E-commerce has long been slated as the future of fashion retail, but 2020 has been a year of exponential growth and adoption on an unprecedented scale. And e-commerce is so much more than just “online shopping” — it’s an intersecting network of technologies, processes, communications and touchpoints across both the online and offline worlds. So what is the future of e-commerce as we look past the pandemic, and what are brands doing to stay ahead of the curve?
Glossy’s Deep Dive: Age of E-Commerce is a collection of videos and key takeaways from our recent Age of E-Commerce Forum Live that provide valuable tips and key insights to prepare you for all the exciting opportunities presented by the e-commerce economy. Below you’ll find key takeaways, quotes and stats, as well as videos from our recent Age of E-Commerce event.
We’ve all spent more money online this year than ever, and it’s all thanks to Covid-19. The pandemic pushed millions of people onto e-commerce for the very first time, and brands rushed to upgrade their websites, social commerce channels and delivery operations to keep pace.
The growth of e-commerce has been a transformative boon for brands amid a year of strife, from the pandemic to civil unrest and a tense election season. “It’s been super positive, because for people who were on the fence about e-commerce or about direct-to-consumer, everyone’s completely, 100% there now,” said Paskho founder and CEO Patrick Robinson.
But e-commerce is thriving independently of the lifespan of the pandemic; online shopping is a habit that’s here to stay, and it’s going to be the spine around which brands build their businesses for the foreseeable future. For the first time, e-commerce is driving decision-making within a majority of fashion businesses, and that impulse has repercussions for the ways brands produce, ship and market their products.
The way the floodgates have opened for e-commerce this year has brought many new consumers into the orbit, including from older generations. Brands may have seen a wider geographic distribution of their consumer base, or more diversity. And many brands have noticed a significant increase in their male e-commerce customers.
All of this means brands are having to get to know their consumers all over again, and the direct-to-consumer model puts the customer at the heart of everything the brand does. Direct-to-consumer has quickly become a defining trend of these times, with some brands entirely pivoting to a DTC model, and others exploring how DTC plays alongside the seasonality and timetables of the conventional fashion retail model.
Robinson of Paskho said the closer relationships that direct-to-consumer facilitates removes the need for some staples of the fashion industry. “Runway shows are a huge waste of time and resources,” he said. “They don’t connect to the end consumer. We look back at that model, and it was Coco Chanel doing runway shows — so why are we still doing that, when we live in an age where you can go direct-to-consumer in every other aspect to have a conversation with them?”
With all those new customers — and with cost-efficiency top of mind for marketers at many companies — brands are willingly testing a variety of marketing channels. TikTok has captured the imagination, of course. But brands are also rediscovering value in formats that not too long ago were written off as yesterday’s news, leading to a revival of linear TV advertising and direct mail catalogs.
Marketplaces are also proving fertile ground for brands, not just in the immediate circumstances but also in helping brands build for life beyond the pandemic. Before that, top of mind for many marketers and leaders is the imminent arrival of the holiday season. Nobody expects anything less than a stern test of nerve, and brands shared how they’re facing down the challenge.
Here’s what you need to know.
The e-commerce explosion
The rapid expansion of e-commerce has undoubtedly been one of the business stories of the year, with the Covid-19 pandemic obviously the major accelerator of a longer-term shift in how consumers shop and purchase. For brands, the spike in interest in e-commerce brings new consumers and unprecedented demand, but also intensified competition as more brands than ever seek to carve out a piece of the online shopping pie for themselves.
“This transition or transformation that would have taken many years to happen has now happened over the course of a handful of months,” said Saks Fifth Avenue CMO Emily Essner. “And so, as we think about the acceleration of our digital business and about more virtual opportunities in general, it’s something we’re excited about and seems very fortuitous.”
- Demographically, the e-commerce audience is broadening. Large groups of consumers have been slow to adopt e-commerce, dragging their heels due to security concerns or perhaps because of technophobia. Covid-19 lockdowns effectively left these consumers with no choice but to figure out e-commerce — and it turns out that many of them are loving it.
Heather Kaminetsky, chief brand officer at DTC shoe company M.Gemi, pointed to a surge in online business among older consumers. “There’s definitely a baby boomer boom within e commerce,” she said.
Meanwhile, Saks Fifth Avenue recently unveiled the results of a top-to-bottom overhaul of its website. Personalization was one of the themes driving the redesign, and particularly a desire to give menswear more room to shine. Essner said that’s an acknowledgment of the store’s growing base of male consumers. “For the last couple of years, we’ve seen a lot of growth in men’s. And certainly over the last six months, one of the remarkable bright spots has been men’s,” she said. “So it was something we were planning beforehand, and seeing the more recent business results certainly made us feel really good about the decision that we made.”
