In the “New Retail” Era, How Do Small and Micro Fashion Companies Expand and Manage Sales Channels?

Christine Tsui Fashion Community

In the “New Retail” Era, How Do Small and Micro Fashion Companies Expand and Manage Sales Channels?

Yibai-Beijing-Channels etc. @ Wechat

Yibai graduated from Tianjin Polytechnic University with a bachelor’s degree in fashion design and engineering and a minor degree in English. She attended the Postgraduate Course of Import and Export Strategy and Management at the University of International Business and Economics. Invited lecturer at Beijing Institute of Clothing Technology, she has assisted in teaching courses such as “Luxury Fashion Management” and “Consumer Behavior”. Yibai has the experience of managing distribution channels for high-end socks (domestic and foreign OEM and ODM channel negotiation and follow-up; domestic brand channel expansion and distribution, etc.).  She has also operated an online store independently.

In the context of new retail, what should channel management for small and micro fashion companies do?

Before answering this question, let’s take a look at an internal industry article in 2018. In the article “Inspecting China’s Street Fashion field from INXX 丨 LuxeCo’s  Exclusive Interview with Co-Founder Liu Kunneng”, it said:

“The fashion brand collection platform INXX was established in 2014. Currently, it has opened more than 130 offline stores in high-end commercial complexes such as Hang Lung, Intime, Kerry Center, etc., with annual sales of nearly 400 million yuan. Recently, LuxeCo interviewed Liu Kunneng, the co-founder of INXX. It was rare to hear the in-depth contemplation from an industry insider who took street fashion as a serious business.

“INXX conducts market expansion through multiple methods including direct management, franchise, and joint venture. Based on the experience of the founding team’s Internet operations, online operations are completely satisfactory, however, it lacks operational experience and channel resources offline.

In the early stage, we tried a lot of new retail methods online, such as Pop-up store, ordering through iPad, etc. Problems have occurred, and later we adjusted our strategies by doing what should be done online and offline respectively, but also using the Internet operation experience to make the two combine effectively. For example, INXX’s space design has a lot of highlights with visual impact. At the same time, our team also followed the traditional offline operation models in combination with the open mind Online, gradually settling down and forming a set of INXX models. ”

Liu Kunneng believes that omnichannel development is necessary, such as combining the member management system with various platforms and channels to form information flow, customer flow, and product flow. In addition, “we focus on extended shopping scenarios, not just in stores.”

“Through practice, INXX has established a complete store evaluation mechanism in terms of operation management. This is a process of continuous correction to reduce prediction errors. In the end, instead of being radical, we opened a hundred stores in 4 or 5 years. We hope to find the right senses in the exploration process to open the store steadily. ”

Why do I start from this article? Because it has mentioned a problem, that is, the early channel establishment of small and micro brands. Promotion budget for most brands, especially small and micro brands is limited, and they often have limited expenses and less staff. However, even with little promotion budget, businesses often hope to achieve good results, so as to achieve simultaneous growth of brand reputation and conversion. Nowadays, it is said that “traffic is the king”, but the current traffic is still at a stage of high price and difficult conversion. Generally, the aim of other channels (non-e-commerce) is just to establish reputation and shape brand impression. The platform for real purchases will still be switched to Tmall, JD.com and others. In this industry chain, what should small and micro brands do? Let’s make a hypothesis first — assume that a designer is an independent designer and operates his own brand. The reality he currently faces is:

  1. There is a store that he rented with average turnover but high operating cost (labor, store rent, inventory, etc.);
  2. He hired someone to manage his own online store, (there is an artist and an operation specialist), whose turnover is average;
  3. The main turnover lies in domestic and foreign buyer stores, but if the order is large, while the unit cost is low, the advance fees such as fabric production will be high, and the repayment period through the channel is long; Costs for small orders are high and the profit is low, which is time and energy consuming.

In fact, cases like this hypothesis of independent designer’s self-supporting business can be found in reality. In view of the situations above, the designer now wants to temporarily close the self-operated store and turn to stall wholesale and retail, whose repayment is faster. Is this a right mindset? Should we carry on when the current operating costs of self-operated stores are high? What are the reasons if we give up?

