Author: Chris Jones, Independent Multichannel Retail Consultant
If you work in multichannel retail in the UK, you can take some pride in the fact that you’re working in a sector where this country still leads the world. What that doesn’t mean, however, is that the UK is the only place where interesting innovation takes place in the multichannel retail space. While we all like to keep an eye on the digital innovation leaders here, sometimes it pays to broaden our horizons. As multichannel goes global, overseas is not just a potential target for cross-border eCommerce, it’s also where interesting innovation happens. What’s more, that doesn’t just mean keeping an eye on the US. The fashion retail start-up ZOOT, based in the Czech Republic and also operating in Slovakia and Romania, is a case in point.
At its heart, ZOOT is a clever twist on the reserve & collect concept. There’s a website, on which you can place an “old-fashioned” order for conventional home delivery. Much more important, however, is that the website is connected to a network of “stores”. In reality, these aren’t stores as you might recognise the term. Although they are attractively presented as fashion shops, in reality they hold no stock, and at their heart they’re little more than a collection desk, changing rooms, a payment counter, and a helpful stylist (=sales advisor) armed with an iPad. The idea is simple: you reserve items you’d like to try on, within 3 hours they’re shipped to a store from a nearby fulfilment-centre, you pop in and try on the items you’re not sure about, probably on your way home from work or during your lunch break, and then only keep and then pay for what you want. ZOOT calls this concept ‘try and buy’.
ZOOT "Store", Prague Central Railway Station
“A typical shop has just a 100 square metre footprint,” explained Sara Rističová, ZOOT’s Director of Strategy and Investments. “Footfall is the key, so we place our stores in transportation hubs such as railway stations, where space is typically less expensive than on premium high streets.”
Yes, is the short answer. ZOOT will be profitable in its Czech home market this year, has rolled out its concept in Slovakia and Romania, is forecast to grow by (another…) 100% this year, and is now looking for next round funding. More interesting than the headline figures (unless you’re an investor) are some of the details behind it.
Firstly, this is probably the first time I’ve ever seen wholly convincing evidence of a multichannel halo effect. Because ZOOT sells online already, it’s possible for them to measure the uplifts when they open a new concept store. “We see sales grow by around 200% in that catchment area when we open a store,” noted Petr Ladžov, CFO. “Typically, 70% of sales in a catchment are ‘try and buy’, compared to 30% delivered.”
Moreover, average transaction value (net, after returns) is around 60% higher for ‘try and buy’ than it is for delivered orders, with higher customer frequency and retention. And of course the cost of processing those returns is lower than for orders shipped individually to customers’ homes. OK, returns rates are an eye-watering 60%. But when they can be managed efficiently, on the spot, with the customer present, without a refund being part of the flow, and consolidated for return to the warehouse, they are much more cost-effective to manage than conventional online returns.
Interestingly, British brands are seeing ZOOT as a credible route-to-market to Eastern European customers: New Look and Dorothy Perkins are already available on ZOOT for example.
It’s tempting when planning cross-border eCommerce from the UK to see Eastern Europe, or at least those countries within the EU, as a single target destination. The reality is that the countries are as different as Spain is from Germany.
Sara Rističová again: “what we’re seeing is that people are more fashion-conscious the further east we go.” (If there’s a UK fashion retailer who’d like to compare Wales with Essex and comment on that view, please get in touch!).
She also notes that Poland was not their first choice for expansion, despite being the largest country in the region, because “in Poland it’s all about price. Even Zalando are struggling there.” Instead, ZOOT has made the apparently paradoxical choice of Romania for its international expansion, and what they’ve learnt is that the market in Romania is really very different from Czech or Slovakia. Most fundamentally, their prime customer in Czech is female, but in Romania it’s male: early technology adopters in a very immature online retail market, who despite average salaries being only 50% of those in Czech, actually generate higher average transaction values.
Firstly, ZOOT claims that its success comes from being multichannel by design. It’s been built from the ground up as a multichannel business, so there’s been no need for compromise with a pre-existing offline or pre-existing online business model.
Secondly, that focusing on the very final, and apparently rather unsexy, part of the story – returns – is critical to success in multichannel fashion retail (memorably the German fashion pure-play Zalando used to have the slogan “schrei vor glück oder schick’s zurück” – scream for joy or send it back. After German teenagers got keen on holding weekend “Zalando parties” they dropped that particular element of their branding, although returns are still free).
Thirdly, that Eastern Europe is an interesting target market for UK retailers and fashion brands, where online retail is now a reality not just a PowerPoint slide; and each country in the region has its own distinctive online retail culture.
Finally, and most importantly, that successful innovation in online retail is happening everywhere in the world, not just in English-speaking countries, and we need to keep a broad lookout.