7TH ONLINE: B2B WITH A FASHION FOCUS

Byline: Valerie Seckler

NEW YORK — “Our focus is on the fashion business because we believe it is one of the most difficult things to do well on the Internet,” said Chaim Edelstein, chairman of 7thOnline, a business-to-business exchange that has just gone live with about 30 vendor partners and a dozen retail affiliates.
“We think that whoever executes the best among the B2B sites will win,” Edelstein offered in an exclusive interview with WWD last Thursday at the Web venture’s headquarters in the Garment District. “We believe we have the best technology, so we think we’ll win.”
Indeed, it was the initial version of the Web site itself that spurred the former chief executive officer of Abraham & Straus and Hills Department Stores to sign on with a fledgling ‘Net venture.
“I was approached about this project in November 1999, after we’d closed the Hills deal that January,” Edelstein said, in referring to the merger of Hills and Ames Department Stores Co. “I saw the site and was very excited about it. I showed it to various people at Federated, got good feedback, and decided to get involved with fully developing it.”
Not that a savvy retail veteran like Edelstein thinks the job ahead will be easy — particularly with the site’s focus on serving suppliers and retailers of better, contemporary, bridge, and designer fashion. He predicted the toughest challenge — among the many complexities posed by B2B exchanges — will be the fragmented nature of the apparel industry.
“The business comprises many different retailers, but there are not too many of them working together in [formal] partnerships,” Edelstein observed. “How many people are even using EDI? Our approach is to go after upscale apparel, items that are found in such stores as Federated, May’s, Dillard’s, Saks, Neiman’s.
“It’s not like the shoe business,” he noted, “where you put a few major players together and you’ve got it. Upscale fashion companies are one way, mass is another, and then you’ve got the middle market, which is different from the other two.
“There are 10,000 vendors of department store apparel lines in the U.S.,” Edelstein added, “and the top six brands account for only 25 percent of the business. It’s totally fragmented.”
Fashion vendors currently affiliated with the site are mostly those that would be found in stores like Saks Fifth Avenue and Neiman’s, such as upscale handbag line Violette Nozieres, said Lauren Sharfman, vice president of sales at 7thOnline, who joined Edelstein for the interview along with Max Ma, the firm’s ceo, and Avonda Nelson, vice president of marketing. Also available at 7thOnline are brands including Ocean Pacific activewear, Fashion Active Laboratory ready-to-wear, J. McLaughlin handbags, Miriam Salat jewelry and Michael Toschi International men’s furnishings and accessories.
According to Sharfman, the B2B site has started with smaller vendors “so we can get them on quickly. Our big push,” she said, “is now under way. We are in talks with many big brands and expect some of them to come to fruition in the next couple of months.”
As for the site’s retail partners, most of them are smaller players, said Edelstein, along with “one major department store,” the Parisian unit of Saks Inc. “We are running a pilot program with this store, and we are working now with a few more [major department stores] to establish partnerships.”
The pilot with Parisian will include four categories of merchandise: women’s ready-to-wear, men’s wear, accessories and children’s wear. Although 7thOnline has yet to sign membership agreements with any of Parisian’s 150 matrix vendors it expects eventually to work with, chief executive Ma noted talks held recently with megabrands like Liz Claiborne and Nautica have been encouraging.
The basic set-up is the same as most online apparel exchanges. Vendors who want to sell at the site pay a page fee for their online showroom and fees on transactions; in return they receive a range of support services from 7thOnline to help them build their virtual showrooms, and, of course, the resulting exposure to the site’s retail affiliates. 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 B2B exchange was built by an in-house technology team. The site’s features include:
An eNotebook and assortment planner that enable retailers to shop the market from their computer, place orders and keep records of what they’ve liked at various vendors they’ve visited.
The capacity to create and display images of the floor plans of a store’s apparel departments, as well as images of individual fixtures within those departments so that retailers can track their sell-through rates per store and per fixture.
eShowrooms customized to meet specifications of 7thOnline’s member apparel companies, such as whether they want to incorporate spin and zoom tools.
An order summary that allows vendors to track, in real time, the buying behavior of retailers who have placed orders at their virtual showrooms, including the name of the company offering an item ordered, and that item’s style number, color, size, quantity ordered, unit price and total cost.
Content such as portfolio presentations from the London College of Fashion’s 2000 graduating class, among other fashion institutions. Students build and manage their own portfolios, and can update them in real time and control who can view their designs on the site.
7thOnline expects to expand its portfolio section to include design schools such as the Fashion Institute of Technology, with which it is currently talking about joining the project.
In addition, 7thOnline has fashioned a strategic partnership with TexWatch, an online aggregator of apparel factories and trading companies, most of them located in Asia, which will provide links to suppliers for the site’s vendors, much as 7thOnline offers access to retailers.
For now, the site’s revenue stream will flow from the transaction fees and page fees, and eventually, Edelstein said, from advertising on the site.
“We’ve started small and revenue should really start to flow just after the pilot program with Parisian,” he projected. “We expect a profit after the first year — faster than most Internet projects. The technology is built now, so there are no more major development costs.”
To begin, the site is staying focused on business in the U.S. “Our position now is to do a great job domestically,” Edelstein stated. “Until we max out here, we don’t need to rush [into international markets.] If the timetable for us is to be completely operational with the big department stores in the next 18 to 24 months, we can get to global growth after that.”
In the meantime, said Edelstein, the Web will start to transform the way apparel makers and retailers do business.
“Things will become faster, more efficient. People will still come to the market to touch and feel, but there will be fewer return visits,” he predicted. “It will take less time to place an order, to obtain a hot item, because retailers will be connecting directly to manufacturers on the site.
“After a retailer places an order, the job is only starting,” Edelstein continued. “Fashion is everything but the status quo — how many times is an item canceled at the last minute, or closed out? At 7thOnline, retailers can check on the status of their orders.
“The Internet is not a cure-all,” the executive acknowledged, “but it will vastly improve communication. You’ll have a lot less excuses for why things aren’t getting done.”

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