing items and convenience of looking in a single place. They also benefit from only having to sign-up once, fast checkouts and insurance against items that do not match their descriptions or fail to be delivered. This in contrast to other customers who prefer purchasing directly from brand websites because they have strong brand loyalty and trust, want to take advantage of loyalty programmes, and are looking for the top end customer experience that some brands offer.²³
What all marketplaces have in common is that the product or service information is provided by multiple third parties, while the transactions are processed by the marketplace operator. Marketplaces usually charge a fixed fee and a percentage fee and many now offer additional services like fulfilment and financing. As such marketplaces offer a fantastic eco-system of solutions for online retailers
There is no doubt that marketplaces somehow flatten the customer experience for each brand. Marketplaces will always be more interested in promoting their brand than yours. But those platforms are continuously innovating, e.g. Amazon adding Brandshop, and Tmall setting up Luxury pavilions. Other more fashion specialist platforms like Farfetch, Mr. Porter an Zalando are now including social media and content as part of their positioning and marketing activities, both off and on platform – creating much improved appeal for both fahion-istas and fashion retailers.
Some marketplaces have become retailers in their own right, next to facilitating the sales of third parties. Others like eBay are designed to work on an auction basis and allow individuals to sell used or unwanted items, as well as enabling shops to sell new products. Amazon, Tmall, bol.com, Fruugo are generalists in the sense that they offer a wide range of products . Others specialise in market segments like Mano Mano (DIY and home improvement), or Farfetch, Mr. Porter and Zalando in fashion.

21

Digital Commerce 360, Link Inﬁnity Blue webinar: ‘You can Export: Set-up and Sell Successfully on Global Marketplaces’, Link Pitney Bowes, Link

22 23

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Why should you consider using a marketplace?

• Access an additional route to market – the benefit of opening up a second or third route to market will depend on many things, but in some countries marketplaces represent over 85% of online B2C purchases
• Export with ease - when expanding into new countries, you will only need to translate and localise the product copy for new marketplaces, without worrying too much about the complexity of customer delivery and returns
• Protect your band - brand registry (or the non-Amazon equivalent on other marketplaces) will ensure sellers that sell your products comply with your listing and brand standards. You can do this even if you do not intend to sell yourself.

Tip: Note that research has shown that the average retailer underestimates the importance of marketplaces for online buyers.²⁴So ignore marketplaces at your peril.

Which marketplaces should I choose?

Any discussion on specific marketplaces needs to start with Amazon and
There are at least 250 dedicated fashion marketplaces that are regularly discussed, including Farfetch, Mr. Porter, Net-a-Porter, Asos, Zalando, Bonobos, The Iconic and Poshmark. They differ in geography, audiences, brand protection, on-platform marketing and promotional possibilities, integration with social media, key opinion leaders etc.
Alibaba, behemoths of online retailing. Amazon is dominant in the USA and the EU (and barely touches China) while TMall’s dominance in China is even more substantial . TMall provides more opportunities for branding than Amazon. It is also much more focussed on the overall e-commerce ecosystem (including working closely with brick and mortar retailers). For now, the threat of Amazon and Tmall to fashion brands depends mostly on the type of apparel in question. Amazon customers for instance, when buying fashion largely buy underwear, socks, jeans and workout clothes.
For more information on marketplaces, including practical tips on how to overcome challenges and make the most of opportunities, see our guide, ‘You can export: Set-up and sell successfully on Global Marketplaces’.²⁶

Both super-marketplaces are experimenting with fashion and luxury products. Tmall launched the Tmall Luxury Pavilion, offering its shoppers access to dozens of brands including Burberry, Hugo Boss and La Mer. Amazon is developing its own private labels, offering a testing service known as Amazon Wardrobe, which allows users to have items delivered to their homes in order to try them on and either keep or return. Amazon is also rumoured to be working on an automated clothing factory that uses personal preference data to create personalised tailormade clothing.²⁵

24

Pitney Bowes, Link Quartz, Link InﬁnityBlue, Link

25 26

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Farfetch positions itself as the “only truly global luxury digital marketplace”. Dedicated to lovers of fashion, visitors can pick from an “unrivalled” range of products. They offer same-day delivery in 19 major global cities including Milan, Berlin, London and Paris. > 995 luxury sellers
Bonanza is a seller-friendly marketplace. Therefore
ASOS is a U.K-based marketplace, targets there are no listing fees and no monthly store fees. younger shoppers giving them the space
Originating in Germany, Zalando has made high street to high-end fashion easily accessible by offering Europe’s largest selection of clothing, accessories and shoes online.
Allowing sellers to make sales and build a brand by to be uniquely themselves and express developing relationships with their customers. themselves, selling over 30 sizes and home to
+ 24,6 million users