Roman Kirsch

Founder & CEO of Lesara

Lesara @ Spiegel - what's right and what's not

Today the Spiegel, the most reputable german weekly magazine and one of the most read online portals published an article about our business and how it shapes the world of online retail.

Here is the article in case you haven read it yet: http://www.spiegel.de/wirtschaft/unternehmen/start-up-lesara-wie-der-kleider-shop-die-branche-veraendert-a-1059590.html

Overall the story captures quite well the dramatic changes happening in retail - from huge inventory piles, 12-month-production planning and lots of middle men & mark-ups to data-driven merchandise selection, quick turnaround times and great value for money for latest trends for customers.

However, the whole interview went only for 30 minutes- hence it is normal that not everything has been reflected 100% accurately in the story. 

That's why I wanted to share in full detail what actually is correct & right in the article  and what is not.

What's right:

  • Yes, we do a very data-driven merchandise selection. No subjective selection but based on what people want. This allows us to focus on bestsellers and not offer the products that cannot be sold, avoiding expensive write-offs and waste.
  • Yes, we are working directly together with factories - which is part of the reason why we can be so flexible and deliver great prices and great quality
  • Yes, by being as fast as 2 weeks between selection and go-live of the product we are not only cheaper and better quality then competition, but also provide them faster & earlier than everyone else. 
  • Yes, value-for-money and fast-fashion have been the biggest & most successful retail segment over the past decades - and we believe that this segment is ready to be innovated in the digital world

 

Outdoor photo shoots of Lesara in China

china IMG_5583 Kopie 2 chinaphotostudio

 

What's not right:

  • The article makes the argument that the majority of products sourced in Asia are produced in factories that are either have "inhuman work conditions" or "intoxicate the environment". This statement is a.) very disrespectful to a lot of countries, governments & people and b.) so wrong that I don't know where to start - and hence just want to focus on some of the most obvious & biggest points:
    1. For everyone who has been involved into working with factories it is clear that this is a huge generalization. Practically over 90% of products in the consumer industry are produced in Asia, no matter if value-merchandise or high-end-luxury. And there are good & bad factories in all of those factories, just as there are good places to work in in Europe as well as bad places.
    2. While there are some countries with high labour and social standards, such as China, there are also others where labor conditions are, on a general level, at another standard. This includes places like Bangladesh, Indoensia or Cambodia. That's also one of the reasons we only source from factories in China as the government but also we as a company have better chances to control and check on all partners we work together with.
    3. Unlike many other retailers we are very open about the factories we work together with. We even had a TV team (here is the link to the Documentary) - twice. 
    4. As we have a 50+ team over in our offices in China we can also do make sure that the factories we partner with are run by great entrepreneurs that we like to work together with (and needless to say, that not only comply with national & international rules but actually go above and beyond to attract the best talent in the country).

 

Visiting the Showroom of one of our factories chinaIMG_4719

 

As you see by this post, it is quite important to us that we engage with partners that share the same values & believes as we do. And also that we are quite transparent about who we work with & how. 

It is important to say that the critique is not targeted at us but a general comment the article makes - I just want to point out to the people who did not have the chance to travel to Asia and visit the buzzling cities and factories  that not everything can be generalized and standardized.

-> The most expensive labels that you know produce in the same places as the Primarks & Kiks of this world

-> Factories that are better run and treat their teams way better in contrast to global chains that don't respect their European employees (See the controversies around the workers at the Burger Kings & Lidls in Germany).

-> That getting a product for a really good prices means in our case also that it is better quality than something double the price.

As always in life and business, the answer is more complicated than a simple generalization and sometimes takes more time & effort to fully understand.

At the end of the day it's our job to inform the consumers - and we are super happy to add way more transparency and share the stories, successes & dreams of the partners that we work together with.

By being more efficient and smarter we are confident that we can offer customers better prices, better quality and great trends for amazing fashion & lifestyle.

We believe that we can shape the world of online retail and give people what they want while also reducing waste and high prices caused by middle men.

And we believe that we will create something that makes the lives of many people better at the end of the day.

Best

Roman

 

Part of the Lesara Team in China

china pictures 

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Lesara on TV

Hi Everyone,

this time a short announcement: A camera team followed our company for several weeks to show how we get access to great price points and products across the world.

Here is the trailer to get you excited: Lesara & Galileo

 

The whole documentary airs on Sunday, 19th of July at Pro7

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E-Commerce Trends 2015

After a long period of abstinence I finally found the time to share some of the insights that I have seen & experienced first hand from starting & running Lesara and being able to understand the dynamics and big trends that happen in online retail from my own experiences as well as talking to a lot of founders & CEOs of E-Commerce business around the world.

I collected some of those insights for a presentation held last month in Amsterdam at the Webhelden conference, as part of the celebration of our entry into the Dutch market.

 

The 4 biggest trends I currently see are:

1. Cross-Border-Commerce

2. Vertical Integration

3. Mobile First

4. Leveraging Community

 

So let's start with the obvious one, 1. Cross-Border-Commerce.

The internet has always been about democratizing purchasing decisions and extreme transparency. Best value-for-money and a great customer experience just matter a lot, if the competition is just one click away. Irrespective of what people think about the price consciousness of consumers or about the general decrease in margins: The consumer is king and hence every retailer needs to question himself, how to build a better experience, day-in, day-out.

So while until recently competition was mainly limited to local online retail, consumers have started to realize that they don't need to limit their selection to local retailers - as people base their buying decision on customer reviews, referrals and the presence of the online retailer, a retailer abroad can be just as trustworthy, if not even more trustworthy than a local one. In countries where either a.) English is a well-spoken second language (think Sweden, Netherlands etc.) or b.) who are too small for their own local online retail players cross-border-purchase already now contribute more than 50% of total online sales.

