Local Competition to Drive Internet Retailing in Fashion
Internet retailing has been one of the primary drivers for consumer goods sales over 2008-2013. However, in terms of personal accessories, internet retailing accounted for less than 4% of global sales in 2013, representing its nascent nature in several key markets for the industry. A deeper dive into individual markets reflects a growing influence of locally-based third party websites as most manufacturers remain wary of operating internet retail portals.
Global Exposure to Online Sales
With internet retailing accounting for a double-digit proportion of its sales in 2013, consumer electronics is an industry far ahead of the fashion world in terms of accepting online transactions. Within the latter, both apparel and beauty purchases are more likely to be completed online as compared to those related to personal accessories.
Relative Influence of Internet Retailing
Source: Euromonitor International
As of 2014, only a handful of online retailers dedicated to apparel and accessories have managed to establish a consumer following across multiple markets. These include Net-A-Porter, Neiman Marcus, Yoox and Asos, all of which have operations that focus on North America and Western Europe. Global internet retailing leaders such as Amazon, Tmall and Rakuten also offer substantial portfolios of personal accessories, as partnerships with them represent the foremost internet sales strategy for several global brands.
As the largest personal accessories market in the world, China’s retail landscape is of special interest to leading global manufacturers. Internet retailing in personal accessories is at a primitive stage in China, and accounted for less than 2% of overall sales in 2013.
While international retailers have found it extremely tough to operate in China’s bargain-driven internet marketplace, certain local retailers are successfully tapping the consumer demand. A recent example of this phenomenon is that of full-price retail specialist Neiman Marcus, which sold its stake in discounting sales portal Glamour Sales in April 2014. Chow Tai Fook, a dominant brand in China’s jewellery sales, invested in Glamour Sales in 2014 as it continually looks to fortify its internet presence. In addition, numerous renowned accessories brands including Prada, Longchamp, JanSport, Swatch and Seiko have agreements with local internet retailer Tmall to reach online shoppers.
Over 2014 and 2015, Hong Kong-based jewellery retailers including Chow Tai Fook and Chow Sang Sang are expected to expand their respective portfolios offered through self-operated online portals. The willingness of local brands to explore the internet is evident in bags as well, where online retail specialist Maibaobao was the fastest growing brand in China over 2008-2013. Locally based watch brands Binger and Tianwang are also highly reliant on their internet transactions.
Despite being overtaken by China in terms of absolute value sales, the US remains one of the most evolved personal accessories markets in terms of brand communication and price segmentation. Internet retailing commanded over 10% of retail sales in the US in 2013, representing one of the highest contributions in the world.
In fact, internet retailing forms an integral part of the growth strategies for several US-based global players such as Fossil, Tiffany and VF Corp. These companies have evolved to focus on an omnichannel experience for the consumer, which includes sales and communication through brand websites, catalogs and social media. All of these are dedicated to provide a lifestyle experience rather than just serving as an additional retail channel. Apart from manufacturers’ own initiatives, online operations of major retailers such as Amazon and Macy’s are expected to be increasingly vital for mid-priced and accessible luxury brands in the US.
India and Brazil
India and Brazil both have immense growth potential in terms of overall personal accessories sales. However, the evolution of internet retailing has been rather stunted in both markets. This is expected to change over the next five years as local online retailers are starting to find consumer acceptance as well as willing investors. In May 2014, two leading internet retailers in India – Flipkart and Myntra – announced their plans to merge and focus on new brand partnerships across apparel and accessories. In Brazil, dedicated online fashion retailers such as Dafiti and Privalia have a steadily growing portfolio of international brands which is helping popularise the retail channel among the masses.
Local Retailers Set to Lead the Way
Historically, non-US based personal accessories manufacturers have been reluctant to explore self-run internet retail portals. Although certain Asian manufacturers such as Chow Tai Fook are keenly looking at its prospects, traditional industry leaders such as LVMH and Swatch remain sceptical as concerns about erosion of brand equity and increased possibility of counterfeit goods sales prevent them from committing to internet retailing.
All the same, the sprouting of a number of third-party internet retailers in both developed and emerging economies indicate an existing consumer appetite for online fashion purchases. While manufacturers make decisions on retail partners, the key will be to gauge the market level preferences for various products. For instance, jewellery is more exposed to internet retailing as compared to bags and watches in France. Given the present circumstances, local third-party internet retailers are expected to be an increasingly popular route to market for brands across personal accessories.