While Europe’s undisputed leaders in the fashion industry are Paris and Milan — in that order according to the French and reversed if you ask the Italians — over the past five years London has quietly become the city of choice for start-ups seeking to use the Internet to disrupt and redefine the fashion industry.
Most of London’s fashion start-ups are developing online sales models that they hope will allow them to emerge from a crowded field of competitors. Fantasy Shopper, for example, is using social media to drive online sales while farfetch.com is offering a platform for small designers to get in touch with consumers. Other start-ups, such as Editd, which produces innovative market research for fashion companies, are creating the building blocks online retailers are using to redefine fashion.
With online sales growing steadily, even as the economies of the world’s richest countries sputter, the prize for the start-ups that find the right formula is potentially huge. Business-to-consumer online sales – including travel, digital downloads and event tickets – will grow an average 11 percent a year in Western Europe through 2015 to reach $344 billion, according to estimates by eMarketer.
Online fashion retailers fall into three categories and European start-ups have played an important role in each:
- A first generation that had a “pull” business model: they had large stocks of merchandise and tried to guess what people wanted, essentially moving an offline store online, a model pioneered by Italy’s Yoox in 2000;
- A second generation that “pushed” products by offering large discounts and impulse-based short-lived sales to entice buyers, a model first developed by France’s Vente Privée which has since been copied worldwide; and
- A third generation that is now working to exploit the opportunities offered by online communities and social networks, such as London’s Fantasy Shopper, which recently beat 1,500 start-ups to win the global grand prize at an annual Web Services competition organized by Amazon.
“Fashion is a social trend-led experience,” says Sonali De Rycker, a London-based partner at Accel Partners, the venture firm behind Facebook, and an investor in Fantasy Shopper and fashion start-up Stylistpick. “The so-called third generation of online or mobile innovators will grow because they are adding a social dimension to the discovery and purchase to create a frictionless experience. If done right, social can both drive adoption and purchase as well as improve the fundamental business model.”
Fantasy Shopper uses elements of social gaming to drive engagement and allows people to explore items sold in brick and mortar stores, connecting the online and offline worlds. It is in the process of raising money from Accel and New Enterprise Associates (NEA), Groupon’s backer, to expand into the U.S. market. Editd, founded in 2009, uses chatter on social networks – including Twitter, Facebook and Tumblr – together with data mined from blogs, retailers, and tradeshows to identify fashion trends before they make it onto the runways and into glossy magazines. Armed with that data, retailers, designers and fashion businesses that have paid Editd for the information have extra input when deciding what to feature on their homepages, what to discount and what to stop offering altogether.
“Fashion moves so fast and Editd is a way to understand much more quickly what the trends are,” said Frederic Court, a general partner with Advent Ventures Partners and an angel investor in Editd. “If leopard prints are what people are after, you want to know that before your competitors.”
Big name fashion designers are adjusting to a changing environment. Karl Lagerfeld, the German designer, said in December he would be launching a new line called Karl that will initially only be available online on London’s Net-a-Porter, a global site launched in 2000 that helped pioneer the selling of designer clothes online. Many other luxury fashion brands such as Prada, Marc Jacobs and Dolce & Gabbana work with sites like Yoox to sell end-of-the season inventory. Yoox, which delivers to more than 100 countries worldwide, now also operates thecorner.com, an online boutique showcasing cutting-edge fashion and accessories through dedicated mini-stores that let designers feature their latest collections alongside multimedia content.
Several London-based start-ups have created platforms to give designers direct access to consumers. Lookk uses a social networking environment to engage visitors in a marketplace stocked with the latest creations of dozens of designers. The company has roots in Vienna but is run from London; Lookk looks for the next big names in fashion, gathering customer feedback to help budding designers improve and evaluate which designs are ready to go to market. Bottica, backed by French ISAI, a superangel fund started by some of France’s most experienced Internet entrepreneurs, groups together little-known designers of jewelry and other fashion accessories, while Dia-Boutique provides a marketplace for more than 30 designers selling dresses and other clothing items with a focus on Arab consumers. Farfetch.com acts as the online channel for a myriad of independent brick and mortar boutiques located in nine European countries, the U.S. and Canada, offering everything from little-known young designers to Chanel Vintage and Gucci. Then there is Mr. Porter, a spin-off of Net-a-Porter, specializing in clothes for men made by designers such as Burberry, Gucci, Lanvin and Paul Smith. The site includes a magazine and tips on how the other half of the population can improve their style.
Ecommerce is, of course, about selling to people wherever they may be, but it helps to have a vibrant home market to sell in, if for no other reason than to make it easy and relatively cheaper to offer free shipping. Here London beats out all competitors on the Continent as the UK had $102 billion in online sales in 2011, according eMarketer. That was more than Germany, France, Spain and Italy put together. Online sales in Italy are barely more than one-tenth that in the UK and only in 2014 will the other four countries together have more online sales than the UK.
A whole crop of London fashion sites hope to entice shoppers to buy even more by offering personalized stylist services. Dressipi, co-founded by serial entrepreneur Sarah McVittie, uses a carefully defined set of algorithms to calculate your personal definition of looking good and find your best size in any brand with no need to scan or measure.
Another company taking advantage of Britons’ propensity to spend online is one-year-old Stylistpick, which designs, produces and sells shoes, bags and accessories. Fashionistas respond to Stylistpick’s 20 questions that delineate their “style profile,” then for £39.95 a month they get to pick a product each month from a list of recommendations. UK style icon Cheryl Cole is among Stylistpick’s designers.
Like many of its competitors, Stylistpick is based in London’s Tech City in the East End, an agglomeration of Internet startups serving a multitude of industries. Tech City is helping London in its bid to become a global tech hub, competing with cities like Berlin and Tel Aviv. The buzz and activity in Tech City has helped facilitate London’s rise to the top of the fashion-meets-Internet world ahead of cities with longer-standing fashion pedigree. But with fashion start-ups sprouting up from Chelsea to Docklands, there is more at work in the British capital than just the growth of an area dubbed Silicon Roundabout.
Government policies that offer tax breaks for local investors have helped. And, of course, London is home to famous stylists and a fashion week that, though not on par with Paris and Milan, is well attended by important designers and fashionistas. The city also hosts one of the world’s best-known schools for fashion designers, Central Saint Martins, which continues to churn out a throng of twenty-somethings with an itching desire to find a way into the industry. Notable alumni include John Galliano, the late Alexander McQueen and Stella McCartney.
London is proving a vibrant environment for online fashion start-ups as well, and some of these companies’ founders are likely to become fashion industry stars in their own right. They may even help their home city in its bid to become Europe’s fashion leader. Look out, Paris and Milan.