Online Apparel Retail - And What The Future Brings

For apparel retailers, online sales are minuscle. Even technologies that claim to increase a brand's ecommerce sales by 50%, will benefit the brand's overall sales only by 4.5% on average (see explanation below). Should we pay attention to internet at all?

Bitter statistics for brick-and-mortar, growth for online

Statistics first: only 9% of clothing is sold on internet. In comparison 50% of computers are sold online; 40% of books are sold online. Apparel is one the most difficult categories to be sold on internet.

Yet, computers sold on internet represents $30bn, while 9% of apparel equals $31bn. Apparel is already the biggest selling category on internet.

Not  only is it the largest category, in dollar volume, but future growth for apparel online market will be dramatic.

Recent reports are showing how the brick-and-mortar conversion rates (number of purchases divided by number of visitors) are rapidly falling. "For the third consecutive year, conversion rates have fallen, with 2010 seeing the steepest drop . It has become much harder for retailers to convert visitors into main users, as competition has intensified," as published by Verdict.

E-commerce conversion rates have been hovering around 2-3.5% while brick-and-mortar conversion rates for fashion retailers have been around 20-25%. But as online sellers become better, their internet conversion rates increase. Amazon.com boasts almost 8% conversion rate.

While overall apparel retail is growing some 3% a year, the share sold on internet is growing much more rapidly. The figures vary, but some high estimates have put the online clothing at 35% share by 2018. This means every 3rd brick-and-mortar shop will be closed. My guess is, you have noticed this trend with bookshops, which have closed or grown smaller. Borders bookchain has closed in the UK, mostly due to sales channels moving to internet; Waterstones has downscaled.

Even if the above trend is overestimated, the retailers who want to stay in business over the next ten years, need to pay attention. The same applies to property brokers and investors.

E-commerce benefits retailers more than 9%

Retailers, who pay attention to multi-channel opportunities, not just their web-sales, realize that their e-commerce site benefits them much more than just 9% of their sales.

Macy's found that every dollar spent online at Macys.com influences US$ 5.77 spent in stores within 10 days after an online purchase. Multichannel customers spend twice as much as store-only customers. The same is being confirmed by the UK's John Lewis.

Social aspects of shopping

Shopping is often regarded as a social behavior - it's not just the desire to get new clothes but to engage in an activity which provides the emotional relief. It's thought that women like this aspect the most, while men behave in a more functional way towards shopping.

Some research found that while women do spend more time trying on clothes, they do this because they are more demanding. Now imagine a semi-cold winter day, a woman wearing a light jacket and a sweater underneath, changing clothes in a tiny and hot fitting room for the umpteenth time. My guess is that most women do not generally enjoy this physical aspect of shopping either.

Nevertheless, brick-and-mortar shopping provides what most online shopping environments simply cannot: sounds, smells, friendly salespeople, the company of good friends. With the exception of smells, it sounds like an existing technology on internet - the Facebook. In the future, the social aspect might be satisfied in cozy cafes, not Macy's.

Which leaves us the luxury and bespoke market, which certainly would never move to internet. Wrong. While I do believe that bespoke will never move to internet - against predictions, luxury is showing trends of increasing online sales. It appears the affluent who prefer Gucci, would happily buy it online instead of going to the physical store.

Feel and Try

This is obviously the topic closest to my heart as this is what Fits.me develops: a virtual fitting room for online clothing retailers.

A word about history: books were thought to be one of the most difficult items to be sold on internet - they had to be browsed, touched. Now we have Amazon.com. It required a technological breakthrough for the internet to be able to serve the needs of a bookbuyer. Same applies to clothes - buying clothes on internet lacks two distinct features: touch and try. Until these two have been solved, the online apparel retail follows organic growth pattern, with dramatic growth to follow after the technology steps up.

Importance of solving these features can be seen from looking at return rates and the reason of returns. The average reason of return because the color did not match what was seen on screen is less than 5%. The reason that the fabric was unexpected is around 10-15% reasons of returns. And the poor fit is the reason of returns a whopping 50-70%.

Tehnologies aspiring to help apparel internet sales

• Styling advice (akin to a sales assistant suggesting: "if you like this shirt, you should consider these pants): Couturious.com;
• Augmented reality: RichRelevance and incredibly cool Fittingbox;
• Size recommendation: myshape.com
• Return services (lets face it, the return shipping is still the most common way to tackle the poor fit): Newgistics;
• Visual Size Guide which lets customer see which sizes fit them best: www.Fits.me

There's many more new and exciting technologies which we will write about soon. If you'd like to get a clickable map of different technologies sooner, just please let us know at info@fits.me.