This article shows how online shops end up offline... and how offline stores can add an online presence to complement the business.
Particular note should go to the KissJane model, an oflline aggregator for blogshops so that online retailers can have physical rack space to show their products. This is the current area of growth as there are now a handful of similar concept stores in Singapore and KL.
From: http://sgentrepreneurs.com/retail/2011/07/29/when-blogshops-get-physical/
When blogshops get physical
Generation Blogshop has come of age. While hundreds, if not thousands of garishly designed and brashly-colored blogshops have arrived and died, many online retailers have done well enough to venture into brick and mortar stores.Tracyeinny, founded by cousins Jeannie Pang (check out SGE’s first interview with her) and Pamela Goi, can be considered a true online-to-retail pioneer. When they moved into their first storefront in Pearl’s Hill Terrace at the request of fans in 2009, the location was a ghost town.
“The place was dead, really.” says Jeannie. All they could rely on was their business savvy, and a whole horde of loyal fans.
The co-founders felt it was worth the risk however, since profits were already at a healthy level. And even if their offline operations bled, their existing business would not be badly affected.
In the end, such worries proved unwarranted since their fans flocked to the store like bees to honey.
About a year on, they outgrew their premises and the time came for them to move. While the rental cost was cheap, they could not renovate their store since the lease was renewed every six months, making tenancy uncertain.
“The landlords begged us to stay and even offered to cut our rent,” she says.
But sentimentality did not prevail. In 2010, they moved to their current location in China Town Square. Although a sleepy town at times, the workplace crowds hover in at lunchtime.
Jeannie says that their move into physical stores has paid off handsomely, with profit margins doubling ever since. They accumulated about $1 million in sales from January to May 2011, and expect revenue to hit about $4 million by year’s end, especially since they will be opening a new outlet at Junction 8 in August the same year.
That’s not too bad actually, considering that they were only generating about $600,000 in annual sales before they got physical.
They’ve even managed to do it without passing any costs to their shoppers, since they have the sales volume. It’s only a matter of ordering more of a particular item to pump up profits and meet the demand.
While the women at Tracyeinny certainly did their homework and minimized their risks, a new game changer has arrived to shake things up in the Singapore scene. Their pitch: An offline blogshop aggregator that lowers the cost and decreases the pain for blogshops who want to venture into the retail space.
Meet Ng Chong Kee (left) and Jason Low (right), who co-founded KissJane in 2010. And yes, the company was started by two manly men in their mid-thirties.
Photo: KissJane
While he himself did not start a blogshop, he was intimate with the scene, having worked as a wholesaler supplying fashion items to various online retailers.
“I’ve observed the whole trend since the beginning, how they’ve evolved from their LifeJournal days and even changed the way they took their pictures,” he says, sort of like a daddy who watched his daughters grow up.
He was also at the sidelines too when the blogshop scene experienced growing-up pains — in a failed business that was Best of Blogshops.
BoB’s business model was considered innovative. They rented retail space at Far East Plaza, and in turn charged blogshops about $600 a month for putting clothes on their racks. On the surface, the business did splendidly, expanding to three units in the same shopping mall.
But everything crumbled in a flash. The business suddenly closed down and the owners disappeared without returning the deposits and upfront rentals. No one knew what became of them.
That’s when CK had the idea of starting the company. The business model would be a reincarnation of Best of Blogshops: KissJane now charges between $1,000 to $1,500 a rack per month, for a commitment of one year, as well as around 15% for the brand’s sales to fund the company’s marketing efforts.
He went to childhood friend Jason’s office, pitched the idea to him, and they agreed on the spot to start the business together. Both were determined to set things right.
“A couple of the blogshops that are now under us were badly burnt by Best of Blogshops. But we convinced them that we’re proper businessmen and won them over,” says CK.
He adds: “So we’re like a caretaker for them. If they do well, we do well. We’re here to help them with our management skills while they focus on doing what they do best — creating a style that people want to buy.”