It is undeniable that there must be sufficient funds to support branding. The first problem that must be dealt with in physical operations is high rents, followed by high staff costs and changes in customers’ offline consumption habits. Although currently the rent of designer’s option—the stall is not low neither, the retail store has a smaller customer base and a lower unit price compared to it. At present, due to the impact of the Internet, many offline stores are indeed in a state of relying on their luck; ineligible operation is a great burden for most small and micro enterprises. Despite this, many small shops can still continue to operate smoothly and steadily. Operation is a dynamic process. In addition to considering the current situation, we also need to focus on the long-term direction. In fact, if you want to grow from micro and small to large scale, self-operated stores are still necessary.

The reason is that even if there are shops online, most customers still need offline experience to buy products online, therefore, offline is still an important platform for customer experience. Even if AI technology is further developed in the future, the online experience can hardly match offline experience. At the same time, offline stores can directly learn, record and investigate the consumption habits of target customer groups, which provide designers with more direct information. Therefore, if the company’s funds allow it, it is still required that a brand has its own offline store, whether it is a prototype store or a brand boutique. But at the same time, it is necessary to calculate the balance of profit and loss.  A good VIP service and strengthened customer experience are also good brand promotion channels.

In addition, what we need to know is that the cost of online customer acquisition is not low nowadays, and online traffic acquisition and conversion are not easy. If you have a regular customer base, focusing on offline retail may be more stable. Plus, since the domestic market is large, there are still many customers who, instead of buying clothes online, choose to buy them in a physical store.

Rather than whether to continue operating offline stores, what small and micro enterprises consider first is survival. Operation needs efficiency, and a brand should spare no effort to improve the experience of offline stores. However, based on different developments, if it is difficult to afford the high cost after comprehensive considerations, it can stop losses in time and give up temporarily. In the long run, there should still be direct-operated stores, and it is better to combine physical stores with online stores. Alibaba’s plot on Freshippo and Tencent’s acquisition of HLA both indicate that the offline traffic is a new lowland. The combination of offline experience and online purchase is the best for consumers.

What are the common KPIs for directly operated stores or channel terminals? In the era when KPI is the king, businesses have to prove themselves through data, so that ordering, distribution of products, listing planning, replenishment, promotion and management of goods can be rational, beneficial, and restrained. In terms of monitoring and trend analysis, buyers’ personal visits to terminal stores are beneficial to the correction of “deviations” caused by pure data. Also, attention should be paid to the difference between single regional stores in comparison to competitors.

图片 204副本

(Source: Hermann retail Weibo, China)

The data commonly used for the assessment of a shop’s KPIs can usually refer to the chart above, which includes 11 core performance indicators: sales rate, inventory turnover rate, surface efficiency, cross rate, seasonal index method, associate purchase rate, and customer unit price. These indicators are also the 11 key passwords to leverage store profits. Here I will share the article “Hands-on knowledge: Eleven Key Passwords to Improve Store Profits” published by Longshang.com on June 3, 2015. The article has mentioned how to define and decrypt these 11 passwords, for example, human efficiency refers to sales per person per day. Monthly staff effeiciency of the store = sales of the store in the current month / total number of people in the store (including the manager, cashier, shop assistant, warehouse manager, with night attendants and securities excluded) / days “. The indicator of human efficiency reflects the following issues:

  1. Product knowledge and sales skills of employees;
  2. Matching between employees and products;
  3. Whether the schedule is reasonable.

(Note: source of the texts above: Longshang.com)

In addition to the significance of the data themselves, we can also use them to guide us for further improvements of store operation, such as enhancing the store experience, holding more activities to attract attention, training sales staff, occasionally adjusting display, unified online and offline accounting, etc. The direction of store operation mainly comes from customer feedback and the objective comparison with neighbor or similar stores. For small and micro businesses or stores, human is fundamental. Service and communication are achieved through front-line service staff, therefore, shop assistants are the key. With enhanced abilities of shop assistants, the transaction volume can be raised. You can also encourage shopping assistants with high sales volume to share their experience. However, it is necessary to give shop assistants an attractive commission and incentive plan, which is for the seller’s profit.

From the buyer’s point of view, it is necessary to provide customers a cost performance experience that exceeds their expectations. Making customers feel that they have taken advantage does not necessarily mean it is cost-effective; it is a self-feeling.

 

Should I Still Carry on If The Sales of Self-operated Online Channel are Average?

As mentioned above, what offline and online stores need is combination instead of conflict. How to achieve integration? In the context of new retail, a good growth point is to manage offline community operations well; in addition, offline brands can also test market feedback and channels through “pop-up stores”.

