Can a clothing e-commerce business be profitable?
Discussion
A close friend of mine is interested in setting up his own e-commerce business selling clothing. He has created his own brand, showing me logos and samples of products(digitally made in photoshop). He has gone as far as planning marketing strategies and it all looks solid.
He then asked the question: "Do think this can be profitable? The clothes are unique and are set at a reasonable price."
My reply: Silence.
I really want to help this friend of mine, but I really don't have experience in the fashion industry. I would appreciate some feedback and tips that I could pass on for him to use or learn from.
But my question stands, with all of the competitors, can you still make a buck?
He then asked the question: "Do think this can be profitable? The clothes are unique and are set at a reasonable price."
My reply: Silence.
I really want to help this friend of mine, but I really don't have experience in the fashion industry. I would appreciate some feedback and tips that I could pass on for him to use or learn from.
But my question stands, with all of the competitors, can you still make a buck?
Tell him to have a look at Hiut Denim as an example of how it is possible to make money with a clothing firm online. However, it is run by very clever marketers, with a clear target market and a great story that they have trumpeted on every platform. For every one Hiut, there are probably 99 (999?) failures.
If he thinks he will be going into the fashion business, he will go bust. He is going into the logistics and warehousing business. AIUI the online-only clothes places see a 30% return rate as a good day, and actually scale for 40% to 50%. The management of returns is more complex than the initial shipping: needs more people to handle it; more disputes with customers; more sophisticated stock tracking; significant reputation risk tied up in the performance of your delivery firm.
Think of it that the revenues are in the design office, but the profits are in the warehouse.
Think of it that the revenues are in the design office, but the profits are in the warehouse.
48k said:
Does he know how much it will cost him to produce the clothes? Surely that's the first question he needs to ask himself.
I had a look at the business plan.The margins on some products are around 45% and that's after shipping with. Plus a My Hermes return system, just in case the buyer wants to return.
So all costs have been covered and his products(in terms of quality) are not far from Superdry Quality.
He has a really nice logo sorted with an interesting idea behind his UPS.
Newc said:
If he thinks he will be going into the fashion business, he will go bust. He is going into the logistics and warehousing business. AIUI the online-only clothes places see a 30% return rate as a good day, and actually scale for 40% to 50%. The management of returns is more complex than the initial shipping: needs more people to handle it; more disputes with customers; more sophisticated stock tracking; significant reputation risk tied up in the performance of your delivery firm.
Think of it that the revenues are in the design office, but the profits are in the warehouse.
Very good point. Think of it that the revenues are in the design office, but the profits are in the warehouse.
He was telling me about the 30% return rate, but scaling for more is a good point.
This website puts all the figures in a nutshell: https://www.business2community.com/infographics/e-...
The returns thing is going to be the deal breaker I reckon. Look at the likes of Zappos and Next who are actively encouraging a kind of "buy three, send back two" model so you can effectively try on an item in different sizes / styles. The logistics of it must be staggering, let alone figuring out what to do with the returned goods - I guess without any physical outlet it would have to be eBay for reselling returns.
Customer service is going to be key - look at Zappos as an example.
An off-topic recent experience with Amazon - I queried why my (£295 soundbar) return was taking so long (no movement 10 days after confirmed receipt at returns warehouse) and they "expedited" it which generated a template email to me saying "don't worry about returning the item, just give it away or throw it away". So the costs of "customer is always right" must be staggering.
Customer service is going to be key - look at Zappos as an example.
An off-topic recent experience with Amazon - I queried why my (£295 soundbar) return was taking so long (no movement 10 days after confirmed receipt at returns warehouse) and they "expedited" it which generated a template email to me saying "don't worry about returning the item, just give it away or throw it away". So the costs of "customer is always right" must be staggering.
Confused of Staffordshire:
- "He has created his own brand, showing me logos and samples of products(digitally made in photoshop)."
- "............ and his products(in terms of quality) are not far from Superdry Quality."
How do you know what the quality is like, for this you at least need samples.
He might be another Superdry but he has a long way to go.
- "He has created his own brand, showing me logos and samples of products(digitally made in photoshop)."
- "............ and his products(in terms of quality) are not far from Superdry Quality."
How do you know what the quality is like, for this you at least need samples.
He might be another Superdry but he has a long way to go.
IJWS15 said:
Confused of Staffordshire:
- "He has created his own brand, showing me logos and samples of products(digitally made in photoshop)."
- "............ and his products(in terms of quality) are not far from Superdry Quality."
How do you know what the quality is like, for this you at least need samples.
He might be another Superdry but he has a long way to go.
He has cotton samples. - "He has created his own brand, showing me logos and samples of products(digitally made in photoshop)."
- "............ and his products(in terms of quality) are not far from Superdry Quality."
How do you know what the quality is like, for this you at least need samples.
He might be another Superdry but he has a long way to go.
miniman said:
The returns thing is going to be the deal breaker I reckon. Look at the likes of Zappos and Next who are actively encouraging a kind of "buy three, send back two" model so you can effectively try on an item in different sizes / styles. The logistics of it must be staggering, let alone figuring out what to do with the returned goods - I guess without any physical outlet it would have to be eBay for reselling returns.
Customer service is going to be key - look at Zappos as an example.
An off-topic recent experience with Amazon - I queried why my (£295 soundbar) return was taking so long (no movement 10 days after confirmed receipt at returns warehouse) and they "expedited" it which generated a template email to me saying "don't worry about returning the item, just give it away or throw it away". So the costs of "customer is always right" must be staggering.
Yeah, good point. Amazon is killing it with customer service. Customer service is going to be key - look at Zappos as an example.