- E-commerce will complement and coexist with retail — but the brick-and-mortar revival will be a long process. Many brands and leaders expect retail to bounce back and play a part in the future of their businesses. However, it could be 12-18 months before brick-and-mortar recovers, and the impact of Covid-19 combined with the rise of e-commerce has many leaders now working on new visions for the future of physical retail.
Kaminetsky said M.Gemi is anticipating a drawn-out path to recovery for the brand’s retail business. And the pandemic will be the catalyst for a new model of in-store shopping, according to Klarna’s beauty and accessories commercial lead, Michaela Griffin. “We actually don’t believe that brick-and-mortar in-store shopping is dead or even dying; it’s just on the brink of a long-overdue evolution,” she said.
- Meeting the demand for e-commerce means bolstering customer service and communications strategies all around. As e-commerce sales volume increases, brands have to step up their game in all respects. Investing in areas like customer service and brand storytelling ensure the brand and its message are as resilient and consistent as the online audience expands.
In the early days of the pandemic, M.Gemi was inundated with calls to its customer service team asking about the situation for the staff at the brand’s Italian workshops. “Trying to communicate our story and [that of] our workshop owners — how they’re doing and what’s happening over there — became a strategy on how to bring new people into our world,” Kaminetsky said.
Essner said Saks Fifth Avenue’s program for VIP customers, SaksFirst Limitless, offers virtual experiences that help keep luxury consumers engaged online. “One of the real themes there is around brands and fashion and newness,” Essner said. “[Those] really continue to be things that the luxury customer is looking for. The pandemic doesn’t change that.”
For many brands, the shift to e-commerce has meant putting greater emphasis on direct-to-consumer business. Some have switched from a wholesale to a DTC model, while others are balancing DTC with a traditional wholesale approach.
The change was prompted by the turmoil of spring, when many brands were hurt by retailers canceling orders and relationships were often put under new strain. As a result, brands have been looking more at a DTC approach — many have decided that model will be the way forward. There has been huge growth in DTC commerce, and some brands have seen the rewards. “We were seeing 200% growth even before. And then, of course, during Covid and at the height of Covid, everybody was shopping online,” said Jeff Abrams, founder and creative director of fashion brand Rails.
Direct-to-consumer also implies a closer relationship between brands and their communities. Patrick Robinson of Paskho is building a “community made” model where all the brand’s production takes place in the United States, specifically by skilled artisans working from home in underserved communities. “We’re making a platform where they can share in the wealth creation and equality. So it’s a brand new model, and we’re excited to be at the forefront of it,” Robinson said. The model creates opportunities in neighborhoods that need them and benefits the environment by slashing shipping distances, and Robinson believes it’s a message that will resonate with Paskho customers.
- DTC liberates brands to focus squarely on what the consumer wants. James Miller, CEO at The Collected Group, said that DTC and dropshipping means product lines and releases are driven solely by consumers’ shopping habits, rather than the demands set by wholesale partners and industry conventions.
“Part of what we’re trying to look at in 2021 is how do we do more of an online DTC business,” Miller said of The Collected Group’s denim brand Current/Elliott. “Realistically if we’re going to drive an aggressive testing model, what could that look like if you took a business like Current/Elliott, took it away from just seasonal behaviors? … That’s where we’re going to be taking the brand in ’21, and it’s going to be remarkable to see how [the consumer] reacts.”
- Instagram represents a growing sales opportunity. Brands like Revolve are part of a wave of businesses that have leaned heavily into Instagram Live this year, and they haven’t looked back. Instagram is better equipped than ever for e-commerce, and that offers enormous potential for brands.
Revolve’s chief brand officer, Raissa Gerona, said the brand pairs its Instagram Live and IGTV output with an extensive and highly diversified influencer network including micro-influencers and big-name influencers. “There’s just so much more room to grow,” Gerona said. “Because there are new influencers that come on the scene every single day. There are influencers that, within a year, will grow significantly. And so we really try to look at so many different types of metrics to make sure that we’re working with the right people.”
- DTC doesn’t mean you have to abandon wholesale channels or brick and mortar. Physical retail may be on a slow road to recovery, but pop-ups will likely be a feature of the coming months. Jeff Abrams of Rails spoke about “hybrid opportunities” to incorporate wholesale, pop-ups and showrooms, as supplements to the DTC model.