Case: “Kenji Wu opened his streetwear store in Sanlitun, claiming  ‘100 stores will be opened in three years’”, The Curiosity Institute (http://www.qdaily.com/articles/44505.html)

“Kenji Wu opened his streetwear store in Sanlitun, claiming ‘100 stores will be opened in three years’”. Opening a pop-up store before setting up a formal store is a way for the brand to test the mainland market channels.

According to media reports, since 2014, Debrand has opened pop-up stores in Shenzhen, Chengdu, Beijing and other places.

In a media interview in June this year, Yu Guoan, the manager of Taikooli, Sanlitun, called the pop-up store “a bilateral selection process”: “Through the pop-up store, we can know whether the brand has potential for development, popularity, consumer favor, sales performance, etc.

On the one hand, it can keep the commercial center of TaikooLi in Sanlitun fresh and boost consumption; on the other hand, it is also beneficial for brands to promote and test the water in a new regional market. ”

This case illustrates that online brands are now seeking to integrate with offline stores. Why? Perhaps because the traffic is getting more expensive, the deterioration of this living condition forces them to find loopholes in the platform. Repressed by channels for years, these online brands have developed unconventional tact. Therefore, it has become popular to open a “pop-up store” first and then a “real store”. The meaning of the pop-up store is to “test”, whether it is the purchasing power of the customer base, or the acceptance of price and style, etc. How to manage a pop-up store? You can find some platforms or institutions that specialize in pop-up stores, such as “Pop-up Palace”. As WeChat thrives, these sellers, who are experience products, know very well that they must grasp the rule of “decentralization”.

This issue needs to be specifically analyzed according to the situation of the company, but the general view is that companies that are eligible for it should open their self-operated stores as the most direct store for brand awareness, image dissemination, product testing and role model.

But online direct sales also need to be carried on. Although it is difficult at the beginning, it is a cumulative process for a lot of things. If you have something ready when others need it, you have grabbed the opportunity, which means you have met the market demand. For online promotion, in addition to attracting traffic through Weibo, Tiktok and livestream, in fact, ground promotion can also be the most popular and down-to-earth method for online store promotion and recognition. Attracting the traffic from offline to online, on the contrary, although a bit old-fashioned, will lead to better quality than some fake followers, if efforts are put into it. Many supporting schemes have to be synchronized– Capital is the first step and then management follows.

Even if your company is exclusive to offline stores, when your brand is successful, there will be someone who fake it under the name of your brand, both online and offline. For example, there was a Victoria’s Secret shop in Shanghai a few years ago. Everyone thought that Victoria’s Secret has entered the Chinese market, only to find out later that it was just a fake and unauthorized store. There is something even scarier and undefendable, that is, the retailers fake the brand of their products –they represents and sells your brand while faking their own products under your brand, which disrupts the brand reputation.

Although it has become increasingly difficult to attract and convert traffic through Weibo and Tiktok, as a matter of fact, neither online or offline is east to operate. Do not give up online stores just because of their average sales volume. Instead, analyze specific issues. Online direct sales provide a convenient way for online customers to purchase products. In the current Internet era, an official online store is a must. Whether it’s for brand promotion, convenient purchase, or new-style test and prices test, it is very practical. Meanwhile, pre-sale of some designs can also be carried out online in advance, so as to add orders on products with good feedbacks in advance. Pre-sale can also greatly reduce trial and error costs.

According to McKinsey Online Luxury Consumption Report,  In 2025, e-commerce channels will contribute 19% of sales to the luxury industry. The ambitious Dubai Internet company Mall.Global wants to create a virtual shopping mall that fully replicates the offline experience.

“The Mall.Global project will be based on virtual reality (VR) and augmented reality (AR) technologies, coupled with artificial intelligence, so that consumers can experience at home the feeling of shopping in a mall. In addition, the project will also include cross-platform consumers functions such as loyalty programs, opinion leader evaluations, and support for multiple virtual currency settlements. Mall.Global will ensure user information security through EU Data Protection and GDPA. “(Text from: http://luxe.co/post/85174 )

In fact, you should think clearly about the position of your online store in your brand, and why you would open an online store. If you feel that your sales are average, you should solve this general reason: it is because of the channel itself, the product, or the people—it is only after analyzing these one by one that you can determine the nature to open an offline store. Analyze your target consumer groups and their characteristics, or shopping habits. We can analyze this through user portraits.

The latest NPD clothing retail industry trend report states that the key to success lies in connecting online & offline stores and expand consumer contacts.

