Time for online fashion retailers to get physical?

The last seven days have seen a number of the UK's largest pure-play online fashion retailers report on their recent sales performances, each with varying levels of success.

Luxury goods business Richemont said today that sales at its Net-a-Porter brand in the five months to 31 August performed well, helping the group to a 3% year-on-year rise in retail revenue when measured at consistent exchange rates. It comes after fellow online fashion house Asos said, on Tuesday, that its retail sales jumped 15% to £240 million in the three months to the end of August.

The story could have been better for Asos, but the business reported that it missed out on sales of up to £30 million due to a warehouse fire earlier in the summer.

Last week, meanwhile, saw the recently floated online fashion retailer, Boohoo.com, announce that its sales accelerated in its second quarter and were up 36% year-on-year for the first half of 2014-15.

Each of the businesses mentioned represent strong UK growth stories, but as the market continues to grow with new competitors entering the sector, there is a growing feeling among analysts that finding points of differentiation will be crucial for maintaining these retailers' upward sales curves.

Jonathan De Mello, director, head of retail consultancy at Harper Dennis Hobbs, told Essential Retail there are opportunities on the high street for some of these pure-plays, arguing that investment in "limited physical retail networks" could help them engage further with their respective customer bases.

"The importance of a physical network goes hand in hand with the rise of click & collect, which is growing far faster than home delivery as a method of online fulfilment," he explained.

"Click & collect gives those traditional bricks and mortar retailers that have invested in a transactional website a tremendous advantage over their pure-play peers, which is best evidenced over Christmas, when pure-play sales drop considerably given shopper reluctance to leave the delivery of important Christmas presents up to the vagaries of the postal network."

Online player My-Wardrobe opened a store at Whiteley's shopping centre in London's Bayswater in June, but there are no clear indications that its competitors are set to follow any time soon. Companies such as Amazon and eBay, however, have invested in click & collect with the introduction of collection lockers and a partnership with high street mainstay Argos, respectively.

De Mello does not advocate online retailers investing in a substantial physical store network, but instead suggests emulating international retailers when they enter a new market for the first time, by unveiling flagship stores in key high footfall centres and pop-ups to test new markets and/or fashion lines.

"Fashion – as a non-commodity item – has understandably grown at a slower rate than other product categories online," he noted.

"The need to try on products to ensure a good fit is important for shoppers, and this will always inhibit online fashion retailers' potential for growth. Many online pure-plays market their businesses on the fact that their business models do not contain physical stores but given online sales growth is now slowing, and more and more players are entering the market, the need to stand out from the crowd has never been more important."

What do you think? We are keen to hear the industry's views on whether online fashion retailers should invest in bricks and mortar stores. Please feel free to comment below or share your comments on Twitter @EssRetail.

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