“We really feel like we want to have a 360 approach to letting the customer shop the brand, however he or she wants to experience it,” Abrams said.
Many new customers have embraced e-commerce this year, including demographics that were traditionally slow to the party. In thinking about how and where to market to these new consumers, brands have found themselves experimenting with a variety of new alternative channels.
These alternative channels are not necessarily new. Linear TV is one of the breakout successes, while SMS and print are among the other avenues brands are exploring. “Many direct-to-consumer brands are dependent on performance media,” said Kaminetsky of M.Gemi. “And we decided to change that funnel that we had and open it up.”
- Linear TV advertising has proved a surprising hit. Few observers could have forecast the emergence of linear TV as an effective marketing tactic for brands in 2020, but that’s just what has happened for some. Low customer acquisition costs and unexpectedly impressive results are giving more brands the confidence to experiment with linear TV.
Kaminetsky said that, six weeks into the brand’s experiment with linear TV marketing, data shows consumer acquisition costs (CAC) are lower than with paid social. “It’s proven to be quite efficient,” she said. She acknowledged that the overall impact of a linear TV campaign is hard to pinpoint, because of the triggering effect a TV ad can have on consumers visiting the brand’s Instagram profile or performing a Google search. “Just trying to look and see how linear TV is playing into all your marketing channels is another big piece of the puzzle,” she said.
- Brands are (re)turning to print for an intimate, tactile encounter with customers. Marketers are building out storytelling principally through investment in digital channels, but print can be an impactful partner to a website and social content.
Jeff Abrams said that Rails has expanded its digital content output to acknowledge the rising demand for everything from short-form video to static images. But it’s also started sending print catalogues to the Rails mailing list. And Abrams said consumers will probably have noticed that Rails isn’t the only brand they’re hearing from in this format. “There still is something tangible that people want to go through and sit with, and have more of an intimate experience with the brand,” Abrams said. “It’s been a great storytelling platform for us, and there’s a ton of traffic coming to our site.”
Essner said media mix modeling and customer segmentation has given Saks Fifth Avenue an unexpected insight into the value of print. “We’re seeing our top customers really engaged with magazines,” Essner said.
- Of course, TikTok is huge, and it’s only growing as a marketing channel. It’s safe to say that every brand is looking at TikTok right now. TikTok is exciting, but it won’t be right for every brand. Brands should do their homework and spend time on the platform, getting to know the audience there before diving in headfirst. The platform’s user demographics are stacked toward Gen Z and younger millennials, although this year has seen more adoption among older users.
Kaminetsky of M.Gemi said brands need to be clear about what they want from TikTok. “If it’s right for your brand, you should try it and just set your expectations appropriately,” she said. “It’s not going to be a direct response channel. But it will help with brand awareness.”
While many brands are moving away from wholesale, there’s growing interest in selling through marketplaces. Of course, Amazon is the ultimate example of this, and 2020 has seen countless brands make their debuts on the e-commerce giant, but fashion-specific marketplaces like Farfetch are also building a reputation as effective channels. And niche marketplaces will continue to emerge as dominant players within every fashion subcategory into 2021 and beyond.
James Miller of The Collected Group said that, compared to a wholesale partner, a marketplace gives brands more control. Brands are also launching their own native marketplaces, which can create opportunities for cross-brand cooperation and add value for customers. “We’ve been able to really understand what that looks like from a different customer angle,” Miller said.
- Marketplaces can help brands tap into new audiences. Each marketplace is its own storefront, which invariably puts the brand in front of a wider consumer base than the brand’s own channels offer. Consumers are also likely to view a brand’s presence within a marketplace they trust as an implicit endorsement.
“You’re getting a different set of eyeballs into the business because of a different customer acquisition base,” said Miller of working with Farfetch.
- Use marketplaces as a springboard into the post-Covid era. Marketplaces are, of course, a virtual shop window. Brands can use marketplaces to build brand awareness so they’re ready to hit the ground running when the pandemic finally eases. These efforts will be rewarded when brick-and-mortar business picks up again.
“It’s not just about generating more online revenue next year; it’s about targeting growth avenues that mean something to the business post-Covid,” said Miller of The Collected Group. “In this new world of e-commerce, this is the most important factor.”
- Sharing insights is essential to shaping the future. Brands should be communicating with marketplaces and other online partners about any changes they identify in their business, so that all parties can stay aligned and develop product lines and strategies as the market evolves over the coming year or two.
