"We don't want to sell online because we want to protect our offline stores." This is a phrase I've heard over and over again in the last 9 years since I've been in online sales. I rarely hear it in the fashion industry now. Fashion started to change a few years ago. I would say that this is a brave attitude considering how classic retailers operate. But have you ever thought about what's best for your end customer? I mean, they are buying your products. Are they able to get your products where they want and where they normally shop?
I would like to share my knowledge from the last 9 years in online sales with you. The "Real com talk" will provide you with deeper insights and know-how. This article is also the start of a new series on online sales to deepen your knowledge and understanding of this business. I have already been able to gain different perspectives on the industry: Amazon internally, brand platforms internally, other online stores externally and have been able to gain a 360 view as a result. I also see that online sales is not such a big issue anymore. It's more about the marketplace business now, because there's also a huge lack of knowledge. Why? Because it's a relatively new topic and it's very complex.
"For me online sales are no longer an "if", it's more a "when and how?". Especially when it comes to online marketplaces."
So it's time to take a look at the world of online fashion marketplaces and get started.
Online sales via online shops, such as Amazon, Zalando & Co.
Fashion marketplaces are distribution channels for brands and retailers who want to sell their products online through large online stores such as Amazon. There is the wholesale business, which is still a B2B business. You have a buyer who pre-orders your items and sells them on behalf of the online store. At Amazon they are called Amazon sellers, at Zalando it is the normal wholesale business.
In addition to wholesale, you can also sell your products independently as a brand via the marketplace. You use the online shop as a platform to sell the products yourself. You have to get the product yourself, stock it and sell it through the online store and also ship it to the end customer. The good thing for you as a brand here is that you can decide where to sell your products and at what selling price. If you sell via wholesale, the online shop itself decides on the selling price, as it sells the products.
In Germany and Europe there are several marketplaces for fashion, also known as affiliate programs, from online shops like Amazon, Zalando, About you, Otto, Klingel, Ebay, Sportscheck, mytoys, Limango, mirapodo, Galeria, La Redoute, Douglas, BOL, Allegro and many more. This small selection focuses mainly on fashion and lifestyle products.
What marketplaces for fashion say about future growth
Marketplaces became the growth opportunity for online stores. Therefore, Zalando stated in the 2019 annual report to increase the GMV share from their affiliate program (marketplace) from 10% in 2018 to 40% in 2023/24, to 50% in the long run. Already in 2019, Zalando increased the share from 10% to 15%, according to the 2019 annual report. It is estimated that Amazon sellers already generate 60% of the total revenue in 2019. These examples show that online sales via marketplaces for fashion will already become even more important in the near future.
"Marketplaces giving you the chance to sell all the products you want depending on your selection"
Let me give you a case study using the graphic shown. You are a retail brand that already sells your products through the wholesaler on Zalando (marked in dark blue).
- Your wholesaler orders 12 of your 20 bestsellers (marked dark blue).
- You add your 20 bestsellers via the marketplace/partner program and sell yourself
- 8 out of 20 bestsellers that have not yet been ordered are now available at Zalando (marked green)
- 12 of your 20 bestsellers have been ordered wholesale, and you also sell them as soon as Zalando runs out of stock due to high demand, lack of reorders, or late season (highlighted in light blue)
This hybrid model gives you the chance to generate additional sales that have not yet been ordered from wholesalers or are out of stock. This gives you the opportunity to grow your online sales business by selling your products through the marketplace model.
The past has already shown that selling through the affiliate program and the wholesale business benefit from each other. It helps you as a brand sell new categories and styles that the wholesale buyer didn't want or misjudged the order quantity. In my experience, you can typically generate at least +10% in sales if you already sell a large selection of your assortment through wholesale. I have also seen growth rates of +30% within 3 months on the marketplace when selling an additional category through the marketplace. This was a test case for buyers, and after that they started ordering that category wholesale as well. If you still want to sell your products through wholesale when you already sell through the marketplace, that's a different story. In my experience, wholesale and marketplace benefit from each other.
Not all marketplaces are the same - Two marketplace alternatives
Within the marketplaces there are differences in the way they are set up
Open marketplaces are open to everything and everyone
Open marketplaces are open to any product without restrictions or pre-selection. This means that anyone can sell anything on these marketplaces. Amazon is a pretty good example here. There are many offers from all over the world, especially from Asia. At the same time, a single product (with the same EAN code) can be offered by multiple sellers. This leads to price competition for the same product. At the same time, you have no barriers to entry, so you can start selling immediately. You don't even have to be a well-known brand. You can enter the market and start your business easily on these fashion marketplaces. Good examples of open marketplaces are Amazon, ebay, BOL (NL) and Real. This year Otto will also open an open marketplace, until now they only had a closed marketplace.
Closed marketplaces are more exclusive and have less competition
Closed marketplaces have restrictions and are more exclusive. You need a selling permission to sell your products on such fashion marketplaces. After this one time approval, you are allowed to sell all the products of your brand on these marketplaces. You can decide which product you want to sell. Not "everyone" sells there, so you can have a good brand experience. At the same time, there is also less competition because only one EAN is offered by one seller at a time. This means that your suggested retail price is also more stable compared to open marketplaces. The barrier to entry in the fashion marketplace is also slightly higher than selling through open marketplaces. Good examples of closed marketplaces are Zalando, Otto, About You, Klingel, Sportscheck, Mytoys and mirapodo.
What's better for my brand now?
It depends a lot on your brand, your products, your prices and your strategy. I have already started the marketplace business for fashion with several brands and opened this business with a well-known underwear brand. With this underwear brand, we had several challenges in terms of the marketplace business. We were already wholesale partners with all the major online stores, and they wanted us to start the marketplace business. We wanted to expand our selection and be our own backup in case the products went out of stock.
- Challenge number one was our logistics headquarters in Hungary, which focused mainly on B2B orders.
- Challenge number two was a lack of capacity in the e-commerce team.
It took us some time to get an overview of the marketplace market. I was the only person responsible in sales for the online business (with the exception of our own online shop). We made several decisions:
- We started with marketplaces for fashion on Amazon, Zalando, Über Sie, Klingel and Otto, where we also had permission to sell our brand.
- We do not want to and cannot carry out a B2C dispatch from Hungary and need a partner who can do this for us in Germany with a consignment warehouse.
- We need a full service partner to take over the main processes to save our team capacity and be an expert in the field
After making these decisions and selecting a full-service partner, we launched on all five marketplaces four months later and increased online sales for our brand. We benefit from the mix of wholesale and marketplace business. It gave us the opportunity to expand our selection, be our own stock and drive sales. I would recommend launching the marketplace soon as it is an important sales channel in the near future.
About the author:
Valerie Dichtl has been responsible for fashion buying (Amazon) and selling via marketplaces and online wholesale for 9 years. With her experience from a brand perspective, online retail as well as consulting within the fashion industry, she supports brands in strategy development and implementation of an online sales strategy. Her focus is on helping brands sell their products independently from wholesalers on fashion online marketplaces and providing them with the necessary knowledge. Learn more about Valerie's work here. Alternatively connect directly with Valerie on LinkedIn.