GANDT Fireside Chat #005 | Shopify, Casper’s European withdrawal and the developments in the fashion industry

True to our motto “Working Out Loud”, we at GANDT Ventures exchange our thoughts and ideas on current news topics. The topics from around the world ranges from online marketing, digital retail to e-commerce. This helps us uncover opportunities that can be used for companies and our clients as part of our daily business.

But most of all, it is a lot of fun and a great way to share knowledge.Our podcast chats are available to anyone who is interested what Google, Facebook, Amazon and co. are up to.

Shopify – the biggest winner of the Corona crisis to date

Amazon is often referred to as the big winner of the COVID-19 pandemic. We too have addressed this topic in our second Fireside Chat. Amazon’s scalable distribution network, and global market position as the go to online marketplace for basic goods. These are paired with the incompetence of numerous local service provider, have catapulted the US-company into new spheres.

The real flyer on the stock exchange, however, is currently called Shopify.

Not only e-commerce itself benefits from the current high phase of digital media. But also those who provide the tools can make a profit.

Shopify’s shop software solutions, a company based in Canada, is in demand like never before and the share price has risen substantially.

The company was founded in 2006 by Tobias Lütke, who emigrated to Canada from Germany. Shopify is a full-service online shop software that allows the retailer to create their own online shops, with relative ease.

Shopify advertises itself to have more than 1 million companies in 175 countries, use their software. Now (April 2020), Shopify’s customers have made more than 155 billion US dollars with the help of the software. With a share price increase of 82% since the beginning of the year, the figures speak for the company’s success.

Shopify’s advantages in comparison

One of the great strengths behind these successes is Shopify’sall-in-one approach. Shopify takes care of most prerequisite hurdles a new shop operator might face, as it offers solutions for the online shop itself from hosting to security.

This is also the most fundamental difference to other successful shop software companies on the market. If we compare WooCommerce and Shopify for example. The latter takes over the complications and technical aspects of online businesses and replaces them with user-friendly tools and standardized solutions. These tools will not be tailor-made or suitable for all customer types, but certainly fit most.

Needless to say, this comes at the cost of being able to customize and individualize parts of the store; possibly not the most flexible solution for those who would like to go full-out creative.

Depending on the respective requirements and existing technical know-how. Shopify may also quickly reach the limits of the possibilities of adaptation.

If you as a shop operator do not want to deal with details such as web hosting and hosting providers, then Shopify is a good choice. Also when you need to be ready for use quickly.

However, it is time to maintain this resounding growth of the company even after the Corona crisis and to help the small businesses, which make up the majority of Shopify customers. To this end, the Canadian company has launched a series of relief measures that will ultimately pay off for the company.

Customers can currently test the shop software for 90 days free of charge. Futhermore, users get free access to its new email marketing tool until October, and can even apply for a loan through the platform.

Mattress startup Casper withdraws from Europe

On the other side of the crisis spectrum, we find the mattress manufacturer Casper. Just three months after the company took the plunge, Casper has had to lay off 21% of its global workforce in order to save 10 million USD.

The company cited the forced closure of brick-and-mortar stores as the reason for the austerity. One aim is still to achieve profitability in mid-2021.

The US mattress start-up, which became known for its ubiquitous podcast advertising, is now also failing in its attempt to conquer the European market. We can only guess where exactly the reasons are.

However, we have often seen US companies fail in the past because of the diversity of the European marketing landscape.

The mattress business experienced a lot of hype for some time now. The mattress business segment has primarily been anchored and limited to traditional brick and mortar stores. A main hypothesis of the industry has always been that the average consumer wants to test the product before using it. It has provided the industry with a somewhat old-fashioned, dusty image.
The newly created “online mattresses” with trust-inspiring first names such as Casper, Eve or Emma should appeal to a new, young target group. Although the start-ups present themselves as “pioneers of the sleep economy”, they still do one thing first and foremost: sell mattresses. And this business is challenging, partly due to a very long repurchase frequency.

Fashion Industry during the Corona Crisis – Dependencies and Industry Problems

Another industry, the fashion Industry, in trouble due to Covid-19 is the fashion industry. We currently see large discounts in almost all fashion online stores, as fashion retailers are particularly affected by the corona crisis. Not only due to the complete elimination of the brick-and-mortar business, but also online, the demand for fashion has declined enormously. Consequently, new and old goods are stacked up.

The result is discount promotions that the fashion houses use to try to get rid of the goods and from which the consumer can now benefit.

A network of brands, manufacturers and retailers in the fashion industry

But how exactly does the relationship between brand, retailer and manufacturer work? Why are there so many goods on the market at the moment? And why weren’t producers capable of scaling back their production capacities more quickly?

Depending on the respective brand and the seller, there are various business relationships in the fashion industry, which sometimes represent a complicated network. At almost every stage of production and distribution there is usually a wholesaler, but in some cases the goods can also be purchased directly from the manufacturer or a liquidator. If a brand sells its own product line, it can be sold directly to retailer or own stores. But the most common form of distribution is through wholesaler.

In the latter case, the goods are purchased by a so-called wholesaler, or if the trade mark grants him the right to do so, it is also manufactured directly. Small retail stores, buy their goods from these wholesalers who represent the brands.

The prepayment principle

In principle, many contracts in the fashion industry are usually based on a prepayment principle. Due to this fact, the cancellation of ordered goods is only possible with significant losses, if at all.

Thus, it can be assumed that the brands themselves will feel the effects of the Corona crisis as the last. The goods have already been accepted and, in the worst case, only a part of the payments can be canceled – if the respective customer is not solvent. Some companies have decided to take back the stock that they have send to their retail partner, in order to keep them alive.

Yet, most retailers have not been as fortunate and battle the flood of goods to their stores. Most stores do not have significant access capacity to store all of the delivered goods for a long period of time. Hence, the only options that remain are to try and sell the goods at a steep discount or try to pass it on to re-seller such as TK-Max.

Fashion Industry Insights vs. 2019

In our fourth Fireside Chat, we looked at the online retail growth number of the last three months in Switzerland shared by Patrick Kessler, President of the Swiss Mail Order Association.

Continuing with these Fashion Industry insights, we can now also put the above-mentioned growth figures in relation to the previous year. Cumulatively, we see an increase in sales in the last quarter compared to 2019 of almost 20%.

March, which has been hit by the crisis, stands out with almost 40 growth, based on the “winners” sectors already mentioned. Fashion or luxury items certainly cannot speak of such positive news, but overall the online industry in Switzerland is doing well.

Agenda | GANDT Fireside Chat Video #005