California Apparel News

Holiday Y2K is the make-or-break season for retail on the Web—and particularly for the “pure play” e-tailers that exist only in cyberspace. This year’s online holiday shopping spree comes at the end of a long season of shakeout in e-commerce, with over-extended and under-funded high-profile e-tailers falling like dominoes ever since the boom times of the late 1990s gave way to the economic uncertainties of this past fall. And by all indications it’s not over yet.

But with the holiday finally upon us, almost all the initial signs look good for e-commerce, particularly for those that started the season from a position of strength. Business is way up and consumer satisfaction, which was so dismal last year, is way up, too. Seemingly, bricks-and-mortar retailers with burgeoning Internet operations took last year’s lessons seriously and made substantive improvements.

Where’s it all going? And what will the e-tail landscape look like when we get there? California Apparel News posed these and other questions—via e-mail—to three senior executives from companies that make and sell e-commerce’s all-important enabling technology.

Maurizio Vecchione is chief executive officer of Culver City, Calif.-based Styleclick Inc., a majority-owned subsidiary of USA Networks Inc.; David Siegelman is president of Marietta, Ga.-based Lectra Systems Inc., the North American subsidiary of Paris-based Lectra Systemes; and Peter Simons is president and chief executive officer of Los Angeles-based NuTechMart, a company that specializes in building Yahoo! Stores for small businesses.

