The Closet, an ethical e-business model based on a state-of-the-art service

Charlene Sarrade

ISM - ISEG BFS5 1A

29 octobre 2016

An ethical e-business model based on a state-of-the-art service

The Closet, a new way of dressing

Content of paper

Introduction        2

Environment        2

Fashion sector        3

1.        An e-business model made on an ethical approach: the Closet        4

Concept presentation        4

Target audience        5

Ethical approach        5

Strengths of the business        6

What differentiate: first mover advantage in France        7

2.        How is this model working?        8

Financial information        8

Stock        8

Impact on the customer behavior        9

s Can use the website as a way to buy at lower prices new collections        9

s Redesigning the loyalty model; a non-binding monthly fee        9

s Personal experience        10

3.        What can we imagine next?        11

References        12

Introduction

Environment

In today’s world, e-business became a substitute or an extension to click-and-mortar companies. The French consumption habit is changing while new technologies and big data is enhanced. Each year there is a significant raise in e-mobile and e-commerce transactions that makes this industry very attractive for investors as well as people who want to create a company, as incubators for example. The creation of e-commerce became possible thanks to the development of new technologies. The acceleration of the economy made information sharing, goods sharing and services sharing more and more important in consumers’ way of life.

The sharing economy exists until a long time, but it is particularly expanding due to the easy way people are able to enter in contact with others thanks to internet and social network. This way, the sharing economy is changing the way people buy goods and use services. Nowadays, according to PwC^[1], the global sharing economy represents $15bn turn over per year and is projected to soar to $335bn in 10 years. This represents a huge opportunity and shows we are not going to stop now the sharing economy. In Europe, as the company the Closet is based on France, we can see with PwC study below that revenues and transactions are considerably increasing:

[pic 1]

On the other hand, the social and economic environments in France are changing. Unemployment rate and the cost of life are growing so that people are willing to explore new ways of consuming. We will see with this case study, the Closet, that the sharing economy can also be developed for high quality and expensive products. People accept the fact that owning something such as clothes is not always necessary. Indeed, 52% of people think they could live better with owning less^[2]. As well, IFOP study in July 2014 showed that more than 1 French on 2 are detached from classic consumption modes. Laurence Allard, university lecturer, said “we are transiting from a logic of appropriation into a logic of usage”

Fashion sector

According to the French Federation of feminine ready-made clothes, women clothing expenditures in France multiplied by 3 since 2008, to reach 1.6 billion € (march 2015). In 2014, the year of creation of the Closet, these expenditures have grown by 11.5% compared to 2013. It reveals the Closet chose the right moment to launch the concept of renew its wardrobe on an unlimited basis by paying a monthly fee.

In the fashion sector, new collections show up very quickly (every 2 months in average) and people living in the city grant a certain importance to follow fashion trends. Nonetheless, in average 80% of women wardrobes would keep still. It is a good argument for companies in the fashion tech industry.

1. An e-business model made on an ethical approach: the Closet

Concept presentation

The Closet was founded in April 2014 by Ralph Mansour and Charlotte Cargnello. It is a feminine personal shopping company set up on the e-commerce sector. The concept is simple, for a monthly fee of 49€, women establish a “wish list” of clothes and accessories they like on the website, then a stylist is proposing a box with 3 clothes and 2 accessories, delivered within 48 hours. Women have the choice to accept it or to ask for receiving a special clothe they want. Then, they can keep the box as long as they want, they can buy any clothes if they want to keep it, and when they want to receive a new box they just need to send back this one received with a prepaid envelope in order to facilitate the return. No need to wash or iron it, the Closet is in charge of this service which makes the proposition very easy to use for fashion-conscious women who do not have time in their life. This model was first set up in the United States of America, where Ralph Mansour discovered it and decided to replicate and to adapt it to the French market. He realized there were a big market in France and an existing demand as the sharing economy is increasing and women wardrobes are at 80% immobilized.

Screenshot of the US website, first mover:

[pic 2]

Target audience

The Closet target audience are business women living in the city and who do not have time to go shopping. 30% of its consumers are living in Paris. Also, they target fashion addicts because it is a nice approach to be able to change clothes as much as they want to. The target audience are exclusively women, not men, aged between 20 and 35.

Ethical approach

We can say this e-business model has something new in its approach: it is a kind of social helper for women because they can renew their wardrobe with high quality products by paying a 49€ monthly fee. This price does not sound like expensive because the content of a box is between 150€ and 170€. It is profitable for both the company and the customer. For the company, products are bought in large quantity so that it makes scale economy. This is also why it can sell such products at a lower price to their clients. It is even more a good thing for the Closet if clients buy any clothe because it save them energy deployed to sell the product. This proposition, to be able to buy at a lower cost when you are lending clothes advised by a stylist, sounds like the company is willing to spread an image of an upscale service and product provider. On the other hand, it is also profitable for the client: she saves time and money! It sounds like a perfect proposition, with a win-win situation proposition of the Closet. This company is really customer oriented: you understand that at the early beginning of your coming to the website. Before seeing some collections, you have to choose clothes and accessories you prefer to create a “wish list”. Then a stylist proposes you a batch you should appreciate. You can accept it or choose your own products. And the experience the Closet is starting, based on personalization of the value proposition.

...