Ecommerce, in all of its various permutations, works when it offers something not otherwise available through brick and mortar retail. In some cases it’s selection. In others it’s convenience or value. In the rarest of all cases, it’s a combination of all three.
One category where this is very much the case is in footwear. When compared to other items in the fashion vertical, shoes have a number of factors working against them in the physical retail world. First, shoes typically come in more sizes and styles than other fashion or apparel items, and therefore require more inventory space. Second, due to their rigid structures and the boxes that they are packaged in, the logistics of shipping and stocking shoes resemble those of consumer electronics more than they do fashion. And we all know how well brick-and-mortar electronics retailers are doing.
In the offline world the fashion category has been rejuvenated over the last decade by “fast fashion” retailers like H&M, Forever21, and Zara. Consumers flock to these stores with the expectation that each time they walk through the door, the selection will be new and on trend – the stores typically refresh their stock monthly rather than seasonally to match the latest designer and popular fashions. That the fashions are affordable is simply a bonus.
Nielsen reports that “Apparel, Accessories, Shoes, and Jewelry” are second only to “Books, Newspapers, and Magazines” as the non-CPG category of items that global consumers are most likely to buy online in 2013. While a further breakdown of that statistic is not available, an anecdotal analysis of the companies succeeding in the space points to shoes as the killer category, or at least the one around which which the largest companies are likely to be built.
The next time you walk into H&M, et al, look for the “back of house,” aka the stock room. It doesn’t exist. These stores place all of their inventory on the showroom floor the second it comes in and keep no reserves in stock. Despite its appeal, this fast fashion model doesn’t translate well to footwear due to the above mentioned fulfillment and inventory management issues. Just think about the massive size and unattractive design of your local DSW, and you can quickly understand why not.
As a result, online footwear retailers like JustFab, ShoeDazzle, and ShoeMint offer the first and only place that women can visit a (virtual) retailer and discover entirely new selection of shoes monthly. With trends spreading (and dissipating) faster than ever in today’s connected world, the value of being able to quickly and economically find the latest styles cannot be underestimated.
This realization is what led Intelligent Beauty (IB) founder Adam Goldenberg to launch JustFab in 2010. After having early success in the cosmetics and weight loss categories, IB had built an online customer acquisition machine that it wished to apply to women’s fashion. But there was one category that was far and away the most attractive.
In a recent conversation I had with Goldenberg, he said:
There is something about a woman and her shoes that makes it the most compelling of all fashion categories to acquire customers. Women love to come back every month and see the new shoes in their personalized showroom. If we can sell them denim a few times per year, or some accessories on top of frequent shoe purchases, fantastic. But it all begins with footwear.
The apparel and accessory categories at JustFab have trended toward those at Forever21 and H&M. They consist primarily of unique and edgy items, in bold cuts and prints available at impulse price points and unlikely to be found in a Nordstrom’s or Gap. This selection isn’t too differentiated from its fast fashion brick and mortar competition, but because it’s not what the business counts on to attract users, it doesn’t need to be. It’s the pair of five inch leopard pumps, those blue velvet flats with the bow on them, and the $50 leather boots that keep women coming back each month.
The company’s reliance on a monthly subscription model ties directly into this desire to get consumers to at least log into its site at least once per month. That’s why it was such a shock when former ShoeDazzle CEO Bill Strauss eliminated the subscription option entirely in a failed business model pivot. JustFab’s consumers log into their showroom an average of 30 times per year. Few if any offline retailers can claim anything near that level of foot traffic. The explanation boils down to the fact that JustFab offers its members something they cannot find offline. With an enormous selection of styles available for around $40 and delivery in under 48 hours, there aren’t many reasons to go elsewhere.
Hautelook CMO Greg Bettinelli agrees with Goldenberg’s assessment, saying that the biggest impediment to any online or offline fashion business is logistics. The biggest benefit of its acquisition by Nordstrom has been its ability to tap into the retail giant’s nationwide infrastructure, dramatically improving the economics of each transaction. Nowhere is this more important than with shoes.
Taking the shoe sales from offline to online completely changed what was possible in the category. The more these retailers scale their operations, the greater these benefits become. The difference between JustFab and its competitors ShoeDazzle and ShoeMint is that the former now orders and ships 5 million pairs of shoes per year. At that scale, the per unit economics are become much less onerous. Even online shoe retailer pioneer Zappos eventually acquiesced control of its supply chain to parent company – and global logistics powerhouse – Amazon.
There are other elements of the online shoe sales model for which the industry can thank Zappos CEO Tony Hsieh (a PandoDaily investor). Hsieh pioneered the free shipping and free returns concept that is absolutely essential for convincing consumers to purchase shoes without having tried them on. Similarly, it was Zappos that first proved that etailers could match or outdo their offline retail competitors in terms of customer service. The individual showrooms and personal style consultants offered by today’s subscription shoe etailers are a direct evolution of this paradigm.
Marc Andreessen (a PandoDaily investor) and other very smart individuals have predicted the death of brick and mortar retail. If and when that happens, and what things will look like once it does, is the subject of another post. But in today’s retail environment, ecommerce represents just a fraction of all US consumer spending. So it’s clear that not all categories are as ripe for disruption as others.
Entrepreneurs like Goldenberg, Hsieh, and Shoedazzle’s Brian Lee succeed by noticing patterns and connections not immediately apparent to the rest of us. In the case of fashion ecommerce, it’s been these men who have proven that shoes are king.
[Illustration by Hallie Bateman]