Are Guccis out of reach? Try these private labels
Never before have so many new fashion labels sprung up in Europe as online retailers try to fend off a dual threat from e-commerce giant Amazon.com and brick-and-mortar stores expanding their digital offerings.
Berlin-based Zalando has conjured up 17 private labels since 2010 and now generates €500 million ($599 million) of its €3.64 billion in annual sales from them, offering everything from Pier One sweaters costing less than €30 to Mai Piu Senza high-heeled boots at €170 or more. The UK’s Asos says its own brands will soon amount to 50 per cent of sales. Even Yoox Net-a-Porter, a Milanbased forum for luxury goods from the likes of Prada and Gucci, is creating in-house labels like Iris & Ink and Kingsman.
“The new crop of pure-play online retailers is rapidly responding to consumers’ increasing demands for immediacy and constant newness,” said Deborah Weinswig, managing director of Fung Global Retail & Technology.
Responding to consumer whims has become more urgent for the likes of Zalando, Asos and YNAP as Amazon expands its apparel offerings with more than a dozen private labels. Meanwhile Inditex and Hennes & Mauritz are redoubling their digital expansion push, with the Spanish owner of Zara expanding online sales to markets like Turkey and India and its Swedish rival setting a goal for ecommerce sales growth of at least 25 per cent a year.
Zalando’s profit margins have suffered as the company increases spending on technology and distribution to try to keep Amazon at bay. To counter that, the German company is trying to emulate smaller rival Boohoo.com, the hottest stock among European online fashion retailers. The Manchester, England-based company, which sells almost nothing but its own brands, has the highest margins among the four major European online operators. Tapping into digitally gathered data on consumer behaviour and moving production closer to home allows the new breed of retailers to beat even the fastest fashion giants. Boohoo makes more than half of its products in the UK, meaning it can get them from concept to store in just a few weeks — rivalling Zara, renowned for its rapid turnarounds.
Zalando, Europe’s largest online fashion retailer, first turned to private labels to fill gaps in its product lineup. One of these was affordable shoes, such as a €12.95 ballet pump. Now its private labels have grown to a business with 500 employees, including 50 designers, churning out 20,000 pieces per year. Zalando’s own-branded Mai Piu Senza boots are made in Italy. The company is also seeking to move more production to locations including Portugal and Turkey to speed up its supply chain.
Some of Zalando’s brands go head-to-head with better-known rivals on its site, albeit at much lower prices. Zalando sells a dark blue sweater under its Pier One brand for less than €30 that’s strikingly similar to a €140 variant sold by PVH’s Tommy Hilfiger. Private labels boost margins because retail prices of clothes can be as much as double the wholesale cost, and the site doesn’t need to share that profit with another fashion firm. — Bloomberg