I attended a semi-public talk hosted by the CEO of a major regional online fashion retailer. Some of the key takeaways below:
- Operating costs online is not necessarily lower than offline retailers. Rather, online, it is skewed towards more variable cost. Shipping, returns, acquisition cost, system maintenance are major cost drivers. Offline is more fixed costs. This is why major online retailers hardly make any profits.
- Generally it's very difficult for general retailer to enter into fashion. There's the prestige factor: if you're a consumer, you dont want to buy your dress shirts on Amazon. Similarly if you're a fashion brand, you don't want to sell on marketplaces. Premium brands avoid marketplaces, because these stores are not incentivized to crack down on counterfeit/grey market products.
- Consignment margins are large in % terms but small in absolute dollar terms.
- Acquisition/onboarding of brands are not easy even for leading online stores. Major brands want to stay exclusive, or want to stay offline. Again, the prestige factor.
- Refunds rate for fashion is very high, it can go up to 50%. Things tend to "look a lot better in pictures" or "doesn't fit well".
- On desktop computers, revenue on weekdays is much higher than weekends. On mobile/smartphones, it's more spread out. Nevertheless, on weekends people don't really shop online, they'd rather go to malls. Nowadays 80 % of purchase made on mobile.
- In Indonesia, online retailing accounts for under 1% of total market for retailing. In China it's already close to 10%. Still lots of room for growth. Indonesia has yet to figure out, for example, simplified cost-efficient online payments.
