Cited: Reuters

It seems that various luxury brands are now creating what they are calling “digital mirrors” online with videos of catwalk shows, pictures of glorious models and catalogs of products as they tap into the growing e-commerce of the Internet

The traditional print advert in a glossy magazine is no longer the only way to communicate with the public and fashion houses are now reaching out to their consumers through websites, Facebook pages, Twitter accounts and phone applications.

Having created brand strength by emphasizing product design and quality and on their brand aura, fashion groups are seeking to re-create their exclusive store atmosphere online.

“If it is done well, the web can convey a luxury atmosphere even better than traditional media,” Michele Norsa, chief executive of Florentine maison Salvatore Ferragamo, said.

The Web and social networking sites present strong growth prospects for luxury groups as they emerge from the crisis and consumers grow more confident using the Internet to shop.

Luxury shopping is usually associated with seeing touching or smelling the product as well as a personal service, and this translates into a premium e-commerce experience online.

Italy’s Yoox, which powers sites for names such as Emporio Armani and Valentino, says it seeks to create sites “in line with the brand’s heritage and DNA.” It offers sleek photo and video shooting — recently a project involving fashion photographer Nick Knight — and a top sales service.

“Great attention to detail and a full understanding of each brand’s needs are absolutely key elements to develop a successful online store,” Yoox CEO Federico Marchetti said.

“Another very important aspect is customization: online stores must be tailor-made in order to be unique shopping destinations … Thanks to all this, a brand’s online store can be the real ‘digital mirror’ in which it can express itself and the brand’s identity.”

NEW CUSTOMERS

Marchetti said a “large portion” of the orders from Yoox’s 18 mono-brand online stores came from cities where the brands have no or limited distribution.

“A new level of exclusivity exists by offering items previously available only in large metropolitan areas such as Tokyo, Paris and London.”

Few fashion brands advertise online, preferring to do their marketing via social networking sites as well at their websites.

“The clients can go online and see what is hot. These sites captivate shoppers, they like them,” Gianluca Brozzetti, CEO of Italian fashion house Roberto Cavalli, said.

Luxury online sales rose to 3.6 billion euros ($4.9 billion) last year and there is room for growth, consultancy Bain says.

However online stores should not be an exact replica of a boutique, Bain partner Claudia D’Arpizio said. “The site should have more entertainment, interaction, be less passive,” she said. “It should keep the luxury feel but be less intimidating.”

Of the different advertising platforms, the Web is expected to have grown 9.5% in 2009 followed by 12% to 13% annual growth through the next three years.

“From a communications point of view, the Internet represents the most effective, efficient and involving means to communicate with clients,” Gucci Group CEO Robert Polet told Italian newspaper Il Sole 24 Ore, adding that in September, Gucci saw 2 million visitors enter its site.

“When you plan an advertising campaign, you buy a magazine page hoping that the one million people who will leaf through it, will focus on the image for five seconds, even though you know that probably many won’t even see it,” he said.

This means the advertising campaigns will be geared towards the average fashion customer.  Bringing in millions to see the fashion shows that they cannot attend.

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My Take: This is great for those who are into fashion.  They will be able to get the latest stretch jeans for women or the latest screen printed Greek shirts.  Unfortunately, I’m not into jeans or Greek apparel.

The fashion industry is going to have to get good computer support to be able to keep up with the changes in the website.  With the amount of people that will be visiting their websites, they are definitely going to need IT consulting services.  They better also make sure that they have good virus protection.

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According to a recent study by Merchants Payments Coalition, merchants and American consumers pay more for credit card fees or interchange fees than in other industrialized economies.  These fees charged by credit card companies are a crucial cost that is becoming increasingly under the scrutiny of retailers who want to trim every cost of business from their mortgages to their utilities.

Two laws currently making their way through Congress were drafted to assist businesses renegotiate those fees.

U.S. Rep. John Conyers Jr. (D–Mich.) introduced HR 2695, the “Credit Card Fair Fee Act of 2009.” The proposed legislation was written to create a system in which merchants can collectively negotiate with banks over interchange fees. Sen. Dick Durbin (D–Ill.) introduced “The Credit Card Fair Fee Act,” S1212, which also intends to create a structure for merchants to bargain with banks.

The Electronic Payments Coalition is a Washington, D.C. based group that represents banks and credit card companies. It said interchange fees are merely a cost of doing business and that an average American interchange rate is 1.6%.

