Is fashion e-commerce still a financially viable business model?

With the ongoing economic turbulence, many industries, including fashion, have experienced significant global disruption. The fashion retail sector in particular has seen profitability shift south in recent years, we have seen many commercial brands simply drop off the radar. This stems from two main factors, namely challenges through online technology and also due to the fact that fashion is an elastic sector and is duly affected by economic downturns.

Over the last eight years we have seen an increase in the number of fashion e-commerce platform startups. Many have survived and many have simply “disappeared into the ether”, but does this trend continue to grow exponentially? Since Natalie Massenet, former CEO and founder of Net-a-Porter, launched the phenomenal online luxury fashion powerhouse, thousands of ships of new fashion converts have sailed.

Yet every two weeks there are rumors that fashion startups are “exploding”, that the fashion e-commerce industry is simply a dead saturated market, an all too easy choice consisting of low-hanging fruit. Furthermore, it is considered to be very capital intensive to maintain, innovate and even more expensive in terms of marketing requirements for customer acquisition.

So is there a magic formula? A significant number of fashion startups falter and very few survive without significant angel or venture capital funding. Everyone seems to be looking for the next explosive formula. Maybe there is no great design and maybe the answer is right here under our noses. It could simply involve staying adept with the times.

We have seen the impact of social networks on the bottom line of many industries, maybe it is necessary to use these methodologies? It shouldn’t be about shopping anymore, it should be about social shopping. Women are the largest demographic in terms of online shopping and we all know that they are a “social species” when it comes to shopping. The advent of Facebook and Twitter has eased some of the stress on marketing overhead and some relatively new startups like Farfetch.com have gained a significant proportion of their user base from Facebook, so social commerce seems be a way to go.

The fashion e-commerce sector is like any industry and will fluctuate with taste, credit availability and the economic climate. There are still opportunities at stake; the market will grow to 380 billion dollars by 2015. More than 20% of fashion purchases are made online by 72% of women. So, doesn’t it make sense to think that returns will constantly evade onlookers in this industry? Perhaps the answer is to look for new and innovative ways to monetize the industry rather than the purely rigid top-down techniques that the fashion industry constantly uses. Also, to create models that allow for flexibility, that can be easily turned around and back if needed, that are less virtual and more engaging, and that put into action the information gathered through customer feedback mechanisms.