FASHIONMALL TRIES A NEW MODEL

Byline: Vicki M. Young

NEW YORK — Claiming Fashionmall.com’s business model is misunderstood, the company’s chief executive last week attempted to assert its B2B credentials during a conference call to discuss fourth-quarter and yearend results.
Ben Narasin said, “Many think of us as business-to-consumer, but we’re really a consumer-to-business company. Our model is the delivery of consumers to businesses, not product to consumers. Consumers, their attention and time are our inventory.” Narasin noted that the firm’s clients are the merchants, manufacturers, catalog companies and advertisers on the site. “Our business model has been fundamentally misunderstood,” he added.
The ceo explained that merchants and advertisers scrambling to get online during the fourth quarter typically turned to traditional offline advertising like television to drive traffic to the site. “What they found by and large is that the model of utilizing traditional media like television is not working cost effectively….In simple terms, they came to us to buy traffic, and that is the heart of our business model.”
The clarification of Fashionmall’s business model came as the company announced it would transform its Outletmall.com property from an e-commerce site to a vertical portal mirroring the Fashionmall.com. The outletmall.com site will sell tenancies to manufacturers, traditional retailers and catalogs that sell off-price, clearance and end-of-run merchandise, as well as sites that have a dedicated clearance section on their Web sites. Outletmall’s refocused site will also offer sponsorship and advertising to clients.
The loss in the fourth quarter ended Dec. 31 was $2 million, compared with a $117,000 loss in the comparable 1998 period. The result excludes a noncash charge of $111,000 relating to the options of Jerome Chazen, former head of Liz Claiborne. His investment company, FM/CCP Investment Partners, holds a minority stake in Fashionmall.
Revenue for the quarter was $1.1 million, up 93 percent from $561,000 in the 1998 period. Barter revenue declined in the quarter to $154,000 compared with $292,000 in the year-ago period and also declined as a percentage of total revenue, to 14 percent from 52 percent in last year’s quarter.
In 1999, the year’s net loss was $2.5 million, compared with income of $8,000 in 1998. The 1999 result excludes a $1.3 million noncash charge connected to the Chazen options. Total revenue was $3.7 million, compared with $2 million in 1998. Barter revenue was $1.3 million versus $1 million in 1998.
Narasin noted that the company attracted a greater number of clients during the fourth quarter. The company had signed 27 new clients during the first nine months of 1999 and then 37 in the fourth quarter alone, he said.
Narasin said companies “are realizing the inefficiency of traditional offline advertising to drive traffic.” On Fashionmall.com, advertising contract periods range from three to 12 months. He added that the company in the fourth quarter shifted its core pricing model for anchor and non-anchor tenants from a flat fee plus a percentage of sales to cost-per-click model plus a percentage of sales.
“We charge clients for traffic delivered to the site, regardless of what the traffic does, plus a percentage of sales,” he pointed out.
Upcoming changes at Fashionmall include simplified purchasing, in which customers use a single shopping basket and move through a single checkout to purchase from the different vendors on the site. The company also plans to improve tracking of customers for trafficking purposes to better generate fees from clients.

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