TWO E-VIEWS FROM WALL STREET
SIZING UP THE BIG BRANDS

Byline: Valerie Seckler

NEW YORK — E-commerce is the least of it.
That doesn’t exactly sound like a point of view about the Internet from a typical Wall Street analyst, a sort who’s generally looking for topline engines to drive bottom-line growth in the various ventures they track. But it is indeed the mind-set of veteran retail analyst Jeffrey Edelman, who has just picked up coverage of 14 major apparel and footwear firms for UBS Warburg: Coach, Columbia Sportswear, Jones Apparel, Kellwood, Kenneth Cole Productions, Liz Claiborne, Nautica, Nike, Polo Ralph Lauren, Reebok, Timberland, Tommy Hilfiger, Venator and VF Corp.
In an interview in his midtown Manhattan office, Edelman told WWD he believes fashion megabrands can best leverage the Internet by building an interactive, marketing-driven dialog with their customers. For the most part, Edelman contended, e-commerce efforts mounted by the relatively few fashion brands selling direct to consumers have been half-hearted and are not helping the image those labels are conjuring up for cybershoppers.
“The jury is still out on how much fashion apparel is going to be bought online,” offered Edelman, who is executive director of the apparel and footwear group at UBS Warburg. “The consumer’s got a full closet and she’s got to have a compelling reason to go online,” he continued. “I have been a skeptic about apparel selling on the Internet. I haven’t seen any Web sites of fashion brands that have excited me, in terms of what sales can contribute.
“Sure, the Internet can drive offline sales,” Edelman acknowledged when prompted. “It’s a great information vehicle,” he added, citing LizClaiborne.com and Timberland.com as examples of marketing-driven sites with meaningful content and interactive elements to establish a rapport with users.
Few fashion labels have gone direct online to date, save a handful of prominent players such as Polo.com, Liz Claiborne’s Elisabeth.com, Cole-Haan.com, maidenform.com, plus those of catalog merchants like Lands’ End, Eddie Bauer, J.Crew, and J.C. Penney, which have well established supply chain infrastructures — including the last mile to the consumer. E-commerce sites for three style-driven labels are slated to go live during the second quarter of 2001: outdoor megabrand Timberland, Madison Avenue retailer Liz Lange Maternity, and men’s wear designer Jhane Barnes.
Others that had anticipated possibly making the leap to e-commerce during 2000 got cold feet, such as Versace and Tommy Hilfiger, which both went live on the Web without a product offer, although Hilfiger opened an e-boutique at macys.com and Versace has an e-tail link at Luxlook.com; Donna Karan New York, which started selling online via e-tailers such as eLuxury.com, saksfifthavenue.com, and neimanmarcus.com, rather than going direct, and Christian Dior, whose goods are offered at eLuxury, and still has a stand-alone site under construction.
“I don’t understand why apparel companies have some of these sites,” Edelman said. “Look at Polo.com, for example. I don’t see what it offers that a consumer can’t get elsewhere. I’d think a designer would want to show users the full scope of their collection,” he continued, noting the skimpy selection of items available for purchase and that only a fraction of Polo/Ralph Lauren product can be viewed online. A visit to the women’s department of Polo.com Friday found 146 items offered under 11 merchandise categories; and a similar range of goods under a half-dozen lifestyle categories, such as Resort, Weekend, Golf, Swim, and Polo Jeans Co. There were also three women’s items on the landing pad: an equestrian scarf, peacoat, and grosgrain ribbon belt.
In the UBS report on the apparel and footwear industries, Edelman said of Polo.com, “It got started with the same fanfare as most other sites, and will probably be something we will hear little about in the future. While it attempted to sell image and attitude, we thought the initial presentation was lacking, as was the depth and breadth of merchandise offerings. Perhaps the best part of this joint venture,” he added, “is that NBC was footing some of the promotional and marketing costs.”
For his part, Jeff Morgan, president and chief executive officer of Ralph Lauren Media, pointed out, “The scale of Polo.com’s assortment is directly related to our experience of what the online customer is looking for: core product from Polo/Ralph Lauren. It’s our classic iconic product that is our fundamental strength,” he said of the company that produces tens of thousands of items.
“To offer our full assortment is not cost-effective in terms of fulfillment costs and inventory management,” Morgan stated. “We approach our business as a destination site for all Polo customers, whether they will buy online or not. About 95 percent of our live chat with users is about the business in general — locating a store, a style, product information — so it is a tremendous marketing platform. But the underlying opportunity,” Morgan maintained, “is for Polo.com to sell products online when consumers are ready.”
“To the extent it makes sense, we will give Polo.com customers a chance to view more product in the collection; we will introduce a feature online [this] week, enabling users to see and learn more about a broader range of the collection,” Morgan revealed, but did not elaborate.
At fashion powerhouse Liz Claiborne, Al Shapiro, senior vice president of corporate marketing, noted, “We view the Internet principally as a marketing tool because our primary distribution is via brick-and-mortar stores and we plan to keep it that way. Consumers are less enthusiastic about shopping online than advocates of the Internet have said. This may change,” he allowed. “But it is my sense e-commerce has been highly overrated, except for firms with a foothold in catalogs.”
Jupiter Media Metrix, one of several Internet consultants criticized recently for making overly optimistic forecasts, is estimating online retail sales in the U.S. will rise 50 percent this year to about $36 billion, up 50 percent over sales of roughly $24 billion transacted on the Web during 2000.
Not surprisingly, Edelman shared Shapiro’s guarded view. “Most companies’ expectations of the Internet have been much too optimistic,” the analyst concluded. “A whole lot of companies got caught up in the hoopla, before they knew a whole lot about it.”

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