How to preserve a retail business in the fashion market in the era of marketplace hegemony?

The fashion segment has become the leader in e-commerce on the Russian market in the last few years. And, of course, this trend has affected the financial results of offline retail stores, which have suffered significant losses in revenue and profit. Not every retail business can withstand price wars with marketplaces, and with each new sales season, the fight for customers will only intensify. SR expert on increasing sales on the fashion market Evgeny Danchev talks about what can be done in such a tough situation and what effective strategies to use to save a retail business.

Evgeny Danchev -

business coach, consultant, expert in increasing sales of the fashion market. Author of the book "A Practical Guide to Increasing Sales of Shoes and Accessories". Author of sales scripts "60 responses to customer objections in a retail shoe store" and "Standards for retail shoe sales." Creator of an online school for fashion market leaders.

@evgenydanchev, www.wconsulting.su

So, let's consider in this article different options for offline retail - what can be done in the conditions of tough competition with marketplaces, and what effective strategies can be used to preserve the retail business.

Below in infographic-1 is a 30-day sales rating of brands presented on Wildberries; the rating includes brands with sales of 200 rubles (data as of October 000, 14).

Please note that the first eight lines of the rating are occupied by clothing and footwear brands. And in first place is the footwear brand O'SHADE with a result of 30 days - 1 ordered pairs. The assortment on Wildberries includes more than 080 models of this brand.

Of course, it should be taken into account that the placed order and the actual purchase of the model are different indicators, and infographic-2 clearly shows that the percentage of purchase of one specific model of this brand in relation to orders is only 34% (taking into account returns). But even if these 34% are extrapolated to the conversion of orders into purchases for all O'SHADE brand articles, then we get more than 350 pairs sold in 000 days!

Ratio of buyouts and orders

What do these statistics tell us, and why are fashion brands leading in sales rankings on marketplaces?

After the COVID-19 pandemic, all the stereotypes and habits of buyers who had not previously bought clothes and shoes online were destroyed. And now every year we see a rapid growth in online sales in this segment, and the statistics look somewhat frightening for owners of physical retail stores.

Ten years ago, the share of sales in the fashion market through online channels was about 4%. In 2023, it is already about 42%, and in 2024 it is predicted to be at 50%.

What are the main competitive advantages that marketplaces have over retail stores?

• lower price;
• saving time (ability to choose at any time 24/7);
• large selection.

Advertising

Advertising LLC "Global Shoes" INN 7710961530 erid: LjN8JzKPK

To offset these obvious competitive advantages of marketplaces, retail store owners and managers can take the following countermeasures:

1. Working with the client base.

If we evaluate which advertising channel for attracting customers to retail stores is currently the most effective in terms of costs and returns, then the first place will be taken by SMS-mailing informing the client about a promotion, or accrual of bonus points to regular customers of the company. The presence of bonus points allows customers to receive an additional and - most importantly - personal discount on shoes, which in many cases, at least, reduces the price difference with marketplaces, or, at most, makes the offer even more profitable. Now we need to create motives for customers, why they should spend their time and come to your store, we need to motivate them to make purchases. A similar situation has long been in the labor market: earlier, companies chose employees, and today employees choose a company to work for.

To ensure that customers choose your store over a marketplace, you need to constantly communicate with them and create the impression of a personalized, unique shopping experience.

2. Branding of goods. The presence of a visual trademark sign on shoes, created for a specific business, already clearly distinguishes the product from competitors selling similar goods on marketplaces, and in this case the rule "similar does not mean the same" applies. But here the question of increasing the cost of the goods always arises, since when purchasing in small batches, branding is not cheap. In the example given earlier in infographic-2, you can see one of the O'SHADE brand models, which is a sales hit. I am sure you will find many analogues similar to this shoe model, but for the average buyer, the very presence of a trademark that no one else has on the market distinguishes a specific product from a mass of other offers. For this reason, branding a product is a step towards uniqueness and differentiation from competitors; there is even a corresponding expression in marketing: "People eat words."

I will give here an example from a completely different segment for greater clarity. Beer producers sometimes conduct experiments, offering their customers to evaluate the taste of different varieties, but without showing the brand name on the can. And people are not always able to clearly say what brand of foamy drink they are currently trying, they do not even always determine the taste of their favorite brand. And here a logical question arises: what are they paying money for - the brand name or the taste? In real life, they often pay for the brand. In our case with shoes, this is exactly what we need to achieve from customers.

3. Dividing the collection into online and offline.

If you are already purchasing products from a well-known brand, in such cases you need to negotiate with suppliers about dividing the collection into two parts. Some manufacturers have faced a wave of negative feedback from buyers and distributors precisely because of competition with marketplaces. No one wants to invest money in promoting a brand whose products are freely sold online by someone at a lower price, and this someone ignores the RRP (recommended retail prices).

It is quite logical to divide the assortment into two collections: one will be exclusively for online sales, and the second for offline, without the possibility of placing it on marketplaces. Of course, there will be a difficult process of negotiations with suppliers, but as practice shows, sooner or later they will understand that it is necessary to form civilized, uniform rules for working in the online market.

4. Development of online channels for offline product promotion.

While marketplaces do create serious competition for retail stores, there are other online channels on the market that, paradoxically, will help drive offline sales.

The behavior of buyers when choosing a product has changed dramatically, and we cannot ignore this trend. Before coming to a retail store, some buyers necessarily browse the assortment in online stores or on social network pages. This behavior model is called web-rooming.

That is why it is so important for a retail store to have its own page on social networks, regularly informing customers about new products, and posting promo codes for discounts as additional motivation for purchase. Having worked on this point, you will be able to provide customers with access to your collection at any time, which will make your business even more attractive against the background of competition with marketplaces.

5. Acceptance of the inevitability of product range changes.

A situation may arise in which the manager will need to make a difficult decision to partially or completely change the product range in order to save the business. This could be a refusal to work with a certain brand, or a transition to a lower or higher price segment of the market, so as not to directly compete with marketplaces.

Stock market traders know that if the price of a stock starts to fall sharply, it is not worth holding it, you need to sell it, fixing losses. Otherwise, you can lose most of your money. In the commodity business, you also need to be able to part with those suppliers whose products are no longer profitable, since they are presented on marketplaces. A flexible approach to forming an assortment and the ability to make quick decisions are the most important qualities for a buyer in the current working conditions in the shoe market.

It is not the strongest and smartest that survives, but the one who adapts best to change.