Is holiday 2000 meeting, exceeding or falling short of expectations?Maurizio Vecchione: As an e-commerce enabler, a services company providing e-commerce capability, we face many of the same challenges as do other businesses online. But because we’re a public company, we’re prevented from discussing financials beyond quarterly statements. We can say that we’re very comfortable with current analyst estimates.Peter Simons: Lots of shakeouts [this season], but the solid-planned business will grow. Our clients were prepared and are shipping on time. Others closed their stores [because] they were not ready. We have noticed over the last 90 days how visitors [to our sites] have doubled every 30 days. The established names are getting the traffic and visitors. Also the solid venues continue to grow on all fronts. What are your expectations for 2001?M.V.: We expect to see overall Internet business, including transactional commerce, continuing to grow—led by quality players. As we approach the new year, the future for Styleclick lies in servicing established brands that are committed and adept [at] fully integrating their emerging online initiatives with their brick and mortar business.David Siegelman: Lectra anticipates 2001 will be another growth year for us as the apparel industry continues to accept the new Internet-enabled technologies available to it.P.S.: Like all business, [success on the Web] takes a manager with an understanding. Finding a good consultant or advisor is another option, but it takes work—working the site, developing content [and] affiliates and much more to keep it effective. Search engines [for example] now need monthly updates to keep high-ranking listings. There is a constant need to update, manage and keep an Internet presence fresh, [with] new looks, new information and new merchandise.What was your biggest challenge this holiday season? And what will be your biggest challenge in the year ahead? M.V.: Our biggest challenges this year have actually been related to the integration of our post-merger assets, and developing our solid business model, the infrastructure supporting Styleclick. We completed our merger with USA Networks Inc. in July of this year and as part of the merger, we took on the ownership of two established e-commerce-driven Web sites, FirstAuction.com and FirstJewelry.com. Fortunately, we have a great team of engineers who have been key in integrating the sites into Styleclick’s proprietary technology platform.P.S.: Our business has been able to offer greater choices to clients with more effective results owing to [the] greater number of options and providers. Solid entities will stay around and grow, while the weak will fold.Has your own venture been affected by the recent and continuing shakeout in retail e-commerce? If so, how? M.V.: We’re seeing more and more brands coming to terms with the reality that they need to align with a quality service provider in order to profit with e-commerce. Styleclick’s sales focus targets the more traditional brands, as well as media and publishing companies [i.e. content sites], which understandably have a much more solid foundation than pure-plays. There’s no denying that this is a critical time for retail e-commerce. However, the established brands [that] integrate their online and bricks-and-mortar efforts are the ones we will see prevail.D.S.: Our goal has been to help our traditional retailers and branded apparel companies succeed in e-commerce by giving them the tools they need to design, sell and manufacture electronically. We’ve also taken the non-essential tasks any apparel company may not have the time or manpower or even expertise to handle and are offering these services on the Web. We’re becoming the one-stop-shopping place for apparel companies interested in going B2B2C [business-to-business-to-consumers] from a design and manufacturing standpoint because we have the technology that integrates the entire design-through-sales process.P.S.: We offer Yahoo Store, Excite and Amazonzshop. These destinations drive traffic [and] this brings in sales. With our experience, we can show our clients dollars within 45 to 60 days and generally within 90 to 120 days be turning to a profitable mode. Does your venture’s business model require short-term profitability or are you measuring success by other criteria? If so, what are they? M.V.: Styleclick is a young and developing company and, as such, our business model has and will continue to require substantial investment. We’re part of the fifth largest media company, USA Networks Inc., and therefore have the resources to sustain us through this early period. However, we’re fortunate to be looking at achieving profitability in the near term.D.S.: First, let me state that Lectra is a $200 million company with $20 million in annual profits and a 10,000-member worldwide customer base. The acceptability of “virtual profits” has been gone for quite a while now, as investors, shareholders and business partners insist on solid, efficient operations. The success of our LectraOnline offer will come not just from operating profitably, but also from building a strong online community from our worldwide client base and providing them with the secure online communications and services they need.P.S.: [It’s] back to basics. You’re competing with the world, the big boys and the little novices. Knowledge and resources will win. The Internet will continue to grow, fine tuning and weeding out the non-performers, while success for the serious entities is now proven. What is the medium-term future of retail e-commerce? What will the e-commerce landscape look like in one year, two years or five? M.V.: The Internet will come to be [just] another channel, just like direct, catalog and outlets became channels following their introduction to the marketplace years ago. None of those channels single-handedly displaced traditional retailing—nor will the Internet. Looking forward, no one brand will be able to afford not to be online. Everyone will be online to some degree, operating or outsourcing e-commerce. Again, we see the successful, long-term e-commerce players as the brands [that] understand how to acquire customers and how to integrate all their channels to generate sales and strategic growth in today’s competitive landscape. For many, outsourcing will be the best and most profitable option for Internet commerce.D.S.: In the medium term, I think we can expect to see a critical number of traditional apparel companies continue taking steps to become click-and-mortar companies. That means designing electronically in order to display and sell styles online and then coordinate their manufacturing accordingly. Moving B2B2C is a direction Lectra is fully prepared and eager to help our clients make—it’s a direction I think we’ll see grow tremendously in the next few years.P.S.: The Internet is a channel of its own. It will [merge] into bricks-and-mortar as bricks-and-mortar has [merged] in to virtual shopping. I do believe we will see flagship stores for the leading e-commerce entities. Will “pure play” e-tailers ever be able to convince skeptical consumers that they are as reliable as local malls or department stores? Or is the Internet inevitably on its way to becoming the dominant retail medium? M.V.: This is an issue that is fundamentally determined by the market segment. The Internet is a channel, a new and developing channel that has yet to realize its full potential as a sales medium. We look at apparel as continuing to be successful in a variety of channels, new and traditional. There will continue to be specialty apparel that is niche or vertical in focus, which will do just fine on the Internet as a pure-play. However, we expect the majority of apparel brands will likely do best by initiating a 360-degree combination of Internet and brick-and-mortar.D.S.: We think very few pure-plays will achieve the “reliability” reputation that consumers expect. We also do not believe that virtual electronic stores will just “inevitably” become the dominant retail medium; e-tailing will be an important complement to a retailer or brand’s existing business.P.S.: We at NuTechMart can take a venture from inception to profit in less than six months. There are so many avenues today to drive the business. The profitability of Ebay.com and other auctions proves the validity of auctions as another sales avenue that works. Invitation marketing, or e-mail, is also proven to drive sales. Traditional advertising ranks as No. 1 for new and Web users. In the last two years, we have [gone] from 20 percent of the households having computers to over 55 percent and growing.