Just over two years ago I posted about the potential of (and possible pitfalls associated with) launching an online design-your-own boardshorts operation (a la T-shirt phenomenon Threadless).
I was intrigued today when I stumbled upon a magazine mention of just such an entrepreneurial endeavour. A mob out of California (now that shouldn’t surprise) called Shortomatic have been building up a portfolio of user- and guest designer-provided shorts through a pretty nifty website.
They have a number of similar elements to Threadless, although users cannot vote on prospective designs (instead the firm is the complete gatekeeper once artists submit). There is a revenue stream for successful designers of up to $1000 per design ($5 a pair up to the maximum run of 200), and a feel-good pledge to donate a similar amount to a charity.
Contrary to our discussions/expectations, all the materials are sourced and stitched together in the US (rather than China), which does push the pricing a bit higher than I expected ($US a pair).
The operation also suffers from a pretty slow turnaround from order-to-shipping – 21 days or so – which would seem to narrow the potential customer base a little (to those explicitly seeking a rare item of clothing). Again, you might argue this is a move away from Threadless’ model, as the t-shirt vendor’s speedy delivery (obviously built on an ability to print and warehouse shirts confident of sales from their much bigger customer base) allows for pretty spontaneous purchase, while Threadless’ policy of limited runs also encourages a “buy while you can” attitude.
Nevertheless, this looks like a pretty neat play at this considerably smaller and tougher fashion segment. Again it does beg the question what other design-your-own, crowdsourced interfaces can we foresee (remembering we’ve also looked at custom bicycles on here too)?
So, despite my repeated naysaying it seems not only is US ragtrader The Gap definitely coming to Australia (their first store will open in Melbourne next month), but they may well be leading a serious onslaught of entrants into the Aussie market.
According to this hype-heavy piece, the list of fashion retailers eying off Aussie wallets now includes Banana Republic (a Gap brand), Forever 21 (from US), Topshop (UK), and Uniqlo (Japan). While I am still taking this talk with a big grain of salt, there is certainly a long tradition of follow the leader amongst multinationals.
This behaviour may reflect several underlying motivations. Rivals may be concerned about early movers locking up resources and this limiting the scope for late moves.
In the retail domain there are grounds for concern that early movers may secure prime store locations, although this is much more of an issue in groceries and fast food than in fashion. Indeed in fashion, it is more likely any early advantage comes from building stronger relations with landlords and property brokers as anchor tenants.
Unlike fastfood, the franchising model used is only likely to be rolled out at a country-level (i.e. companies are awarded the right to run all stores in a state or country, rather than companies that then sub-franchise to individuals store-by-store), so there is a less of a race to secure franchisees and/or build reputations.
Interestingly two of the most successful internationalisers H&M and Inditex (i.e. Zara) remain very tightlipped about any Aussie plans. Both firms are much less inclined to franchise (mainly because they control their value chains much more tightly than the others on this list). They’ll need a lot more convincing that Australia represents sufficient bang for their buck/Euro/krona. I suspect they still see Australia as small fry.
But I’m reluctant to say never anymore. The performance of their international rivals down under may well play out as the demonstration effect (that this is a market worth seeking) that is a further key aspect of following.
Fourteen months is a long time in international business. In March 2009, I quoted a senior figure at Swedish fast-fashion retailer H&M who said:
“We’ve never really opened in a country where they are in a different season. We are not in South America and although we have one shop in Egypt we are concentrated in Europe and North America, with some shops in Asia. The next destination is Russia… To go somewhere like Australia, it’s far away from our production offices”.
This week, her boss announced a reversal of this stance:
Hennes & Mauritz AB, Europe’s second- largest clothing retailer, is looking at opening its first store in the southern hemisphere to tap emerging-market growth and catch up with larger rival Inditex SA.
“Brazil and Argentina are very interesting,” Chief Executive Officer Karl-Johan Persson, 35, said in an interview at his Stockholm office, adding that he’s also looked at Australia. The company wants to enter the region at some point after making “sure we can handle it.”
Tellingly, it would seem that there has been some demonstration effect from the firm’s big rivals – Inditex and the Gap – expanding their operations into the lower hemisphere. H&M are concerned about missing the growth opportunities in this markets. International Business scholars need to pay close attention to such clustering of expansion behaviour within an industry, as a firm’s location choices (especially when market-seeking) are not independent of their competitors’.
Do I think we’ll be seeing H&M in Aussie shopping strips real soon? No, I can’t see that we are a major priority for these guys, or Inditex, and I remain unconvinced about the likely scale of Gap’s entry.
Australia will remain an under-internationalised retail sector for years to come.
Here’s the next episode in the Stevie Marx interviews. He’s a Melbourne entrepeneur and uni student selling fun umbrellas (and more)…
André: How has expansion into overseas markets made your business more complex?
Steven: The US market is a complex but lucrative market that can really bring any brand to a completely new level. Australian retailers have anywhere between 100 to 400 stores (with the major supermarkets having around 700-750 stores), in the States the smaller chains have around 500 and the ‘big guys’ have up to 4,000.
Most wholesalers in Australia have a hard time keeping up with the strict guidelines and demands of a national retailer here, but in the US the already complex nature of any deal is taken to the extreme. Things like things that are pretty basic here in Australia such as promotions, ordering, rebates, insurances etc. are much more thought-out and planned for. Luckily the team I am working with in the USA have an exceptional record and are really professional people. For example, I have found that my presentations to national retailers have improved probably by 40 or 50% just from working with them and developing the absolute best presentation possible so as to attract attention.
André: Do you find your products needed adaptation for different consumer tastes? If so, did this impose unexpected costs?
Steven: I have already noticed a difference in designs that are liked and ones that are not as well received by the buyers and ‘reps’ in the USA. I have my own personal opinion of just about every design ever been produced by Stevie Marx (and there are a lot of them), and I have normally found that my opinion has been matched by their performance in stores. There have been some designs I would put in my less preferred range that have I have received feedback from the States that I would never have imagined, like “the best design they have seen in years”. It is really interesting to see how some patterns and colours are more favourable in different retail atmospheres.
There is no doubt that the USA expansion has been an additional cost to the business due to the amount of work that was done on samples and presentations. At one stage we were creating over 700 samples to be sent to the USA of about 20 different umbrellas and 5 different gumboots and raincoats. Getting each individual made for the first time was extremely expensive (with the opening of moulds and the purchasing of small amounts of fabric for samples).
André: I note you still haven’t got the online store up and running? Does this reflect a shift in your perceptions of the value of e-commerce?
Steven: Yes, your right. On www.steviemarx.com we have yet to open an online store. Initially this was postponed due to the global financial crisis. We thought it was not worth the risk of developing at this stage. It has been something we’re hoping to do sometime before the winter season of 2010.
To some extent it does reflect our perception of the value of e-commerce. Umbrellas are really an impulse buy item, when you see it in a store and you think “hey that looks cool!” you might buy it. I am unsure of the amount of people that would go online to buy an umbrella from an online store. I definitely believe the Australian market has not yet fully embraced the e-commerce market as much as a market like the USA.
I must admit this has been one of the most difficult “to do or not to do “parts of the business. I have changed my mind about it numerous times. Business is all about generating income; non-income producing work is the last thing any company wants. An online store would take a certain amount of time and it could very easily become non-income producing work.
What do the readers think about the online store aspect?
Update: Part 3 is now posted here.
