Net-a-porter, Matches, Farfetch lure Aussie fashion followers overseas

AUSTRALIA is a key market for online global fashion retailers, so why are their domestic rivals unable to match them?

Former David Jones executive David Bush says fashion retailers need to think seriously ab

THERE has probably never been a more difficult time to be an Australian fashion designer or a fashion retailer. The entry of popular and globally omnipresent fast-fashion brands - such as Zara, Topshop, Uniqlo and H&M - with their well-designed and well-priced clothing threatens to make life very hard for local brands. To make matters worse, Australians continue to shop from overseas-based online retailers and new players are entering this market with alacrity. When consumers are not shopping at the aforementioned fast-fashion stores at home, they are buying apparel from overseas-based online retailers to the tune last year of an estimated $1.8 billion.

WISH has spoken to several of the key overseas-based online retailers in recent months — Net-a-Porter, Matches, Stylebop, Farfetch, Neiman Marcus and Mytheresa, among others - and they all seem to be singing from the same song sheet. “Australia is a key market for us,” they attest. Or: “Australia is a booming business for us.” “It’s our No 2 market in the world.” “It’s in the top three”, “top five”, “top 10” and so on. All of which poses the question: if Australia is such a key market for foreign-based online retailers of fashion and accessories, why is there no Australian-based retailer servicing this lucrative market with a satisfactory online offering?

David Bush is a retail consultant who spent 25 years as an executive with David Jones. Since leaving the store two years ago, he has established David Bush Consulting to work with Australian fashion brands on their retail strategy. “I hear the same things all the time too,” he says. “It’s our third-biggest market; it’s our second-biggest market. It will be interesting to see what happens in 12 months’ to two years’ time if the dollar is not as strong as it is today.” Despite the clear cost benefit that has led Australian consumers to make fashion purchases in US dollars, euros and pounds, Bush says price is only part of the equation; the other part is that Australian stores are not offering what they want.

“The fact that Net-a-Porter happens to be the market leader in selling luxury fashion online is not about price; it’s about the customer experience and the standard of service.” He believes Australian retailers haven’t invested enough money or time in online. “What they deem is acceptable service in their bricks-and-mortar stores their customer is telling them every day isn’t acceptable and they are applying the same formula to online. When it comes to a store, they think you just stick something on a rack and that’s your job done. They don’t see any value in service ... That said, you would probably put up with bad service if the brand and the assortment was so desirable that you just had to have it.”

Bush says one of the nation’s most successful online apparel businesses is Country Road, majority owned by Woolworths South Africa, which is acquiring David Jones. “In terms of volume, it’s a phenomenal business,” he says. According to Country Road managing director Sophie Holt, 11 per cent of total sales now comes from its online store, which has recorded year-on-year growth of 30-40 per cent for the past three years. Almost all of what is available in store is available online and the company uses its retail store network to fulfil online orders. If a customer wants an item today, they can pay for it online and have it ready to be collected from a nearby store within four business hours.

The online infrastructure is just part of the solution, though. Bush says retailers need to think seriously about what they are selling online. “If you go to David Jones’s website or you go to Saks Fifth Avenue’s website or Neiman Marcus’s website, you’ll notice that they don’t look all that different in terms of layout and design,” says Bush. “But then what happens is you notice the merchandise is very different. It’s about price, sure, but more importantly it’s about service and the breadth of product assortment.”

There’s no doubt Australian retailers such as David Jones and Myer have been late to the online party and are playing catch-up against far more experienced and established online retailers. “I think each of those stores had distractions and I’m not sure they thought the internet was going to be what it is today, and probably 10 years ago when the Australian dollar was US70c the issue wasn’t there,” says Bush.

Myer demonstrated how little it values its online business when its store’s website crashed on Boxing Day, the busiest shopping day of the year, and remained down for seven days. If Amazon or Net-a-Porter had gone down for as much as seven minutes it would be considered a disaster, but Myer boss Bernie Brookes brushed off the glitch, pointing out that Myer’s online store accounted for less than 1 per cent of business at the time. That’s despite tens of millions of dollars invested in online by both Myer and David Jones. For the record, Myer says its online sales doubled in the third quarter of this financial year and David Jones now derives 2.2 per cent of its sales from online.

Both stores claim they will get to 10 per cent in three to five years. They have a long way to go to catch up with their overseas counterparts and rivals. US department store Neiman Marcus, which launched its online store in the Australian market last year, derives about one-third of its sales online, while the figure for British department store John Lewis is 25 per cent. They also have a long way to go to catch up with the rest of the Australian retail sector. NAB’s latest Online Retail Sales Index says Australia’s online retail spending increased 11.3 per cent to $14.9 billion last year, and it now represents 6.3 per cent of traditional retail spending. Domestic retailers, according to the NAB report, account for 73 per cent of online sales.

WISH surveyed key overseas-based luxury fashion retailers to find out what they’re selling that makes them so attractive to Australian consumers. Britain’s Net-a-Porter says Australia is one of its largest markets. At present the company services the market with two to four business- day shipping but will be offering next-day delivery soon as it begins shipping to Australia from its Hong Kong warehouse. Dresses are a top-selling item for Net-a-Porter; it has shipped 60,000 dresses to Australia since January 2001. Its most popular brands are Chloe, Jimmy Choo, Miu Miu, Alexander McQueen and Christian Louboutin.

The Net-a-Porter Group’s men’s site, Mr Porter, says its most popular items are T-shirts, socks and casual shirts. Mr Porter has shipped more Falke socks than any other item to Australia, closely followed by J. Crew T-shirts. The top five brands on Mr Porter for Australia are J. Crew, Alexander McQueen, Falke, Lanvin and Paul Smith (shoes and accessories). Mr Porter launched in February 2011 and its first Australian order came less than 30 minutes after launch. Within the first 24 hours of trading, nearly 20 per cent of purchases were for shipment to Australia, which is three times more than any other country outside Britain.

Germany-based Stylebop is also selling a lot of dresses (80 per cent of its sales are women’s fashion) and says they are its most popular category with Australians. “Since launching we’ve experienced triple-digit growth each year and Australia has gone from No 10 to No 5 in sales,” says Stylebop fashion director Leila Yavari.

Shoes are the most popular category shipped to Australia by Germany’s Mytheresa, which sells only womenswear. Australia is among the company’s top-10 markets since launching an Australian channel last August.

Matches, based in Britain, launched in the Australian market two years ago and has experienced 200 per cent year-on-year growth. Shoes are again the most popular category for Australians, representing a quarter of all purchases. Seventy per cent are womenswear and the single most expensive item sold to an Australian customer was a piece of Sabine G jewellery for $18,000. Isabel Marant, Balenciaga and Saint Laurent are among the most popular brands on Matches with Australian consumers. Also in Britain, Farfetch shipped a winter coat to Australia from Liska in Austria for $11,100. The largest single order consisted of 21 items from 14 boutiques and came to $7200. Seventy per cent of Farfetch’s Australian customers are women and the most popular category is tops followed by boots. Farfetch says Australia is now the company’s third biggest market.

There are lots of reasons why department stores in the US and Britain are doing better in online than their Australian counterparts. David Jones and Myer will never put their online performance down to poor product assortment and service; they say overseas department stores had a head start, and many were strong catalogue businesses that knew the delivery business well and had geographical advantages. But customers do not care one iota about any of that. They care about choice, brand assortment, price, speed of delivery and ease of returns. But one this is certain: fashion customers don’t care that a store hopes to have a better online experience soon - they want it now.