The report classifies the interviewed consumers into six categories:

  • Social consumers (enthusiastic about shopping online and searching for information; sensitive to pictures);
  • Technical consumers (enthusiastic about obtaining more product information through technology; shopping attitude is cautious);
  • Trendy consumers (enthusiastic about pursuing fashion trends; sensitive to pictures);
  • Taobao consumers (pursuing cost-effectiveness with clear shopping goals);
  • Loyal brand consumers (willing to pay for quality, high brand loyalty, and only shop when needed);
  • Lazy “consumers (prefer one-stop shopping, don’t have time to shop and hate online shopping). (Source: http://luxe.co/post/86145)

Intentional strengthening can be applied in terms of website page design, marketing channels, etc. Online channels should also be categorized according to different goals: exposure, conversions, and new visitors. Professionals need to be invested if small and micro enterprises want to do business on platforms such as JD.com and Tmall. Moreover, attracting traffic is quite costly at the moment, which might not even result in higher conversion rate in turn. Although e-commerce is not easy, it can’t be abandoned. To establish e-commerce, you need to first learn to attract traffic with pictures and control costs through ROI. People are visual animals, so picture editing and copywriting are very important. At the same time, you should also understand the various other maneuvers on e-commerce platforms. These platforms have always been issuing new requirements and new rules; it will be more disturbing if you are fined accidentally. At the same time, traffic costs competition is fierce, so in the long run, it would be better to have an independent website.  In the early stage, promotion and introduction can be conducted, but accumulate step by step. Engage in low-cost activities to increases consumer loyalty—For companies with low budget, try to attract traffic through free channels, such as Weibo, Official accounts, etc. I will share the specific steps through the following two articles for your reference:

“Teach You How to Do” shop diagnosis ” in One Article”

(Https://weibo.com/ttarticle/p/show?id=2309404263091813632519)

“The Most Comprehensive Taobao Shop Diagnostic Method– Quickly Find the Core Breakthrough Point of the Shop!”

(Https://weibo.com/ttarticle/p/show?id=2309404093292693352422)

It is worth mentioning that, based on the enterprise, co-development of multi-channel online can be achieved. When online distributors are involved, the company should designate relevant staff to monitor the implementation of price policies and promotional plans of different channels, otherwise it’s easy to get out of control. With the popularization of the Internet and the rise of the sharing economy, online channels are increasingly valued by enterprises. No matter what kind of dilemma they face, many things are actually a process of accumulation. In the development of small and micro enterprises, they should cooperate with new media and pay attention to self-operated channels online. In terms of new product testing, they still have great advantages. In fact, in the channel of new media, there are companies doing very well no matter what the platform is; it is suggested to pay more attention to them in daily life to accumulate and draw reference from.

 

With Limited Time and Money, What Factors Should Be Considered When Establishing a Chanel?

Survival is the primary concern in the first stage, but the problem in this phase is that the advantages of the brand have not been tested by the market. At this stage, you need to see whether the user group of the channel itself coincides with your target customers. The first step is to look for similar companies to portray your users. First of all, the company itself should form a general understanding of its target users, and then clarify it through data to avoid fundamental cognitive bias. For example, I want to sell products to “fair, rich and beautiful ladies”, but somehow the store staff reported that most of the actual purchases were “new money”. This is the deviation. Through data analysis, you can more accurately formulate sales strategies and improve efficiency for your user portraits.

The first thing is usually to do what you can and focus on breakthrough. Prioritize whichever problem that can bring you profit soon by solving them. If the initial funding is limited, you can consider finding second-tier channels with target customers, such as advanced second-tier cities, and then enter central cities. It is very important to act according to our abilities, but we can’t let income affect the brand image, which should be protected in the early stage, while the channels can be limited and refined.

Survival does not necessarily require a powerful brand; an ability to survive proves it is a brand, because survival represents the satisfaction of some customer needs. It is feasible to consider the model after when there is a team and cash flow. However, you have to be prudent with the choice of brand channels– you can register for a sub-license for the wholesale channel, which means “open source”. Brand channels in the market are roughly divided into three categories: 1. Completely autonomous (higher requirements for retailers, but brand owners barely have control over its terminals); 2. Auxiliary support; 3. Complete domination (high requirements for brand owners).

Some retailers are relatively dominant and require buyouts. You can decide based on the situation of the enterprise.

