THE BLOG

How Online Retailers Can Compete With Brick & Mortar Stores

09/20/2010 07:20 am ET | Updated May 25, 2011

Twice a year, buyers, editors and everyone else worth their salt in the industry convene at the major fashion weeks to preview next season's collections. After the collections are shown, during market, buyers place their orders, acting as curators, boiling down the season to the pieces and stories that would speak to their customers. This selection is then ordered, produced and delivered to the shop floor in time for the customers to buy their new pieces for the season. These retailers attract and retain their loyal customers through a judicious mix of store experience, location, and, of course, selection of clothing. This is more or less how the fashion cycle works for brick & mortar retailing. Retailers edit the collections for consumers who don't have the time or inclination to scour the marketplace. They present the cream of the crop.

The rise of online fashion retailing raises the question of whether this formula can be directly translated to the online world. This is a world of information, where runway shows are streamed live as they are shown, and anybody, anywhere, can have access to the entire online marketplace with just a few clicks. This is a world where customers know that that blue Marc Jacobs jacket on Barneys.com comes in grey on Net-a-Porter, and might that not go better with the combat boots she bought at Shopbop? The time cost of searching the marketplace has diminished to an almost negligible amount, the environment is nearly always the same (you, wherever you are, staring at a screen), and the relationship that is so well cultivated in department stores between sales associate and customer, is absent. All in all, this world raises the question, why should a customer be loyal to your e-store?

As I write, there are still relatively few major online retailers of high-end fashion, so the problem of competition and differentiation is not as serious as it is likely to become. But as the online marketplace grows, and more brands feel comfortable selling their wares online, the nature of the beast may change. The factors that make customers so loyal to brick & mortar stores are much more difficult to maintain online. As just one example, each major city has its own few department stores that inhabitants of the city rely on, simply because of the fact they are in the same city. It is just not practical to visit Harvey Nichols if you live in New York. But HarveyNichols.com ships internationally. This in and of itself is enough to open up the competition. In addition to an increasingly open marketplace, customers are aware of what is out there from the moment it hits the runway. Buyers are going to have to work harder to justify their selection of the season to well-informed fashionistas. If the retailer did not buy into a particular runway look, they will have a lot more explaining to do to the customer who has been coveting it for six months, the same customer who previously would not have been aware that the option existed.

The fact that loyal customers are already more difficult to cultivate online is only compounded by online off-price sale sites like Gilt Groupe and Yoox.com. Now not only are customers aware of everything that's out there, they also have last season's looks easily available at a fraction of the retail price. Buyers are going to need to give customers compelling reasons to buy their current season looks.

All in all, online retailers have a tough job ahead of them to convince customers to be loyal to their online store. They are going to have to get creative, in terms of customer service, site experience and their product selection. Speedy delivery, generous return policies and attentive customer service are all going to become obvious key differentiators. Net-a-Porter has quite rightly taken the personalization and customer service to a new level. Their top clients get to preview new arrivals a day before anyone else, and their tip-top clients get personal shoppers who style them over the phone. Retailers are going to have to think hard to find ways to compete with each other in terms of loyalty programs and customer service. These can offer effective enticements for a customer to remain loyal to a single retailer.

Site experience, editorial features and personalized accounts will all also become important assets. The good stores will provide reasons for customers to visit their site beyond just selling clothing. Blogs, editorial shoots and features all provide a way to speak to a consumer and get her to return to the site even if she isn't interested in purchasing. Maybe she'll come across a bag she didn't know she wanted, and the desire sets in. Content also provides an effective way for a retailer to develop authority in the market. The site aesthetics, along with the quality of the content can go a long way to gaining the trust of the consumer. When Net-a-Porter says sequins are in, their customers listen.

After all of this, however, perhaps the most important factor of all will be the obvious one: the product. Retailers will no longer be able to half-heartedly serve up the broad trends of the season, attempting to appeal to everyone. Online shoppers need a reason to visit one site rather than another, and retailers can provide this through a focused selection. Whether this focus is a very specific "look" or a defined category of apparel and accessories, retailers will have to prove that they are the best at what they do. Whether you are the go-to store for soft bohemian looks at an easy price point, or whether you do shoes better than anyone else, online stores will need to develop a strong association in the shopper's mind. Ultimately you're selling product, not visits, and you need to turn interest into dollars.

All in all, online retailers will have a tougher time than brick & mortar stores. Good news for the consumer, bad news for the stores. Ultimately though, the progression that must inevitably be made will benefit the industry as a whole, as the market opens up and competition becomes fiercer. The key point is that online retailers will have to adapt creatively, and try harder to speak to their consumers. Or run the risk of being lost forever in the faded relevance of second page Google results.