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Will retailers click with branded sites?

With online spend set to double in the next five years, high street giants are preparing to launch branded fashion websites. But how will they fare in the saturated online market?

When British consumers switch on their computers and go shopping this autumn, they will find three major retailers fighting to sell them branded fashion. John Lewis is expanding its online fashion offer from August 24; House of Fraser is launching a transactional site next month; and Next will weigh in with The Branded Directory in October.

Although each retailer has yet to finalise the exact line-up of brands and mix of own-label product, names such as French Connection, 7 For All Mankind, Nougat and Replay are likely to be available on their websites this autumn.

The fact that three big high street retailers are set to go online within two months of each other is no coincidence. They all intend to be ready for Christmas, after the huge yields for online players in the run-up to last year's festive season, when UK shoppers spent £7.66 billion online across all categories, not just fashion. Market analyst Mintel predicts that online fashion retail spend will double by 2011, reaching £2.93bn a year.

John Lewis, HoF and Next arrive in a cyberspace already well-served by specialists including Asos.com, Net-a-porter.com and Littlewoods Direct, as well as independent retailers such as Psyche in Middlesbrough and Bagga in Chislehurst in Kent.

James Roper, chief executive of etail industry body IMRG, says the move should have come earlier. "What took them so long?" he asks. "Half of UK households have broadband, and that tends to be the smarter half with money and jobs. They'll see massive sales almost overnight".

Steve Cochrane, owner of Middlesbrough department store Psyche, which has been selling labels including Fullcircle, Levi's and Roberto Cavalli online since 1998, says the retailers have missed the boat to a certain extent. "They've waited because they haven't believed in it," he says. "But the market is saturated. There's too much product on offer and too many routes to market. To rank top in Google adverts you have to be very clever and spend a lot of money. It takes a lot more effort than people think. And new websites run the risk of being hit by fraudsters."

The commitment needed to embrace ecommerce is not for everybody. John Heath, managing director of Scottish-based independent designer mini chain Cruise, expects to have a small online presence by Christmas. He says: "Internet growth is massive but I'm very conscious that we are not a big retailer. We don't have the buying power of Next or House of Fraser. It is dangerous unless you have enough garments to put on there. You don't want to end up disappointing the customer."

The big winners so far have been the specialists: mail order companies working online and internet-only operators. This is good news for Next's new concept. The Branded Directory will carry no Next branding but the group's mail order "back room" - an automated warehouse in Leicester - will power the operation. Next's own website has more than double the market share of branded operator Asos.com, which is also seen as a good omen. The professionalism of Next's operation has been a great lure for brands, which are expected to include Diesel, Rock & Republic, 7 For All Mankind and Paper Denim & Cloth. The buying team is understood to be taking on only the top-end of each collection, pushing it as far away from Next's market segment as high-end denim will allow.

Despite the large number of branded fashion websites, there is not yet one site to rule them all. Could the Branded Directory change this? Brian Toft, who owns Hanon in Aberdeen, sells Adidas, Levi's and One True Saxon online. He says: "I don't see Next as any sort of threat. But it does have superb logistics. Anyone successful online has already been successful in mail order. The online market is getting saturated now as these brands get more exposure. An online shop is essentially a mail order catalogue, but it can just be a bit more fancy."

Although Cochrane sees Next as the newcomer that independent retailers need to watch, he is concerned that it is going down the branded route. "It reeks of desperation from Next's point of view," he says. "It's not cheap enough to be George or Primark, but it can't compete with more top-end fashion retailers," he says.

But Dave Lomax, owner of the Bagga website and store, which sells brands including G-Star and Armani Jeans, questions Next's ability to transform its database of own-label shoppers into Brand Directory customers: "Next will have a slow start because it is a new audience for this kind of offer. John Lewis and HoF will get off to a flying start as they already have the database." Lomax, who set up his internet business in 2002, has other concerns about these new entrants, beyond the competition. He says: "Successful e-commerce has to be nurtured. If big players come and are served by brands, and then they neglect those brands, it will change e-commerce across the board. The brands will think 'I don't want to do it any more', which is a big concern for those of us who are doing it right."

Brands are also troubled by how some retailers are approaching the web. HoF's new venture comes in for particular criticism. "A lot of people are using e-commerce to try to get an extra Saturday's takings," says the UK boss of one young fashion firm that is working with the Branded Directory. "House of Fraser asked for our details and logo but hasn't asked if we want to be on the site. I am worried it will take orders for 10 stores, keep stock in the warehouse and put it on the site even though I haven't given permission for that."

G-Star is one denim brand that has not signed up to the Branded Directory. But unlike Hugo Boss and Paul & Shark, for instance, it does work with stockists that want to take its product online. The company is also considering launching its own transactional site. G-Star UK sales manager Casper White says: "We are part of House of Fraser online by default of being a supplier. We don't deal with any internet-only businesses. We're one of the few denim companies that don't. We don't deal with Asos. We don't deal with Next's Branded Directory. We don't do catalogue. But we understand that e-commerce is part of retailers' business. Retailers are free to sell online anything they stock in stores. We supply images and other information to help their presentation."

Harrods sells brands including Canali, Missoni, Paul Smith and Sass & Bide online. Home shopping director Guy Hipwell believes that brands will soon overcome their etail phobia, and says the recent addition of a sales element on Louis Vuitton's website is a sign of the times. "There are luxury brands not wishing to participate online but that will change," he explains. "Some say point blank no, but more progressive brands are moving towards e-commerce. We work in partnership when taking product and putting it under the Harrods umbrella. We're very keen to work with as many brands as possible," he says.

The internet has reached a stage of maturity, with a growing chunk of UK consumers happy to flex their credit cards in cyberspace. It has also improved technologically. Roper says: "The consumers are in control. They do what they want. And if they want to shop online, they will shop online. Smart retailers will recognise this and use it to complement their bricks-and-mortar business."

IMRG's Roper believes the internet's capacity for creating a wonderful shopping environment is underused. "The high street says that shops offer a better environment, with trained staff and elegant surroundings," he says. "That is what the internet must become. At the moment, most websites are like tatty catalogues that you could run on a 56K bandwidth. Everything that you do in a well-styled store you can do online, and more."

As well as the attentions of credit card fraudsters, the cost of returns can knock back an internet business, no matter how strong its portfolio of brands. Technology offers some solutions to this - for example, a zoom function on photos can enable shoppers to see a close-up of a garment's fabric so they know exactly what they are buying, which can help to minimise returns. And it is understood that HoF's site will include detailed information on measurements to reduce returns because of size complaints. "With the catalogues, people used to buy three in different sizes and send two back - that's the kiss of death. It's why you see online retailers working so smartly," says Roper. The rise of speedy broadband connections now enables retailers to offer far more information online. "Until broadband, selling was almost impossible because you need lots of detailed information," he adds.

Littlewoods Shop Direct brand director Gary Kibble agrees. "Growth within this marketplace is testament to the fact that customers want a retailer to have an online presence. Having online as a channel to market is not enough," he says. "The retailer must focus its online proposition around customers' different needs, which are as much about speed, excitement, confidence, choice and flexible delivery terms as they are about having the right products in the right size. Driving customers to the site is not enough. The retailer also has to excite the customer and entice them to buy."

HOW ONLINE SPEND HAS RISEN

Etail sales of clothing and footwear

Year: Sales

2001: £220m

2002: £337m

2003: £483m

2004: £698m

2005: £858m

2006: £1.23bn

PREDICTED

2007: £1.45bn

2008: £1.81bn

2009: £2.09bn

2010: £2.54bn

2011: £2.93bn

Source: Mintel

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