But whichever method you choose, don’t leave it once the delivery is finished. The channel management staff should visit the store from time to time. An extreme case is that the retailer has developed into a larger scale and would like to make its own brand, but the product design and development ability is weak. After importing from the brand owner, they went directly to factories to change the logo on the clothes. The fact that many big brands choose not to enter the channel is also related to their own positioning, that is, the question of which advantage to pitch into. For example, in the case of the cooperation between new brands and Lane Crawford, since the advantages these new brands have are very weak in all aspects, they can properly compromise to platform for faster development.

For small and micro enterprises, how to make the “channel” find you? This can be achieved in the following ways:

  1. Self-promotion:
  2. Weibo account and official Wechat account, etc .;
  3. Media interviews and reports;
  4. Participating exhibitions;
  5. Good reputation– if a good reputation is established, retailers will also actively look for “you”;
  6. Keep up with competitive products;
  7. Department store, real estate, chain stores– conversations with the investment promotion department;
  8. E-commerce: JD.com, Red, etc., analyze investment promotion policies and evaluate costs;
  9. New opportunities: Keep an eye on industry news, for example, those of HLA and Meituan these days, to find new channels.

 

Here is an article about whether direct sales will become the future trend: “Strengthen Control, Outdoor Brand Columbia Acquires Remaining Equity in Chinese Joint Ventures”

(Source: http://www.qdaily.com/articles/52190.html)

French knitting queen Sonia Rykiel has accelerated the pace of reorganization: Japan’s distribution channels have returned to self-operation– womenswear and girl’s clothing product lines have found partners.

” Sonia Rykiel, the French knitting queen under the Li & Fung Group in Hong Kong is accelerating its pace of revolution by launching a key strategic decision: take back the Japanese distribution channel and implement self- control.”

“The licensed production of Sonia Rykiel and the Japanese / Italian luxury group Onward Luxury Group and the agreement of exclusive distribution in the Japanese market ended in A/W 2017. From the S/S 2018 collection, the brand will directly manage the Japanese market. After 30 years of cultivation, the brand has gained a very high reputation in Japan, which has also become one of the brand’s key markets. Company executives believe that direct control of Japanese distribution channels is one of the company’s opportunities. ”

In my opinion, the proportion of direct sales mainly depends on the development stage of the brand. Initially, the brand enters the market quickly through distributors and dealers. On the other hand, with considerable economic background and understanding of the local market, brands are more inclined to operate on their own.

 

What Are the Pain Spots in Channel Cooperation? How to Deal with It?

With regards to pain spots, especially for new brands and micro-enterprises, consider the issues of inventory and factory production capacity, billing period, online and offline price management in different regions, etc. In addition to this, there are also venue issues that offline entities often encounter. The conditions for traditional department store cooperation are renewed once a year or even every six months and are subject to adjustments and changes at any time. Some shopping malls implement elimination system. If the sales are not good for a while, they will move you to a bad location. In this case, you can cooperate through groups or carry out multi-brand collaboration. Performance is the key. Only with sales performance can we have the power to speak.

For online brands, the pain spots they face are more in terms of physical entities or offline cooperation.

“This 45-year-old sports giant will dramatically reshape its retail channel and focus on its key retail partners in the future, which accounts fo 40%”

“Currently, Nike’s retail network includes more than 30,000 retailers and 110,000 retail stores. Although it will not dissolve partnerships with all these retailers, in the next few years, the company will put its important resources, marketing strategies and exclusive products on a few limited retail channels. They will be “merchants who are willing to set up a unique Nike brand space in the store and have specially Nike-trained employees to assist in sales.” (Source: Nike announced that it will reorganize the retail channel; the revenue of the next 5 years will mainly come from overseas markets)

Online and offline cooperation is an inevitable trend. An important element in cooperation is to establish common performance expectations at the beginning of the cooperation, and then maintain close communication to ensure that the goals are achieved. At the same time, whether it is channel management or a buyer, as long as it is retail, it is better to visit stores and chat with customers and front-line shop assistants. Although the data is important, it is too abstract to look at the numbers alone, so on-site visits are needed.

In the new retail era, what should small and micro enterprise brands do? In summary, if conditions allow, shop assistants are the key to establishing a self-operated store and solving specific store operation problems; the cost for traffic through online channels is high so it is feasible to attract traffic through free channels (Weibo, Tiktok, etc.) to refine presale and reduce risks; if the money and staff of the company is limited at the initial stage, it is necessary to consider its own advantages when establishing channels. Multi-brands and multi-channels can be applied to ensure survival. Carefully choose  your brand channel vendors, cooperate closely and strive for a win-win situation.

 

 

 

 

 

 

 

 

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