Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Because of its diversity and size, the online apparel market, which, according to Forrester Research Inc., will generate online sales of $14 billion this year, is particularly well suited for foreign retailers to launch a web site or expand their operation in the U.S.. YOOX SpA quickly built a presence because it could easily leverage its infrastructure to sell hip designer clothes and related merchandise to urban online U.S. shoppers. YOOX, which sells in more than 20 countries and expects its U.S. web sales to grow by at least 25% in 2005, also stuck to a tried-and-true e-commerce strategy. Though it`s based in Milan, YOOX operates its own e-commerce platform and ships U.S. orders directly from its European fulfillment center.
To build market share in the U.S., YOOX took advantage of the market`s wide range of established e-commerce technology and service providers to find just the right partners. For instance, YOOX uses Commission Junction Inc. and several other companies to help run its affiliate market network in the U.S. and Omniture Inc. as its web analytics provider. By finding different companies with expertise and ties to the U.S. web retailing market, YOOX was able to use the web, study the market and launch a web store with relative ease. "We have the infrastructure and when we want to expand into a new market such as the U.S. we look for the right partners," says YOOX CEO Federico Marchetti. "It`s a strategy that works well, especially in the U.S. which is our fastest growing market."
Single delivery service
Finding and using the right partners can make start-up operational problems easier to deal with and resolve. For instance, despite the obvious headaches of shipping from a foreign fulfillment center and handling returns, YOOX, which has picked, packed and shipped more than 1 million orders since 2000, uses a number of operating strategies to make order processing to the U.S. run smoothly. YOOX uses UPS as its sole global carrier. All orders are picked and packed by YOOX, then sent via UPS to a New Jersey UPS hub for a final inspection before delivery to the customer. "We can ship orders to the U.S. within four days to eight days which is standard for the market," Marchetti says. "Using one global carrier the size of UPS means we can take advantage of their expertise and economies of scale."
In the U.S., YOOX sells to a higher-end urban shopper who typically spends about $250 on each purchase. In each of its markets, YOOX looks to align itself with up-and-coming designers such as Bernhard Wilhelm in France, Alexandre Herchovitch in Brazil and Hamish Morrow in the United Kingdom and then offer online shoppers in each country an exclusive private label from its stable of designers. In the U.S., YOOX will grow in 2005 and beyond by looking for new designer labels and other relationships that will help the company in larger metropolitan areas. "We already offer the U.S. shopper our full inventory of more than 50,000 SKUs from 300 designer labels," Marchetti says. "We will expand in the U.S. by looking for new marketing and merchandising partners that will make us even more local."
YOOX is succeeding in the U.S. because it`s leveraging the Internet in ways that produce faster results. Five years ago, prior to the dot-com explosion, some foreign retailers such as OneAsia, an entertainment retailer, tried but failed to create a critical mass because they were undercapitalized and didn`t really understand U.S. shopping behavior.
Picking and choosing
But now, foreign retailers are picking and choosing their market segments carefully and taking full advantage of their internal e-commerce and web development expertise to create U.S. sites that draw traffic. Within months of starting up, YesAsia.com, an Asian entertainment products web store, launched a U.S. e-commerce site. Seven years later, the U.S. is generating annual e-commerce revenues of about $13 million and web sales have doubled in each of the last two years, says CEO Joshua Lau.
Rather than take on mainstream sites such as Amazon.com, YesAsia.com sticks to its niche of selling CDs, DVDs, books and games produced and distributed by artists in The People`s Republic of China, The Republic of South Korea, Japan, Taiwan and other Asian countries. The Hong Kong-based web retailer is also growing in the U.S. because it`s taking advantage of an internally developed and maintained e-commerce platform that can rapidly add content and product pages in numerous languages, including Japanese, Korean and two forms of Chinese.
For instance, YesAsia recently expanded its U.S. site to include a new line of 23,000 books from BooksChina.com, one of the largest book distributors in mainland China. In just a matter of weeks, YesAsia`s internal staff translated product descriptions and other content from BooksChina into both English and Chinese and updated its site search to let YesAsia`s U.S. customers shop the merchandise in English, Mandarin or Cantonese. Adding multiple language capability to its product pages and shopping cart sets YesAsia apart in the online home entertainment space and helps the company sell to its core market: more than 10 million Asian Americans and citizens from other Asian countries temporarily living and working in the U.S.
"We can sell to the U.S. market because people shop us for Asian entertainment products that they can`t find elsewhere," Lau says. "We`re in the U.S. because the web and our technology base make it easier to establish a niche that we know how to serve."
With an established base of operations, most foreign web retailers are putting in place bigger U.S. expansion plans. Both YOOX and FigLeaves are expanding their U.S. management teams and FigLeaves recently opened its first pair of North American fulfillment centers, including one in Detroit.
FigLeaves sales were up more than 167% from $1.3 million in 2003 to $3.5 million in 2004 and it is encouraged by that growth to expand further. With an expanded search and affiliate marketing program driving more traffic and sales conversions, FigLeaves` U.S. web sales could exceed $7 million in 2005. "We have very high expectations for the U.S. market and you will see us heavily embedded there," Bussey says. "One advantage we have as an Internet retailer is using our web technology to expedite our speed to market, and we are doing just that in the U.S."