Maiden Lane

culture, society and deep thinking on the left coast

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Merry Christmas!

I’m sitting on the stairs at my mom’s house, surrounded by empty boxes and scraps of wrapping paper. My month-long Shopping for Mum project culminated this morning with the delivery of a gorgeous black silk blouse, camel-hair blazer and silk scarf which I’m half-hoping she’ll pair with sweatpants. She’ll look tremendous. My dad, meanwhile, gave me a history of the 1916 Easter Rebellion with instructions to read up on family history. Handel’s Messiah is playing in the background and I’m feeling good about having orchestrated a successful Christmas.

If you need Sunday reading material, I recommend Matier and Ross’s column. While I’m confident that ‘Ed Lee laughing’ will sooner or later become a nasty meme, I did enjoy the item about strippers giving to the firefighter’s toy drive. Around here, even ladies of the night have hearts of gold.

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Mannequins in the window at Saks’ mens store. They look as though the snow took them by surprise.

Mannequins in the window at Saks’ mens store. They look as though the snow took them by surprise.

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Saks gets in the spirit with Donna Karan - a stark contrast to Neiman Marcus, where the mannequins have butterflies on their heads. Do you see butterflies this time of year? I don’t. Maybe they don’t have Christmas in Texas.

Saks gets in the spirit with Donna Karan - a stark contrast to Neiman Marcus, where the mannequins have butterflies on their heads. Do you see butterflies this time of year? I don’t. Maybe they don’t have Christmas in Texas.

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The Flash Sales Bubble

One of the strange hybrid beasts to emerge from the 2008 financial meltdown was the flash sales site - a “brand safe” way for retailers and manufacturers to liquidate inventory they couldn’t otherwise shift. Gilt Groupe led the way with Ideeli and RueLaLa hot on its heels. There’s talk of an IPO for Gilt in 2012. But could the engine be running out of fuel?

Over at the Business of Fashion, Matt Carol, a footwear startup veteran based in San Francisco, takes a long look at the site’s prospects. He concludes that Gilt’s future is in further diversifying into categories such as home wares and travel, plus private-label sourcing (where the ‘discount’ is mostly illusory) and analytics-driven marketing to better target customers.

That’s a fine prescription for Gilt. For many competitors, it won’t go far enough.

The flash sales phenomenon got started when retailers had enormous quantities of inventory they were desperate to get rid of. That bubble (and it was a bubble of excess inventory) has passed and every flash sales site is now desperately looking for new things to sell. I’m guessing that in the coming months, one or more sites will see its growth fizzle and sell itself for a song or simply shut down if it’s not able to raise more capital.

For Gilt, meanwhile, the designer discount business is fast becoming a legacy as the site transforms itself into a full-price retailer. In August, it launched its full-price menswear site, Park & Bond, going head-to-head with Net-a-Porter’s Mr. Porter. While I haven’t seen any specific figures for Park & Bond, it seems unlikely that Gilt can expand into the densely crowded territory of full-price ecommerce without encountering some headwinds.

Still, Gilt has shown promise as the Hydra of ecommerce. We’ll see what happens to the others.

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Convergences: eCommerce and Local

Local merchants are feeling the pinch from ecommerce, from bookstores who lose sales to Amazon to fashion boutiques whose customers have shifted spending to Gilt Groupe. Yet in this contest, I don’t believe one side holds all the cards. I’m seeing signs that some forward-thinking local retailers would like to take the fight to the enemy and go online themselves.

One example is Farfetch, a consortium of small stores which together offer an impressive selection of hard-to-find designers. Having taken $4.5m in funding last year, they had fallen off my radar - but the site is up and their Facebook page is active. 

Another example is our own Sui Generis, whose window displays I posted about recently. Bravely, they are going it alone with a new online store

The online Sui Generis isn’t as easy to navigate as one might hope: there are too many clicks, the banner is too big, the pictures too small and they could fit more products on the page. There also isn’t enough product information - knowing that a dress is size 6 doesn’t do much for a customer, when a Prada 6 could be an Ann Taylor 2. Still, these are retail veterans who are putting valuable resources into ecommerce.

Could this be easier? Sure. I can tick off what they could do differently: rather than building an ecommerce site from scratch (expensive!) they might have chosen a customizable template store from an ecommerce provider. Or there’s also eBay, less flexible but blessed with strong traffic and voluminous search volume for designer brands.

Then there’s the marketing end. Jil Sander mohair coats do not sell themselves, so stepped up efforts to drive traffic and build a social media following are mandatory. Online advertising could even become a driver for foot traffic.

As more local merchants go online, there will be increased demand for easy-to-implement ecommerce tools, search engine and social media marketing, and necessary backend integration with inventory management systems. Local merchants have a big advantage in this fight: familiarity and personal service go a long way towards encouraging repeat visits, something online retailers can’t match. But if they’re to hold their own, these stores will need to be everywhere their customers are.

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Neighborhood Retail: Sui Generis

What a nice surprise to pass the windows of Sui Generis, the tony consignment stores on Market, and see these ritzy evening ensembles in the windows of the womens’ store.

Christmas is almost here, yet when I go downtown Macy’s is the only store whose windows betray even a trace of holiday spirit. 

To be fair, Wilkes Bashford gave it a shot, putting a Christmas tree in the window. It was a bit literal. They could have other priorities with renovations underway.