After the pandemic, Miller predicts that there will be more similarities in terms of what the customer is looking for, rather than more extreme differences across regions or channels. “It’s really important with any major shifts in customer behavior to give foresights to any partners that also work within your brands’s architecture or merchandising,” Miller said.
The explosive growth of e-commerce has been fantastic for the fashion industry, but brands are likely to be shipping an exponentially larger volume of packages this holiday season. It’s a major challenge for the brands and their delivery partners and one that could push America’s logistics infrastructure to breaking point.
Meera Bhatia, TechStyle’s president of expert services, cited research predicting that the volume of packages being shipped this holiday season will exceed the ecosystem’s capacity by 5%. “That means a lot of people are going to be getting gifts late,” Bhatia said.
- Prioritize first-class, timely communication to manage expectations. At this stage, many of the features that will define this holiday season logistically are already baked into the cake. Brands can’t change the system or innovate their way around the challenges ahead. What they can do is get the communications right by being proactive and on the front foot about setting customer expectations. Consumers will likely understand if not everything goes according to plan, but the brand has to keep them in the loop.
“It’s too late to change things in your actual logistics and infrastructure for the holidays now,” said Bhatia. “The No. 1 thing that companies can focus on is customer communication that’s clear and accurate.”
- Don’t try to compete on speed with Amazon Prime. Prime has raised the bar for shipping times, but trying to keep up is a dangerous game for brands. Bhatia said that smaller brands, in particular, need to be prudent and work within the constraints of what their business allows.
“People shouldn’t be trying to do things that are unnatural or unprofitable for the business,” Bhatia said. “As you scale, obviously being faster is better, but I would focus more on brand and how you really differentiate your product and all of those things.”
- Expect unprecedented synergy between online and offline retail. Griffin of Klarna said some physical brick and mortar stores will convert into being temporary warehouses to facilitate the demand of the online order experience.
“I like the word ‘pod’ better than warehouse, because it functions as more than just a logistics shipping place. It can also be a retail center; it can be a place where the community can come and have meetings, and where the makers forming their co-op can actually be a part of the company and what we’re doing.”Patrick Robinson, founder and CEO, Paskho
With more brands adopting models like direct-to-consumer and dropshipping as the core of their business, the function of a brand-owned warehouse is up for a reimagining. Paskho is undertaking a root-and-branch overhaul of its production and logistics operation, rooting its manufacturing in the homes of skilled craftspeople in American neighborhoods and setting up strategically located warehouses, or “pods,” in those communities. Robinson said these hubs can provide a holistic service benefitting the brand, makers and the wider community.
“Not every sale is a good sale. You can blast people with ads on Instagram or on Facebook, but if you turn off 95% of your customers because you’re hitting them with ads every five seconds, then you’re going to do your brand a long-term disservice.”Jeff Abrams, founder and creative director, Rails
Rails founder and creative director Jeff Abrams cautioned brands against burning out the goodwill of consumers by discounting persistently or being too eager in pursuit of the next sale or the next first-time purchase. Reaching new customers is great, but protecting the brand is of critical importance. “It’s a slippery slope when you try to do a lot of the things that will drive revenue at the expense of brands,” Abrams said.
WTF is the community-made model?
Paskho’s Patrick Robinson outlined the brand’s recently launched “community-made” model as a more sustainable and equitable vision of a way forward for the fashion industry. The model will see Paskho move its manufacturing from Asia to the United States, centering production in neighborhoods that urgently need jobs and opportunity. Paskho will work with skilled local people, who will stitch and assemble products in their own homes. Meanwhile, the brand will establish warehouses — or “pods,” as Robinson prefers to call them — in those same communities. That will cut down on shipping distances, create more jobs and set up hubs that can serve the community by potentially doubling as retail or events spaces.
WTF is digital clienteling?
This has been around for some time, but the concept of digital clienteling has come into its own since the onset of the pandemic and especially during periods when brick-and-mortar stores have been forced to close. Essentially, digital clienteling tools are about enhancing the relationship between customer and sales associates, enabling a more personalized degree of service in virtual contexts. Essner of Saks Fifth Avenue said the store offers customers a personal shopping experience, assisted by a style advisor. “I’m really glad that we had the skill set already built, but it’s something where we’re seeing the adoption really grow,” she said.
WTF is dropshipping?
The cornerstone of many direct-to-consumer businesses, dropshipping offers a more flexible, lightweight approach than traditional supply chain dynamics. Rather than ordering from the brand in bulk and having to store stock in a warehouse, the retailer receives an order from the customer and passes the order to the brand, who ships direct to the customer upon completion.