Fashion 2.0 - Apparel goes digital

Fashion & Apparel is one of the fastest growing online areas and there is a tremendous amount of innovation in the space. The market is large ($150BN in 2011 in the US) of which online spend is likely to make up about 25%. Top-tier Venture Capital firms such as Benchmark, Matrix & IVP have invested in innovative models which are creating shifts in the online fashion & apparel markets.
There are a few areas that I find extremely interesting:

1) Limited Time Sales: using email lists to target buyers of high fashion products in time sensitive sales.
  • Vente Privee in France (almost $1BN Revenue in 2009) pioneered this model for luxury fashion goods in Europe and there has been some great success with US companies emulating this model. 
  • Gilt Groupe have got some great press and have done an awesome job at expanding into new verticals (Fusion, Men, Travel) and Ruelala had a successful $350M exit in 2009 to GSI Commerce.
  • Shopittome has a pretty interesting model where users input large amounts of information about their preferences and receive highly personalised sales. They seem to be doing well and have no venture funding - it would be interesting to see if IP can be created with such innovation to increase the barrier to entry in the space.
I do feel that the major department stores are in a better position than these players as they have pre-existing relationships with the brands, and access to a lot more customer data from their stores - in the long term I think they are going to come out on top...

2) Bridging the gap between online and offline shopping 
  • Image Recognition: People are great at buying stuff they search for, but they have already discovered it offline. and Modista allow people to specify items they like the look of, but then suggest alternative products which are similar based on image recognition
  • Social Shopping: Social fashion is a fragmented market and no-one has really solved the issue of creating a social platform for people interested in fashion/apparel - this is a cool area to look out for... I really like the idea of using games to drive engagement and try and gauge product/style demand this way. 

3) Crowd sourced content: There are a bunch of companies working on crowd sourcing apparel content and we've studied a bunch of interesting models at HBS (Threadless & Zazzle) which are great and have shown that crowd sourcing of product design is a great way to engage customers and drive sales.
  • Polyvore have built an awesome product which crowd sources editorial/fashion collages (what Vogue and Elle produce). They have pretty amazing usage stats (5M+ monthly actives growing at 10% MoM) which I think makes them the most visited fashion site on the web. I think it's one of the most innovative sites I've seen for browsers to discover new products. For fashionistas out there - it's definitely worth checking out..
4) Men's shopping: Men are rubbish at buying stuff online. As a group, we are not good at sale shopping, buy only stuff that we are familiar with and don't shop that often. There are a couple of cool companies that i've come across to cater to more niche needs - they have built brands online alone and have a small but dedicated following.
  • Bonobos make trousers that fit the modern, younger, and more athletic man (/yuppie) - and I think each customer has bought >1 pair - it's definitely branding itself as a niche product and will be interesting to see if they can maintain this identity as they expand to more products.  
  • Proper Cloth allow men to completely customize every aspect of their shirts - from collar cut to the colour of your cuffs. The barrier to entry for a user to try this is a little high ($120+) but it's definitely a service I would use if I was happy with the first shirt.
5) Rental Models:  Sometimes it's too expensive to buy stuff - especially high fashion items or things you don't wear very often.
  • Avelle (previously Bag, Borrow or Steal) have set up a service where you can rent handbags by subscription and send it back when you are done to get the new hot thing. Great idea but I wonder how women feel about using someone else's bag - I've heard that one can get pretty attached to these bags :)
  • Rent the Runway was founded by a 2009 HBS student and has received venture funding from Bain Cap Ventures. Users can rent ball gowns, tuxedos or other high cost/low wear frequency items. If I were them, I would focus on stuff people already rent, as opposed to high fashion items for the fashionistas. Will be cool to see how they do....