Is time running out for store mannequins?

A recent report by consultants Retail Forward Inc. identifies 18- to 24-year-olds as the most web-savvy online shopping audience. So with a target audience of 15- to 25-year-olds, it’s no surprise that multi-channel apparel retailer American Eagle Outfitters views the web as its primary marketing vehicle.

Whether it’s research for school, shopping, instant messaging, e-mail or blogs, “It’s where our customer is,” says Stacey McCormick, director of marketing and merchandising for AE Direct. “Our peak hours are at night because when they get home, they’re on the computer.”

But it isn’t just the marketers of the hippest or most youth-oriented duds that are following their customers online. Apparel retailers such as Lands’ End and Eddie Bauer have successfully sold on the web for years. Old-line clothier Brooks Brothers recently beefed up its online presence, while Burberry, the British maker of classic trench coats and other gear, has launched its first-ever web store in the U.S. And if any doubt still lingers as to whether consumers will really embrace the channel for buying clothes, mainstream retailers Walmart.com’s and Sears.com’s moves last year to launch apparel effectively serves notice: apparel’s here to stay online.

Fastest growing category

Forrester Research predicts that with $13.8 billion in sales this year, the fast-growing apparel category, including general apparel, accessories and footwear, will rack up more online sales this year than any other merchandise category, overtaking online sales of computer hardware and software for the first time. By 2010, predicts the research firm, 12% of all apparel sales will be online, up from 7% today.

Forrester puts that gain down in part to factors including increasing online access among shoppers, better multi-channel integration, more broadly distributed online campaigns that actively reach out to more consumers, and a better, easier online shopping experience.

Those improvements are boosting online sales across categories, but two other elements—visualization technology and custom fitting—are having a particular impact on the growth in the apparel category online. New imaging technologies are helping to break the “touch and feel” barrier. Online visualization tools that give consumers increasingly detailed and representational visual information about fit, fabric, sizing and multi-angle product views are going a long way toward compensating for the inability to actually try on clothing online, which remains the category’s key challenge on the web. The ability to specify customized clothing online, a spin that uses some of the same visualization tools helping to drive standardized clothing sales, is also helping to expand apparel sales on the web.

As the apparel category grows online, so do some attached headaches. Take returns rates. As more clothing sales move online, the volume of merchandise that’s returned is magnified, even with better visual information available to web shoppers before they place an order. “Most of our clients are seeing about a 20% average return rate on general apparel and about 25% to 30% on footwear,” says Jonathan Dampier, vice president of marketing for retail returns services provider Newgistics Inc. “Retailers already know apparel sales are shifting online, because they see bellwether retailers like Wal-Mart and Sears going there. What they may not know is the impact of returns.”

Dampier’s point is that with a short and seasonal lifecycle, apparel loses value if it’s not returned to the sales stream quickly. Or put another way: what Minnesota consumer, for example, is going to be interested in paying full price for a swimsuit that doesn’t make it back onto the sales floor until August?

Unique efficiencies

But the web’s at work to address such back-end problems too, with unique efficiencies to shorten the return cycle and even shorten the path from apparel supplier to retailer. By athletic shoe maker Nike’s own calculation, for example, if it made only the samples its b2b sales force needs to show the product to retailer customers and no other shoes for actual sale to consumers, it would still be the fifth largest shoemaker in the world. But that could be about to change. Nike is implementing new imaging technology from Scene7 Inc. that will cut the time and cost of producing that many samples by allowing Nike reps to show retailer customers online immediately how a new or redesigned shoe will look.

“We needed a tangible piece to sell, so historically, we would mock up each color of shoe,” says Mark Capalbo, executive producer at Nike.com. “This way we are going to be able to limit the number of samples we make. And if you can reduce that number, you’ve obviously got a cost benefit.”

The web has also helped put boot and apparel maker The Timberland Co. into the custom business on its direct-to-consumer side. In August, Timberland.com, which senior director and general manager Troy Brown calls the brand’s largest and fastest-growing specialty store, launched its Boot Studio.

