California Apparel News

Every month 700,000 to 1 million people visit Greg Selkoe’s e-commerce business, Karmaloop. It has taken seven years to build the burgeoning customer base for his streetwear Web site, according to the 32-year-old chief executive. However, Selkoe still believes that retailers have more obstacles in building an online business than they would with a physical store.

“It’s very hard to get people to come to a Web site,” he said. In order to build a big crowd, Selkoe invites consumers to the equivalent of a lively party.

To maintain the party vibe, Selkoe provides entertainment on his Web site. This month, he will debut Karmaloop TV, which will be composed of two-minute segments of interviews with streetwear designers. Also featured will be talks with the artists and the musicians hailed as icons by the youth who love streetwear’s hip-hop and skateboard-inspired clothing.

One of the Web site’s top attractions is the availability of limited-edition collections of popular streetwear brands. The site also provides a mini-boutique, called Kazbah, for small, emerging labels. While people find Karmaloop through search engines such as Google or Yahoo!, Selkoe invites more people to the Web site through means that would be familiar to a nightclub owner.

He employs promoters to spread the word on his site. Karmaloop has 15,000 representatives spread throughout 35 countries. They’re responsible for 20 percent of Karmaloop’s sales, Selkoe said.

They hand out flyers for Karmaloop at concerts. They talk up the Web site’s merchandise on MySpace and other social networking Web sites. Representatives often earn free clothes and 10 percent of sales. Enthusiastic representatives who live the streetwear lifestyle add to the site’s credibility.

“It’s being real with people and being excited about the product,” Selkoe said about the way that the representatives build community around streetwear.

Karmaloop, like many fashion e-commerce sites, is benefitting from a shift in online buying that has put fashion in the top spot.

According to a recently published study by e-commerce market research groups Shop.org and Forrester Research, it’s fashion.

The report found that sales of apparel, accessories and footwear outpaced the retail of computers, cars and travel in 2006. Fashion e-commerce earned $18.3 billion in sales last year. Online sales of computers and software, which have historically dominated online retail, followed fashion by earning $17.2 billion in 2006, according to the May 14 report.

But being No. 1 does not guarantee a smooth ride. The study’s authors said that one reason why fashion leapt to the top of the heap is that the Internet has become a much more crowded place. Sales have increased because more businesses have been offering fashions online.

An increasingly crowded marketplace has made having a competitive edge more crucial, according to several e-commerce retailers. Many of them have discovered fresh opportunities through a mix of strategies old and new.

Some entrepreneurs report finding significant markets through social networking sites such as MySpace. Others have added revenue by opening a bricks-and-mortar store, an institution that many feared would be obsolete in the early, go-go days of online commerce.

MySpace is more than just a forum to connect with potential customers for Andrew Hanson, designer and owner of emerging label Andrew Hanson’s F. Since May, the 24-year-old Los Angeles– based designer has sold his T-shirts and hoodies, with price points from $12 to $95, on his MySpace page (www.myspace.com/ahfashion).

He reported earning more than $12,000 from online sales on the social networking site. His business gets an extra boost through one program that has helped make e-commerce possible.

On every blog and message coming from his MySpace page, he includes a link to Internet payment system PayPal. He claims that the blogs with the PayPal links reach more than 30,000 people. The messages equipped with PayPal increased his opportunity.

“It’s not like having a store in one spot,” Hanson said. “It’s like having a store in three or four locations.”

Raising a standard on every Internet platform, whether it be Web sites or online social networks, is also crucial for moreestablished businesses, according to Bob Allison, chief executive of mall-based specialty retailer Metropark, based in City of Industry, Calif.

All retailers must develop a presence wherever potential consumers might be, Allison said. Metropark plans an aggressive expansion into the mall; it expects to open 15 more stores by the end of 2007 and more than 25 stores in 2008. Spreading the word on the store might be impossible without cross-channel promotions such as the company’s Web site, www.metroparkusa.com, which works in conjunction with the store’s MySpace page. “It’s naiuml;ve to think that everyone will learn about you through the mall,” Allison said. “Everbody believes that you have to be online. It’s where everybody gets their information.”

E-tailers also use well-worn strategies to attract new customers. Many Internet stores seek to set themselves apart by offering discounts. E-tailers post discount coupons on shopping Web sites such as ReesyCakes (www.reesycakes.com), Toutie (www.toutie.com) and JessicaStyle (www.jessicastyle.com).

Promotions can range from 10 percent off to more than 40 percent off on these sites. The discounts satisfy online shoppers’ desire to comparative shop, according to Tanya Zilinskas, owner of San Francisco–based e-boutique Maneater Threads. “It’s the way a lot of people are sweetening the deal,” Zilinskas said.

But is e-commerce too promotional? Mary Helen Shashy, co-owner of the Los Angeles–based e-boutique Hotter Than Hollywood, thinks so.

The competition to offer the best promotions can take a big chunk out of profit margins, according to Shashy. And, she said, one must add the promotions to the high costs of Internet advertising, which can range from five cents to $1 per click on search engines such as Google.

Also include financing the construction and the maintenance of an e-commerce Web site, which can cost thousands of dollars, and part of the romance of e-commerce is deflated. It isn’t as easy or as cheap as staking a domain name on the Web, which was one of the early attractions of the business, Shashy said.

When it came time to find another revenue source for her business, Shashy opened a bricksand- mortar store in Glendale, Calif., in April.

Shashy estimated that running the physical store cost her considerably less—an estimated 10 times less—than the costs of running an e-commerce business. It’s also a good way to spread risk and to attract more customers, she said. “There will always be people who will not shop online.”