11/11/2012 10:01 GMT | Updated 09/01/2013 05:12 GMT

The Next Stage of Growth for the Online Fashion Market


By assuring shoppers of the right fit, a host of businesses hope to 'revolutionise' online fashion, through the employment of airport body scanning technology. Such technology would serve a practical function; the clothes have got to fit, right? I'm not sure though, if it could ever be credited with 'revolutionising' the online fashion market. For starters, similar technology has been around for a number of years, initially deployed on-site in stores. But more importantly, the online fashion market has already taken off, something that can be attributed to 'e-tailers'. Over the past decade and more, online brands have come up with innovative and exciting ways to get around the issue of fit, and if these companies' performance figures are anything to go by, consumers have responded pretty well.

By way of background, Net-a-Porter (NAP) is generally considered the most significant company in terms of making online shopping real, and what it is today. It was set up in 2000, to sell high-end clothes and merchandise to women who enjoy fashion and shopping, but are time-poor. While there were several other companies attempting to do the same around this time (suggesting that the market was ready for it), the idea of selling clothes online was still an untested and thus bold concept. Indeed, many sceptics doubted that consumers would risk buying clothes they had not tried on. But NAP remedied this by making editorial content one of the key features of the site: each item comes with a comprehensive description of what consumers can expect, including specifics on the fit (e.g. "large to size, take next size down"), with the option to speak to a fashion advisor. Convenience is also central to the offering, and all NAP deliveries arrive complete with prepaid DHL slips for any returns.

This approach seems to have worked: NAP now attracts four million monthly unique users, each with an average spend of £500 per order. At the nadir of the financial crisis in 2009/2010, NAP earned £23.5m profit, on sales of £152.5m. And the latest annual report at Richemont, owner of NAP, shows that NAP's growth outpaced the average of the group as a whole for the period.

Other players in the online clothes market such as Asos, Gilt Groupe and Yoox, are experiencing similar success. In May, Asos reported a close to doubling of profits for the twelve months to March, while annualised turnover at Gilt Groupe is expected to hit $1bn by the end of this year. Revenues at Yoox were up almost one-third in the first half of 2012, and in a significant coup, they have just entered into a joint venture with luxury group PPR.

But perhaps more tellingly, e-tailing powerhouses Amazon and eBay have jumped on the bandwagon and specifically repositioned themselves to push their fashion offering. Earlier this year, Amazon made headlines when it sponsored the Met Ball. This is widely recognised as one of New York's most prestigious fashion events, showing that Amazon is serious about being taken seriously in high-end fashion. Meanwhile, eBay is now using leading fashion stylists and bloggers to front its advertising campaigns among other things.

How do the figures stack up for online fashion? According to Euromonitor, in 2011, the global online fashion market grew by approximately 10%, leading it to account for 5.6% of total women's sales and 5.1% of total men's sales. The Cotton Council is more bullish on this figure when it comes to the UK; its research found that online accounts for 13% of total fashion sales in the UK, up from 3.0% two years ago. And at the upper end of the market, Italy's luxury body Altagamma and consultants McKinsey found that globally, online luxury grew almost three times as fast as total luxury in 2011 (28% compared with 10%).

But online fashion has now moved on from being purely transactional, to fulfilling both an entertainment and educational function for consumers. Shoppers want an 'experience'; an opportunity to interact with the brand and bring it to life in the context of their own lives. Possibly the best example to highlight this is the recent opening of Burberry's global flagship in London, which creative director Christopher Bailey describes as bringing [Burberry's] "digital world to life in a physical space". This would suggest that the virtual experience is now the one we aspire to replicate in the physical world. Until recently, it was the other way around.

Overall, the key take-away is that online fashion is growing impressively because consumers are having positive experiences with the channel and they seem to be over the "will it fit?" hurdle. As is often the case, the developers of this uber-sophisticated (online body scanning) technology have neglected to consider how people interact with the product, and as a result, its impact on the industry will be only marginal. Online shopping has already moved to the next stage, which is about entertainment and making the process social for consumers.