It’s an offering that lets customers order its iconic yellow waterproof boot in pink, blue and other colors, adding the details of their choice on features such as the sole, hardware, stitching and more. Shoppers can design and order the boot based on actual materials samples available in Timberland specialty stores, or they can order from home or from new web-enabled kiosks in Timberland stores using an online configurator.

Brown won’t disclose custom boot sales from the Boot Studio, but says they’ve already exceeded expectations and were building rapidly into the holiday season. In fact, Timberland already is looking at using its web site to extend customization to other boot lines, apparel and accessories. “The challenge is finding a balance between having a custom product line developed for the consumer, a price point at which they’ll accept and buy it and enough volume for it to make sense. We’ll be picking product categories that will have enough volume to justify the investment,” Brown says.

Smaller catalogs

From front end to back end, the Internet is changing how the apparel industry sells, markets and even manufactures. The key difference between now and the efforts of only a few years ago is that mainstream retailers are today using the web more deliberately, as a strategic complement to other channels, rather than viewing it as competition.

American Eagle, for example, has dialed down its former mass catalog mailing into a smaller direct mail piece to focus more of its marketing online. It’s done such an effective job of selling jeans on the web that its 800-plus North American stores are now looking for a way to implement in-store the jean guide developed for online use.

While it doesn’t disclose sales by channel, the web is growing faster than its stores, American Eagle says, in part because its web team has worked to make AE.com a major destination for jeans among its youth audience with features like the guide. Launched last July, the jean guide helps online shoppers organize and process a very large amount of information on product attributes such as fit and wash, to guide them quickly toward a purchase decision.

IRCE 2008 Conference Multi-Media CD-ROM

“We needed to break it all down for customers so they would be able to understand the hierarchy,” says McCormick. AE.com does that for women, for example, with the presentation in the jean guide of four different fit styles. Shoppers can move from a fit style selection to narrow the field based on type of denim wash, or vice versa.

The rest of what goes into the fit story is the rise of the different styles of jeans, and the fit guide presents that information in a side-by-side comparison showing styles ranging from low rise to ultimate low rise, with measurements supplied for each. Shoppers can also go deeper into the guide to view a selected jeans fit and wash on a model from the front, side and rear. Or they can simply choose to shop by viewing the whole jeans assortment, presented all at once. “We wanted to make it interactive, but structured and organized in how we sell to customers,” McCormick says.

At its stores’ request, American Eagle is now looking at how to present the same information and selection process in-store. “It had to be clear and concise and organized because of how we present the information online, but the stores liked it so much that now we really have one point of view on how we present this information to our customer,” says Dave Brumback, director of operations at AE Direct. “It’s a good example of how something we have done online has really impacted the overall branding in a positive way.”

Doubling jeans sales

AE.com isn’t the only apparel retailer to look to the web to carry the ball on a complex message on fit and style. In August, Eddie Bauer launched an online video version of its own jean guide to support a fall jeans collection marked by a new attention to fit and fashion. That month, denim sales doubled those of the previous August.

American Eagle, Eddie Bauer, Land’s End and others point out that the expanded sizes available on the web are another key driver of apparel online; in fact, that’s a common theme among apparel retailers having both a store and a web presence. More retailers that have been primarily store-based will now either direct customers to access the web site in the store to order the exact size and color combination they want or even order for the customer online right at the point of sale terminal and arrange to ship the item to the customer, a service Gap stores provide.

“One advantage web and catalog customers have had is that their inventory is in one place, while for store-based retailers, that’s been an age-old problem: they’ve got that pair of size 10 shoes in the system, but not always where the customer is. The web turns that out-of-stock situation into one that completes the sale,” says Mary Brett Whitfield, senior vice president at Retail Forward.

