Fashion companies are investing in online marketplaces, expanding distribution for smaller brands that sell on the platform while increasing their own profits.

With brands that are coming onto the market now Spotify playlists and customer groups on social platforms, marketplaces offer another way to serve and connect with their community in a way that feels authentic and not selfish.

“More and more brands are thinking about their business in new ways. It’s basically, “My business isn’t my inventory, but my business is my audience,” said Frederic Court, Founder and managing partner of Felix Capital, investor in the luxury market Farfetch and marketplace solution provider Mirakl. “It’s not about whether they own the product or make more or less profit. Now it says: “What can I sell to the customer that is relevant to him or her?”

James Miller, CEO and Chief Creative Officer of the Collected Group, made up of contemporary fashion brands Joie, Equipment, and Current / Elliott, said he will open a marketplace on one of the company’s e-commerce websites selling the brands tailored to these needs are the same audience, but fill blanks in the company’s inventory. This includes accessories, for example, as The Collected Group mainly focuses on clothing. The marketplace will support young brands looking to diversify their sales while also making The Collected Group’s website a one-stop shop for their customers.

In the entire fashion trade, new and expanded marketplaces are in vogue. Right now they’re an attractive option for brands that rely on physical retailing and have been left high and dry.

In April, the British online fashion retailer Asos expanded its Asos Marketplace, which sells 130,000 models from 800 vintage shops and indie labels, by 80 brands, which was 100% more than in April 2019. The brands included vintage companies who usually sell through the London-based vintage market Truman Markets. For new and existing brands on its platform, Asos is temporarily waiving the monthly fee of £ 20, or around $ 25. Asos also charges a 20% commission on all sales.

There are also Facebook shops and The Yes, both launched last week, leaving the responsibility for packaging and shipping to the brand partners.

Several brand founders recently told me that they were listed on a marketplace or on a retailer’s website as a Drop ship Partners, with many pointing to Nordstrom. Both models provide the brand awareness of selling through a wholesale model, but eliminate the risk of, for example, handing over ordered products to a department store that may not be sold and returned at a later date. And of course there is the risk of canceled orders.

Jane Winchester Paradis, founder of Jane Winchester Jewelry, said she’s been drop shipping with various retail partners, including Tuckernuck, since launching her brand in late 2017, largely because of her online presence.

“As a small business, controlling as much inventory as possible is the way to go,” said Winchester Paradis. “I felt very comfortable with that [drop-ship] want to model and do more of it. “

Lina Calabria, co-founder and COO of Australian accessories brand Bellroy, said in April the company had spoken to Nordstrom about selling the drop-ship model on Nordstrom.com. “We do drop shipping with several other retailers around the world, and we recently welcomed the opportunity to do so,” she said. “We want to keep all of our inventory in place as much as possible.”

On the flip side, a fashion company founder who speaks anonymously said the brand awareness that comes with drop-ship partnerships and marketplaces isn’t worth it. “I’ll give up the margin and do all the work?” he said. “It doesn’t make sense to us.”

The big difference between drop ship and marketplace models lies in the customer perspective. When customers order through a marketplace, they are usually informed that they are buying from a company other than Dotcom because of a “dispatch from” or similar notice. If not while shopping, you will notice when you receive your package with the external company branding on both the inner packaging and the box. The retailer branding is highlighted with Drop-Ship used by Nordstrom. Both models require brands to package their sold products and ship them to the buyer.

Of course, marketplaces are nothing new. In 2019, sales were accounted for in the top 100 marketplaces 58% of total global e-commerce salesAccording to Digital Commerce 360 ​​analysis. This group, to which Amazon, Alibaba and Zalando belong, accounts for around 95% of the global market turnover.

For fashion companies, Court compared the marketplace model to a broadcast partnership. For hosting companies, the financial advantage lies between selling products that are made in-house and selling other brands’ products through affiliate links.

Mirakl, a leader in market solutions that has fashion clients like Urban Outfitters and Galeries Lafayette, announced in January that the company saw sales growth of 77% year over year in 2019 and $ 1.5 billion worth of products through its marketplaces were sold. In April, its customers’ GMV was up 300% year over year. In 2019, Mirakl gained 49 new clients and closed a $ 70 million Series C financing led by Bain Capital Ventures.

Mirakl’s take on companies is that having a marketplace allows them to instantly expand their product offerings, become a one-stop online store, and collect more data to determine what other products their customers want.

Court said it makes sense for a brand to open a marketplace because their customers have already decided they are referring to and trusting their taste level and curation.

“If you’re not known for your sneakers, you can curate other people’s sneakers to match yours Clothing offer? “he said, adding that it doesn’t matter to the customer whether the products they are buying come from the brand’s store, someone else’s store, or someone else’s warehouse.” All that matters is their experience [on the site] is consistent. ”

Having no inventory, marketplace hosts are not forced to limit their listings to what they can buy and store, and they avoid the financial risk associated with introducing a new product or category to their audience is. Hence, Court said, it would be a breeze for more luxury department stores to go, especially given their brand relationships and reach, not to mention their current physical retail challenges.