Jason says that it’s a win-win situation for both players, since it lowers the barrier to entry for blogshops who want to dip their toes into retail space, while at the same time helping to defray the storeowner’s rental costs.
And with a presence in two prime locations, KissJane also helps them reach out to a “million footsteps on a monthly basis” and target consumers who don’t shop online.
The plan seems to be working out, as all the blogshops have not lost their investment so far and have made tidy sums throughout the last year. KissJane has broken even seven months after starting on October 23 with an initial investment of about $200,000, which includes rental costs,renovations, and initial deposit.
Demand for their racks are strong, with about 160 brands on the waiting list, although not many will make the final cut. They have a few criteria when considering whether to accept a blogshop: Being in operation for around one to two years, considerable social media presence, and passion in what they do.
Currently, 23 blogshops are already represented in their outlets, including popular names like Tracyeinny, Missy Pixie, Love & Bravery, VainGloriousYou, and MomoTeapots, all of which own their own physical stores.
True to form, KissJane brands itself as a “kaleidoscopic shopping experience”, with the promise of a faster turnaround of new designs compared to traditional fashion retailers, which often go by the four seasons.
CK whips out a calculator and began crunching numbers: With as much as four wardrobe changes a month, the fickle fashionista can expect 18,000 designs a year, color variations included.
“We don’t carry inventory either; the blogshops carry their own items,” he says.
While retailers like Tracyeinny and KissJane seem to be doing well, not everyone is sold on the idea of opening a physical storefront.
Photo: Vincent and Yvonne
While the couple declined to reveal sales figures, they’ve apparently done well for themselves: Yvonne was recently featured in Singapore tabloid The New Paper as one of the five top-earning recent graduates for Nanyang Technological University. Her salary: A cool S$12,000 a month.
For them, the huge cost involved is the main deterrence to going offline. Setting up a physical store requires a lot of cash for expenses such as rental, renovation, manpower and inventory.
“We have friends who own a number of retail outlets. They seem pretty busy and are always running around,” says Vincent.
Going into retail is more risky too. Locations that bring massive human traffic have exorbitant rental costs, while areas with low rental have low traffic. They would also have to fuss about renovation expenses and inventory management — which create extra work that they don’t need since in their current business model they would only purchase items from the suppliers after the orders come in, resulting in no need for storage.
Unforseen circumstances can wreck havoc too: “What if a similar epidemic like SARS comes again? Many retail stores closed down or went bankrupt during that period so we shouldn’t overlook the downside,” Vincent warns.
But what about shoppers who feel uncomfortable buying online, and prefer to touch and feel the real product? Addressing that, Yi Fong says that they have put in place an exchange policy that allows shoppers to return their purchases in exchange for another product or even web credits should they be dissatisfied in any way. That lessens the risk of wasting money on an unusable product.
“It’s something that’s common overseas, but not in Singapore,” she adds.
Whatever their approach, none of these retailers believe in exclusively sticking to one platform. In fact, all three businesses do bat on both teams in some ways. At the end of the day, the important thing is to strike the right balance and find an approach that suits them best.
While Ministry of Retail is primarily an online business, they do organise offline events to engage their customers. Recently, they held a party for Creme & Co customers to check out the new collection.
“Customers feel safer shopping at an online store if they can put a face to it. Physical interactions are still needed to foster relationships after all,” says Yi Fong.
For the guys at KissJane, who aspire to promote Singapore blogshops to an international audience, an online store (which also aggregates the best blogshops) is on the cards. Jason says that the new platform will allow them to test foreign markets and get a sense of their tastes and preferences.
“The brands trust our judgement but we want to careful in the process of our brand building. Our online presence will allow us to feel the ground with the countries we are targeting.”
They hope that by the time they set up their first brick and mortar operation overseas, legions of rabid KissJane fans would be waiting at the doorsteps.
