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Rob Feldmann

Intelligent brands should treat clearance as part of their overall strategy, says the UK boss of BrandAlley, who hopes the discount etailer’s new projects will make working with it a no-brainer.

While many UK retail bosses have been taking a glass- half-full-approach to 2011 trading - “cautiously optimistic” is a favourite phrase - Rob Feldmann, UK chief executive of discount etailer BrandAlley, has been preparing for the worst.

“I think people are working on the premise that if everyone talks a good game, it will be fine, but I just don’t believe it at all. It’s going to be very tough in the first quarter of next year,” he says. “The signs are quite ominous that we’re heading for a double dip [recession].”

Like nearly every one of his peers, Feldmann argues that the company he runs is in a better position than others - although he is easier to believe on this point than most. BrandAlley strikes agreements with brands to sell their surplus stock, but only pays for that stock once the end consumer has placed their order, so there is very little capital at risk “except occasionally if we really want something”, explains Feldmann. By limiting the need for inventory and warehousing, the model eases pressure on cash flow, and because BrandAlley is internet-based it can keep staff and property overheads relatively low.

Eyeing a profit

BrandAlley launched in France in 2005 in founder and chief executive Sven Lung’s garage, but - thanks to an investment from Sunday Times and The Sun owner News International, which holds a 50% stake - is on track to clock up net sales of more than €100m (£87m) in 2010. It is expected to turn its first profit next year.

Nonetheless, Feldmann, who transferred from News International to head BrandAlley in 2009, concedes that BrandAlley has felt the impact of the downturn - particularly on the supply of off-price goods.

“There is much less ready-to-wear stock around because brands hawked back [their orders] a lot because of the recession. They probably reduced them by an average of 20% but this has a magnified effect in the off-price market [because a higher proportion of stock sells through in the full-price retailer] so it feels like a 30% reduction,” he says. “The prices are going up, and there is also more competition [for off-price product].”

It is particularly hard at present for off-price retailers to get their hands on trend-led garments such as shearling coats and boots, or must-have brands like Barbour, but Feldmann claims “intelligent” brands treat off-price “as part of their strategy”.

They bump up orders in order to deliberately sell some stock off-price, where brands can still expect to make a 20% to 25% margin, or they make product to order for discounters using end-of-run fabric. The indies who were last year up in arms over BrandAlley’s deep discounting of in-season product will doubtless take an alternative stance on whether this is as “intelligent” as Feldmann claims. But whatever the reason for the surplus stock, he is hell-bent on making sure that when the right off-price product hits the wholesale market, BrandAlley is first in the queue.

The etailer’s most obvious appeal to brands is its discretion. Feldmann refuses to name a single brand that sells via the site (though, for the record, luxury womenswear label Chloé, premium denim brand Pepe Jeans and premium womenswear brand Soaked In Luxury were all prominent when Drapers checked) and because BrandAlley restricts access to registered users, and confines sales of any one off-price product to as short a period as a single day, it maintains an air of exclusivity.

Meanwhile, shoppers visit BrandAlley because the prices are low - it plans to reduce its own margins from about 40% to 35% for 2011 - and because they trust the etailer as a curator. Feldmann proudly notes a haul of footwear by French designer label Les Tropeziennes, which sold within hours even though the label is little known in the UK. Now

BrandAlley wants to use that close relationship with customers to help it woo suppliers by providing them with highly valuable customer insight data, for free.

The etailer already sends targeted marketing emails on behalf of brands to its customers, and has helped at least two major labels settle on the right store locations by sharing data about how many shoppers that have bought that brand on BrandAlley live in a particular area.

Next week, BrandAlley will take this a step further with an informal consumer testing feature called Le Lab. The idea is already up and running at BrandAlley France but was first trialled in the UK with a promotion around little black dresses. BrandAlley shortlisted LBD designs by emerging talents, and threw it open to its customers to vote for the dress they wanted to be made available to buy as a made-to-measure garment.

The etailer will now use Le Lab to help shape its own buying decisions - for example by asking customers: ‘Do you want these Christian Louboutin shoes [at a discount on BrandAlley] or these Jimmy Choos?’ - and to help brands test the response to new product in the early stages of development. “When [brands have] produced the stock it’s too late,” he says. “The end goal is to be indispensable to brands so they go nowhere else.”

Power sharing

In January or February, BrandAlley will take the Le Lab idea a step further, inviting shoppers to back emerging design talent by taking a stake in a particular collection. In return for an online payment, they will get a share of the profits and the chance to meet the designer, comment on the designs and attend the collection launch (see p6). Lung explains: “The street is electing new designers, new trends, so we want to give this power to internet users.”

But Feldmann and Lung also believe there are significant opportunities to grow outside fashion: they already sell homeware, beauty products and jewellery, and plan to branch into travel next year. It’s an approach more fashion businesses should consider, says Feldmann.

“In September, our average basket size was £70 across three items from different categories. Shoppers want a really good selection [of products] and one delivery charge,” he says. “That’s why Amazon has done so well. Fashion retailers need to stop thinking like fashion retailers and learn to think like their customers.”

CV

2009 Chief executive officer, BrandAlley

2005 Mergers and acquisitions director, News International

2002 Pan-European adviser, News Corporation

1998 Chief financial officer, Global Music Group at News Corporation

Feldmann on…

2011 trading…

There’s going to be a really big hit from the loss of jobs - it’s not just about consumer confidence - and there are a lot of other factors such as VAT and rising cotton costs that are adding pressure on retail at the same time.

I think it’s going to hurt the young fashion sector first.

Price sensitivity…

Customers are watching every penny and they’re going to keep watching every penny. We don’t want to make massive margins.

Other retailers online…

John Lewis and House of Fraser have done it really well. Selfridges has done it really poorly, despite the fact it has a fantastic [bricks-and-mortar] store. High street retailers’ online stores should be selling as much as their London flagship, but a lot of retailers don’t see it like that. They still see the [online store] as competition [to their bricks-and-mortar business].

Guilt buying…

Lots of our shoppers are young mothers aged between 30 and 40, who have quite high disposable income but are also paying two sets of school fees. They’ll buy a luxury handbag at 35% off, then they’ll make a guilt-driven purchase for the kids.

On competitors…

TK Maxx stores are what they are - a mess. Brands probably ask themselves: ‘Do I want to be in this store?’ Because we are online, we can pay brands twice as much as TK Maxx but we are also less visible.

Working with brands…

We want to partner with brands. We don’t just want to be there when they have surplus stock.

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