An off-topic recent experience with Amazon - I queried why my (£295 soundbar) return was taking so long (no movement 10 days after confirmed receipt at returns warehouse) and they "expedited" it which generated a template email to me saying "don't worry about returning the item, just give it away or throw it away". So the costs of "customer is always right" must be staggering.
Quick question, can you not re-sell returned goods? If they are in good condition?
Are you breaking any laws by doing that?
I've worked at one of the biggest fashion e commerce sites. The revenues are staggering but not sure the profit is there though. They used lots of off shore staff in the back office and warehouses.
A guy has started up near my old home town. Advertisers on Facebook, Instagram for free by just posting 24x7. He has tapped into the older football crowd. The guys who used to spent their weeks wages on a stone island top.
They seem to be making a living out of it.
A guy has started up near my old home town. Advertisers on Facebook, Instagram for free by just posting 24x7. He has tapped into the older football crowd. The guys who used to spent their weeks wages on a stone island top.
They seem to be making a living out of it.
I used to work in the eCommerce department of a big fashion brand, as well as on the 'other side' for an online retailer. I also spent a short time in their design dept., and also dabbled with my own small brand. In order to stand out as a fashion brand, a nice logo and a backstory only get you so far; it's the product and customer 'experience' that will really sell it. The actual business side wasn't really my area, so all I can say is the points raised about returns are valid, 30% seems a little optimistic.
What I can say is that fashion and clothing is still something that's very much dependent on the physical product, so digital mock-ups will only get you so far. As mentioned above, you really need to be getting samples; it's one thing having the same graphical quality as Superdry, but they put the same time and effort (possibly more!) into the actual materials, print techniques, small things as labels, packaging etc. so you've barely got half the picture with just the designs. By the sounds of it he's trying to create a fashion brand rather than just a t-shirt company churning out slogans and the like? Therefore, has he considered the material and fit of the garments? Has he thought about things like the neck/care labels? Also what about the packaging? Folded into a clear bag and then into a plain grey mailing bag might not cut it if he's trying to tell a 'story' with his brand.
Just some little things to think about that can end up making all the difference if the rest of the business is solid!
EDIT: Just to add about returned goods, they tended to get pushed to the eBay store for a reduced price, along with items that had small defects.
What I can say is that fashion and clothing is still something that's very much dependent on the physical product, so digital mock-ups will only get you so far. As mentioned above, you really need to be getting samples; it's one thing having the same graphical quality as Superdry, but they put the same time and effort (possibly more!) into the actual materials, print techniques, small things as labels, packaging etc. so you've barely got half the picture with just the designs. By the sounds of it he's trying to create a fashion brand rather than just a t-shirt company churning out slogans and the like? Therefore, has he considered the material and fit of the garments? Has he thought about things like the neck/care labels? Also what about the packaging? Folded into a clear bag and then into a plain grey mailing bag might not cut it if he's trying to tell a 'story' with his brand.
Just some little things to think about that can end up making all the difference if the rest of the business is solid!
EDIT: Just to add about returned goods, they tended to get pushed to the eBay store for a reduced price, along with items that had small defects.
Edited by Burny16v on Tuesday 2nd January 13:01
CasioPasio said:
Quick question, can you not re-sell returned goods? If they are in good condition?
Yes you certainly can. We (Dyson) try to avoid returns because once the vacuums have been used (even for a second) the internals contain dust so must be refurbished and sold as B grade (which we do via eBay). I would imagine clothing has to be cleaned, pressed and inspected before being sold "as-new". Burny16v said:
I used to work in the eCommerce department of a big fashion brand, as well as on the 'other side' for an online retailer. I also spent a short time in their design dept., and also dabbled with my own small brand. In order to stand out as a fashion brand, a nice logo and a backstory only get you so far; it's the product and customer 'experience' that will really sell it. The actual business side wasn't really my area, so all I can say is the points raised about returns are valid, 30% seems a little optimistic.
What I can say is that fashion and clothing is still something that's very much dependent on the physical product, so digital mock-ups will only get you so far. As mentioned above, you really need to be getting samples; it's one thing having the same graphical quality as Superdry, but they put the same time and effort (possibly more!) into the actual materials, print techniques, small things as labels, packaging etc. so you've barely got half the picture with just the designs. By the sounds of it he's trying to create a fashion brand rather than just a t-shirt company churning out slogans and the like? Therefore, has he considered the material and fit of the garments? Has he thought about things like the neck/care labels? Also what about the packaging? Folded into a clear bag and then into a plain grey mailing bag might not cut it if he's trying to tell a 'story' with his brand.
Just some little things to think about that can end up making all the difference if the rest of the business is solid!
EDIT: Just to add about returned goods, they tended to get pushed to the eBay store for a reduced price, along with items that had small defects.
Thank you for the input. It was really informative to read and has opened my eye up to more. What I can say is that fashion and clothing is still something that's very much dependent on the physical product, so digital mock-ups will only get you so far. As mentioned above, you really need to be getting samples; it's one thing having the same graphical quality as Superdry, but they put the same time and effort (possibly more!) into the actual materials, print techniques, small things as labels, packaging etc. so you've barely got half the picture with just the designs. By the sounds of it he's trying to create a fashion brand rather than just a t-shirt company churning out slogans and the like? Therefore, has he considered the material and fit of the garments? Has he thought about things like the neck/care labels? Also what about the packaging? Folded into a clear bag and then into a plain grey mailing bag might not cut it if he's trying to tell a 'story' with his brand.
Just some little things to think about that can end up making all the difference if the rest of the business is solid!
EDIT: Just to add about returned goods, they tended to get pushed to the eBay store for a reduced price, along with items that had small defects.
Edited by Burny16v on Tuesday 2nd January 13:01
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