At Sui Generis Ille, the mens store, I found candy canes:

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A Daily Deal Done Right, Cont.

Following up on the post about my new Rickshaw bag, I got to chat with Mark Dwight, the founder of Rickshaw Bags, by email. I had some questions about the LivingSocial deal and Mark very kindly indulged me. This is a longer entry, but for anyone interested in the daily deals space, domestic manufacturing or Rickshaw, I think it’s a necessary read (edited for brevity, bolds and italics mine).

Maiden Lane: What made you decide to do the deal with Living Social? And now that it’s done, what’s the verdict? Did you get the payoff you were expecting? 

Mark Dwight: We first starting researching the “daily deal” phenomenon in early 2010 – which seems so long ago. We reached out to both Groupon and LivingSocial to see if there was any interest in doing a deal with our bags. Honestly, we got brushed-off by Groupon in our initial conversation. Our reception at LivingSocial was completely different. The representative was friendly and enthusiastic, and told us they were excited to experiment with product deals. She also explained how their terms were favorable [compared] to some of the other daily deal players, with a 35/65 revenue share versus a 50/50 revenue share, no extra charge for credit card transaction fees, and prompt payment within 10 days versus 30 to 45 days. All in all, the LivingSocial proposition was very compelling. 

In the week before the launch, we placed internal bets on how many deals we thought we would sell, and the wagers ranged from 300 to 800. The consensus number was 500. The deal went live on Monday at 6am West Coast time. We hit 1000 at 4:30pm, and 1200 around the 6:30pm dinner hour. I remember thinking, “Who are these people.” Our final tally was 1723 coupons. Wow! 

In summary, the deal was absolutely fabulous for us – and was also a success for LivingSocial. We garnered a level of local awareness that we could not have achieved in any other traditional way. And, importantly, the deal was ultimately profitable for us, as many people upgraded their purchases with premium fabrics and accessories at our regular retail prices. Many customers were first-timers who said they had never even heard of us before they received the deal. 

On the heels of that success, we were approached by other deal sites, but resisted their overtures. We waited a full year before running our second LivingSocial deal on Thursday, September 15, 2011. In the early afternoon, we received a call from LivingSocial offering to extend the deal in the sidebar for an additional day. We agreed, figuring we might capture a few hundred more orders the second day. We closed the deal at 5am Saturday morning with a total of 2912 coupons. Another smashing success! 

Despite our success with both of these deals, we still tread lightly in the online deal arena. We are not inclined to do a “web wide” deal. We specifically use the LivingSocial localized deal to bring locals to our factory store  no online redemption. This gives us the opportunity to interface with every customer personally, tell our story, show them our shop, and up-sell accessories. We’re looking forward to running a third LivingSocial promotion around the same time next year. I think once per year is a good frequency for giving our brand an annual boost without cheapening our value proposition. 

ML: I’m a big fan of domestic manufacturing, but for the benefit of my readers - why does Rickshaw choose to make bags in San Francisco? What are the advantages over manufacturing in a low-cost country overseas? 

Mark: The main reason we manufacture our own products in our own factory, right here in San Francisco, is because I love making the things I sell – and I love doing it in SF – where I live and ride my bicycle to work. The vibe, history, culture and natural beauty of San Francisco is an important ingredient to our brand story. We celebrate our local roots and “pride of place” as a founding member of SFMade, an organization I personally founded to support, promote and grow our local manufacturing sector.

Manufacturing locally, and manufacturing our own products ourselves, makes us the experts in every aspect of our business. I prefer to operate on a “human scale”, and to “own the process” by which we design, manufacture and deliver our products. In an age when most products are outsourced to nameless, faceless overseas factories, we love making our own stuff – and inviting people to come see how we do what we do.

I do not have a fundamental objection to outsourcing or offshoring. I accept the nature of our modern global economy. In fact, most technology products require broad and diverse supply chains to make all of the pieces come together. That said, I’m a firm believer in the notion that “as manufacturing goes, so goes innovation” – so I support initiatives and policies to promote domestic manufacturing as a matter of national competitiveness and economic security. Meanwhile, I have intentionally chosen a business well suited to local manufacturing – because that’s what I like to do. It’s a personal choice – a celebration, not a protest.

ML: Do you consider yourselves ‘lean’? I checked out your site and didn’t see this term, so I’m just wondering if you think of Rickshaw as a lean manufacturer and, if so, what that means to you. 

Mark: Lean manufacturing is an operational methodology. It is best applied to medium to high-volume “continuous flow” manufacturing environments – though lean manufacturing concepts can be applied at any scale. In the simplest terms, lean manufacturing is about eliminating waste – and that’s just smart business at any scale. Rickshaw is still a very small business, and we operate primarily in “batch mode” rather than continuous flow. We are in the process of developing continuous flow processes for our main product lines, and we will be employing more lean manufacturing techniques in the future. 

[Ed Note: for more on lean manufacturing, check out Fashion Incubator, a blog and website that specializes in sewn product manufacturing.]

ML: What advice would you give to entrepreneurs who’d like to follow in your footsteps making things locally? 

Mark: Learn more about how things are made, and don’t be afraid to explore the possibility of making your own products. And visit the SFMade web site. 

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I’m delighted this went so well for Rickshaw. As for local manufacturing, that’s a whole ‘nother can of worms and one I’ll leave for another day.