7TH ONLINE, GE GLOBAL FORM FASHION TAG TEAM
Byline: Valerie Seckler
NEW YORK — A journey of a thousand miles begins with a single step, advises an ancient proverb. Or, in the case of one of the numerous nascent ‘Net apparel B2Bs, a couple of steps.
Case in point: 7thOnline, the 14-month-old business exchange, has just scored a heavy-hitting strategic partner for facilitating fashion technology and a second round of financing by striking a deal to jointly develop an Internet-based retail buying and merchandising service with GE Global eXchange Services.
And for its second step, which 7thOnline is striding ever closer to completing: The e-marketplace, based in New York’s fashion district, has entered advanced negotiations with Saks Inc. Consummation of a deal would make the Birmingham, Ala.-based department store firm 7thOnline’s first retail member — and one chief executive officer Max Ma acknowledged is crucial to the success of the business-to-business Internet startup.
“We just visited with Saks Inc.,” Ma revealed in an interview with WWD. “Saks’ participation is essential to the success of this project. Now, we will present our [e-marketplace] plan to the branches of Saks Inc. together with management of Saks Inc.”
In October, as reported, 7thOnline initiated a pilot program with the Parisian unit of Saks covering four categories of merchandise: women’s ready-to-wear, men’s wear, accessories and children’s wear.
That’s also the month it went live online, offering about a dozen small retailers access to roughly 30 vendor partners, from upscale handbag brand Violette Nozieres to labels like Ocean Pacific activewear, Fashion Active Laboratory ready-to-wear, Miriam Salat jewelry and Michael Toschi International men’s furnishings.
Those retailers, however, were not full-fledged members of the Web site.
Taking that effort to the next level, 7thOnline this month trained Parisian’s buyers, divisional merchandise managers and general merchandise managers on how to shop the Web site. The Parisian personnel are expected to start shopping for apparel and purchasing it on the site beginning in early February, and by May, it and other Saks divisions are expected to be fully functional in the e-market.
Although it has yet to sign any membership agreements with retailers, 7thOnline is focusing on doing deals with such department stores as Federated, May Co. and Dillard’s, as well as Saks. Style-driven mass merchants, like Target, Kohl’s and J.C. Penney, also are targets.
Much as 7thOnline has been banking on chairman Chaim Edelstein’s Rolodex to help hook some retailers for its marketplace — leveraging bonds forged during his career as ceo of both Abraham and Straus and Hills Department Stores — it now is counting on new technology and bucks, via GE, to accelerate the process.
“The GE deal is, in part, aimed at attracting retail customers,” Ma noted. “Whether you’re dealing with the big department stores, like Federated, or the lower-tier mass department stores, like J.C. Penney, they want a sense of comfort. They want to know something big is behind you. GE sees [our model] as appropriate to any industry with lots of sku’s that change rapidly, like fashion or the supermarket business. Eventually, we’re planning to go into the supermarket business [online].
“This is our first serious stab,” Ma added, “at getting retailers with the scale of a complete offer, through the deal with GE.”
No offer is complete, naturally, without the funding to form a firm foundation. For 7thOnline, that will mean pursuing institutional financing, with an assist from GE.
“We are in the process of looking for our first round of institutional financing,” Ma offered.
“We’ve probably gotten about a third of it done; we’ve raised a few million dollars. We’ve been talking with a new investor,” he added, “but it’s been tough to find funds. It’s very hard to gauge when we’ll get it done. It could come at the end of the month.”
Among the Web site’s original backers was Chazen Capital Partners, an early-stage Internet investment firm founded in 1997 by David Chazen and his father, Jerome Chazen, former chairman of Liz Claiborne Inc.
The basic set-up of 7thOnline is the same as most online apparel exchanges. Vendors who want to sell at the site pay a page fee for their e-showroom and fees on transactions; in return, they receive a range of support services from 7th Online to help them build their virtual showrooms and, of course, the resulting exposure to the site’s retail members. Retailers register, but don’t pay, to shop the site, and are free to enter any showroom unless a vendor decides to bar a particular merchant by using the site’s blackout feature.
The service being developed jointly by GE and 7thOnline will aim to enable fashion brands to design secure showrooms on the B2B site; allowing those vendors, and retailers, to exchange business data ranging from purchase orders to bar-coded product information; make communication more efficient, and cut operating costs.
In addition, the service will be designed to support electronic data interchange, or EDI, and extensible markup language, or XML, among other online transactional formats.
According to Ma, GE fields a total of one billion EDI transactions in 56 countries, worth a combined $1 trillion annually, and Ma estimated 7thOnline can help some of the apparel players slash their EDI costs by between 20 and 50 percent.
“We’ve been working on the technical integration for a couple of months,” he said.
Among the apparel merchants now using GE’s retail technology platforms, Ma pointed out, are Marshall Field’s, Nordstrom, Penney’s, Target stores, and Kmart, any of which form potential fodder for 7thOnline’s retail membership drive.
The new marketplace 7thOnline develops with GE will also bring vendors and retailers access to the GE Global eXchange Services online catalog of Universal Product Code and European Article Number product data, a database that currently contains coded information for more than 60 million items.