While some consumers who don’t currently shop for clothing online are unlikely to do so no matter which shopping tools or blandishments they’re offered, there’s another group that could be persuaded, given the extra degree of confidence that better online visualization can provide, Whitfield contends. That’s why Michelle Hornsby, senior Internet and merchandising manager for Frederick’s of Hollywood, anticipates a sales lift on Fredericks.com from the zoom and color swapping capacity it expects to launch with provider RichFX Inc. early this year. At Frederick’s, the product story is in fine details and color, two attributes on which industry reports suggest better images can move the sales needle. According to data from Retail Forward, for example, the conversion rate among shoppers using zoom capabilities to enlarge product views is about 55%, while it’s about 50% among shoppers using online color-swapping functionality.

With unusual shades of lingerie such as guava, iris and periwinkle, “I’m confident that with the ability to show some of our most exotic colors and help the customer see what she looks like in that color, it’s definitely going to affect sales,” says Hornsby. Rich FX also will be supporting zoom “hot spots,” giving online shoppers the ability to greatly enlarge views of selected product image details, which Hornsby says is critical to displaying key product attributes such as lace and stitching.

Tailored marketing

In addition to an assortment that expands on what’s available in Frederick’s stores or in any single Frederick’s catalog, the web allows Frederick’s the flexibility to tailor marketing to what Hornsby says is a different type of customer. “The catalog shopper flips through the catalog and if she sees something that interests her, she might pursue it. The online shopper is less passive in her selection; she knows exactly what she’s looking for,” Hornsby says. “Once you gain an understanding of that customer, you know how cater to her needs. And online, you can change to meet those needs continually.”

Scene7 retailer customers in the apparel segment have accumulated enough experience that CEO Doug Mack has identified specific ranges in improvement the technology affords retailers, across several metrics. Among them, a typical sales lift that an apparel retailer might expect from implementing some dynamic imaging capacity is in the range of 5% to 15%, even when using only one element, such as clickable swatches, for example, he says. Some retailers have exceeded that range considerably, he adds. Retailers using Scene7 technology also have been able to reduce returns rates by roughly 2% to 5% on average, he says, by doing a better job of closing the gap between customers’ expectations and what is delivered to their front door.

For apparel that does get returned, getting it back out into the sales stream as quickly as possible is critical. “That’s particularly true if you are dealing with apparel that’s seasonal or high-fashion. Trends in high fashion come and go,” says Dampier.

Across Newgistics’ apparel clients, about 90% of retuned merchandise is eligible for resale, but it’ll be at a lower price if it’s not back in inventory in time. Newgistics’ outsourced web-based returns service speeds up that process by capturing key data including customer information at the point of sale and barcoding it on every outbound package. The coded information facilitates the quick disposition of packages that go back to the retailer.

Bypassing inventory

With such advance notification about which packages are on their way back, some Newgistics clients, like Neiman Marcus Direct, are able to pick the returned item right off the loading dock and send it out in response to a customer order without having to return it to warehouse inventory first. Given the short product lifecycle for apparel, that allows Neiman to maximize sell through, says Greg Shields, vice president of operations at Neiman Marcus Direct.

While technology and systems exist to take online apparel sales into a new realm, such initiatives must compete for retailers’ time and resources like anything else. Generally, technology developments are a few steps ahead of retailers’ ability to roll them out on their sites and in their systems. Nevertheless, tech vendors say adding even some of the new functionality can boost online apparel sales, and different pricing models exist to support retailers buying into technology and services at different levels. A single function like zoom, for example, might cost somewhere in the range of a few thousand dollars a month for a retailer whose use is scaled to a particular level, while implementing a broader functionality under a license model could entail a one-time fee in six figures.

Fast forward a few years in online apparel sales, and the addition of features and functions now in development could make the tools now used to present and sell clothing online seem as outdated as a dime-store mannequin. If they find their way into standard use online, however, it will be because even the newest tools and systems designed to sell and showcase clothing have adhered to a classic business standard along the lines of that articulated by Scene7’s Mack: “In all implementation types,” he says, “our clients generally see their business benefits dwarf their investment cost.”

mary@verticalwebmedia.com