By Erin Joyce
Online fashion discounter Bluefly, Inc. is gaining
ground as clothing retailers, especially designer retailers, feel the pinch of over-supply and lack of demand.
The New York-based Bluefly.com said net
sales for February jumped by 50 percent to $2.4 million, compared to $1.6
million in sales it took in during the prior February.
The boost for Bluefly comes as retailers such as the Gap cope with sales
that are down by an estimated 17 percent so far this year. Department
stores, meanwhile, are calling designer vendors and asking them to take
product back that’s not moving, according to industry watchers.
That means Bluefly.com has been able to negotiate better discount prices on
hot ticket designer items, while protecting its margins by avoiding
promotional skirmishes such as free shipping offers.
“We’re finding the products are more in season and the trend items are very
current,” said Ken Seiff, Bluefly.com’s CEO. Designers that once sniffed
about putting their vaunted brands on the Bluefly.com site are taking a
second look.
And so are frequent visitors to the Web site. Subscribers to the company’s
e-mail alerts are finding deeper discounts on fashions on items that are
still current, a change from offerings of six months ago.
Prada bags that had once been discounted from $400 to a still pricey-to-some
$200 are now below $100 in some cases.
A designer sweater by Elie Tahari, including a rabbit fur collar, retails
for $179, close to 50 percent below the $340 retail price.
It’s still on the high end, which is good news to Seiff, who is looking to
announce Bluefly.com’s first profitable quarter by the end of this year.
He has a way to go, given the company’s continued losses. But one milestone
bodes well for the company, in addition to having a name like George Soros
as one of its investors.
For the fourth quarter of 2001, Bluefly reached positive cash flow for the
first time, generating $1.3 million from operations compared to the negative
burn of $3.4 million in the same, year-ago quarter. Its overall sales were
$7.9 million during the period, up from the $5.7 million in revenue during
the fourth quarter of 2000.
The turn on cash was due to a 37 percent increase in sales, and a 40 percent
reduction in sales and administrative costs, especially customer acquisition
costs.
Overall, Bluefly.com’s loss from operations for the quarter was $1.4 million
(not counting one-time items), compared to a loss of $5.4 million during the
same quarter in 2000.
“Looking forward, one of the most encouraging things I’ve seen is that the
discounts we’ve established are now permanent fixtures in the business,”
Seiff said.
“We’re signing on more designers, and gaining more interest.”
One aspect of discounting online that is appealing to designers: their
ability to control how the product is displayed.
Seiff said the designers pleased that “they’re not putting their brand
equity at risk” like they might at an off-price outlet where high-end frocks
are often falling from hangers or tossed in a discount bin.
Word of mouth, especially among its mostly female customer base of over
300,000 has also been a secret weapon too. About 63 percent of the company’s
$7.9 million in sales during the fourth quarter were from repeat customers.
“We’re working on enticing customers with more relevant offers,” he said,
“and spending an enormous amount of time mining customer data.”