But according to the MPC study, released Sept. 14, interchange fees in the United States cost 2% of every transaction, compared with 0.5% charged per transaction in Australia and a 0.3% fee in the European Union.  The study claims banks and credit card companies made $48 billion from American fees in 2008, which is triple what they made from these fees in 2001. The Washington, D.C. based MPC is supported by retail trade groups such as the National Retail Federation, Retail Industry Leaders Association and California Retailers Association.

California boutique owners are watching the fight over interchange fees with interest, and they renegotiate their interchange fees with varying degrees of success.

Fred Levine is co-owner of the M.Fredric chain of boutiques, based in Agoura Hills, Calif.  He said renegotiating interchange fees is a crucial part of doing business. “It’s kept our rates low,” Levine said. M.Fredric has done business with Wells Fargo for more than a decade. He fields calls daily from other financial institutions that promise lower rates. Requesting his bank compete against other offers has helped keep rates low. But the success of his company has created better terms for processing fees.

“We pay a fraction of what we paid in the 1980s,” he said. “We used to pay 4.5% for American Express cards and 2% and 3% for Visa and MasterCard will. Our rates have gone down significantly based on the volume of the business and the average size of the ticket.” He did not divulge what the interchange rates were for his store.

Alison Muh is owner of Surly Girl, a Los Angeles boutique and accessories brand. She said lowering transaction fees by 1% meant great savings for her business. However, she said it was a hassle negotiating with processing companies. “The fine print in your contract often has hidden or misleading terms and cancellation fees,” she said.

Diane Merrick is the owner of the Diane Merrick boutique in Los Angeles. She said her processing fees were fair and the various offers to negotiate bank fees never seemed to result in important savings for her one-store boutique business. “It’s major, major work to change, and it ends up with very little change in monthly fees,” she said of renegotiating fees. “This is an important thing for big, big guys. For the little guys, it’s not a big deal.”

Bringing in negotiators

There are better ways to cut fees than going through tough negotiations with finance companies, said James Van Dyke, president of Javelin Strategies, a Pleasanton, Calif. based research firm and consultancy that specializes in the financial-services industry.

He suggested retailers restrict consumer choice to payment methods with cheaper interchange fees. He said the PayPal payment systems and Arco service stations often nudge their customers to make purchases from debit cards or payment options cheaper than the higher-cost credit cards.

The nudging often means offering lower prices to those using preferred-payment systems. Other times, it takes nothing more than a simple request, he said. “A high-end retailer might post a sign in elegantly scripted gold lettering saying: ‘For convenience and safety, [this boutique] respectfully recommends that our valued customers use “XYZ” card,’” he said. Shoppers often take note of the sign and comply.

Reuven Cypers said he believes many retailers, large and small, need consultants to help guide them through the fine print of negotiating processing fees. Since 2001, his Los Angeles–based Associated Merchant Services, a division of Rocky Mountain ATM, has helped retailers find savings from several hundred dollars per month to $300,000 annually by knocking down processing fees.

One basic way to cut processing costs is to not lease credit card transaction machines from fee-processing companies. Cypers said buying machines often can be more reasonable than leasing. Buying a machine can cost $300, compared with leasing a machine, which can be $50 for a common period of 48 months. Like Van Dyke, he recommended nudging customers to use debit cards rather than higher-cost credit cards.

Associated Merchant Services consults with 2,500 merchants, and Cypers said business is growing. “When the economy is doing well, many merchants were not as concerned,” Cypers said about processing fees. “With the economy tightened so dramatically, everybody is concerned with how to save money and help the bottom line.”

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My Take: From a consumer’s point of view, I think they should reduce those damn fees because the merchant usually passes those fees on to the customer by raising their prices.  In never see merchants lowering their prices unless they’re trying to get rid of an overstock item or they are going out of business.  It would be nice to see one merchant who has the courage to follow one economic system.

That system is one that they teach in every economics class.  I believe they call it the “turnover” process.  (But do not quote me on this.)  The idea is very simple.  If you normally sell 20 widgets in a week at $5 a widget, that means you make $100 a week on widgets.  Let us say that the widget only cost you $2.50.  That means that your markup is 50% and you are making $50 profit every week.

How would you like to make $100 profit every week on the same widgets?  It is simple to do!  Usually when items are purchased in bulk, the larger the order, the smaller the cost.  If you normally purchased 20 widgets at a cost to you of $2.50 each, it is possible to order 40 widgets at $1.25, spending only $50.  This means that you could sell your widgets at $3.75, 75% of the price of your competitors, and make $100 in profit.

As you can see, you have doubled your profit and are now able to order and utilize those promotional bags to help increase your business.  This type of profit allows you to expand not only your business, but your advertising potential as well.  You might even be able use those recyclable poly bags and advertise your business as a “Green” business.

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