Whereas E-Commerce in general is growing at a healthy rate of 20% in Europe, Cross-Border-Commerce is expected to grow an annaul 43%, from $105bn to >$300bn by 2018.

So for every online retailer: Make sure that you are competitive enough to leverage this for yourself or go under.

 

2. Vertical integration

 

The online retail industry has been mirroring the developments of brick & mortar-shops over the last decades in just a few years.

The first big rise was from companies re-selling other brands with a focus on desktop.
This mirrored the initial successful concept of general stores - however those are the first in the offline business to loose out, most of them already struggling.

The online equivalents of those general resellers are amazon, zalando & others. The challenge with this model is that in a transparent world you need to constantly deliver best value = cheapest price for a comparable product - something that comes only with scale and which amazon has mastered excellently. But which also doesn't leave any room for competition.

The next wave will be all about the biggest segment in offline retail: Vertically integrated discount & fast fashion retailers. These retailers account for over 60% of offline retail and have been slow in embracing online. This is where the $$$bn opportunity is going to lay in over the next few years, as shown by companies such as alibaba, wish.com, lightinthebox and others.

In a digital & transparent world, every middlemen between the factory and the retailer just doesn't make any sense.

At Lesara we always ask ourselves, what our reason to exist is - and the answer comes natural: We provide the quick delivery, marketing, user experience and control supply chain & merchandise quality, whereas the factory produes the merchandise. A perfect combination, that doesn't need any wholesellers or agents in between and which we believe will be the future

Bildschirmfoto 2015-07-13 um 20.28.14

 

3. Mobile first

 

While this has been months, even years in the coming, a lot of companies still see mobile as another, smaller version of the desktop website. A by-product which they do responsive and that's it. 

Just as people first underestimated the wave that would come with online commerce, the same seems to happen with mobile.

In this case emerging markets such as India and China, where mobile penetration was bigger than computer penetration to start with, lead the way: Over 80% of revenue is generated already via mobile and some of the biggest retailers, such as Flipkart or Myntra are even closing down their desktop websites to focus on mobile development (http://time.com/3829150/india-flipkart-tech-e-commerce-website-mobile-app/).

The reason why also European companies also need to think mobile first: The user behavior and experience is a completely different one than on the desktop. People don't read text, they focus on pictures, they browse with their thumbs and not with their mouses, purchases are easier to make, but less cross-selling possible to name a few.

In any case retailers need to understand that the shift from online to mobile will be just as big as from offline to online and hence requires just about the same ressources to master.

Bildschirmfoto 2015-07-13 um 20.54.16

 

4. Leveraging community

What started slowly with Amazon pioneering customer reviews and developed into sharing via facebook or other platforms has accelerated quickly thanks to the ease of sharing via smartphones. Sharing products, websites and news is just a whatsapp-message away - and hence also we see that sharing ratios are 5x as big for mobile devices vs online devices.

 Bildschirmfoto 2015-07-13 um 21.05.57

 

Even more interesting is the increase in user-generated-content, as plenty of retailers start building communities along the way, with Poshmark, Sammydress start adding user pictures to the actual clean product presentations. Sometimes it doesn't need to be picture perfect, but just authentic and real :)

 

 

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Speaking at TEDx in Berlin

The last TEDx event in Berlin was all about the vast World of Opportunities.

Having myself been lucky enough to be able to use some of the opportunities in life, I was excited to be there and connect with a fantastic crowd and inspiring speakers.

Here is the video.

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Managing Loyalty and Maximizing CLV in the Online world Part I.

Earlier this year I gave a talk at the Onlinemarketing Rockstars conference in Hamburg on the big trends in the Marketing industry.

My main point has been, that Loyalty Marketing is still a hugely underserved market in the ad-tech industry and bears plenty of potential for retailers, but also other online players, to improve their sales & ROI

 

 

Spending money on retaining existing customers (filling the holes in the funnel) leads in most of the times to a higher ROI than just acquiring new customers.

The big question for many companies is, how to measure the long-term effectiveness of their marketing dollars and the long-term prospects of their business model.

Here are some thoughts that might help you on this path:

  • The main metrics to focus on, no matter what business you are in, is the CLV (Customer Lifetime Value). How much more revenue does a customer generate over his lifetime minus the costs that can be attributed directly to the customer (marketing, COGS, payment costs, etc.)
  • Focus on the right metrics at the right time. It's not a bad thing to start optimizing for CPA (Cost -per-Action) in the very beginning. It is however a bad thing for your business if you continue to optimize on CPA even after you have sufficient data to optimize for your ROI or your CLV

 

An overview of how to move from optimizing on CPA to CLV 
over the lifetime of your business cycle.
 
  • However, 95% of the time companies compute a completely inaccurate estimate for the CLV of their customers. They get it wrong.
     
  • Some of the wrong methods include (and I have seen all of them)
    1. Taking the average revenue per user (ARPU model)from the past and forecasting the same number.
      • Example: A customer signed up with your store and spend €30 in the first 3 months (€10 per month). For your business model you assume that the Average revenue per month for the next couple of years will be €10. 
      • Why is this wrong? - You don't account for churn, reactivation costs (e.g. vouchers, retargeting, mailings)
    2. Taking past user cohorts and using a linear regression model to forecast future behavior
      • Example: You take all the users that signed up last January and see what their revenue has been after 10 month (in October). After averaging this out for some of your monthly cohorts, you estimate the monthly revenues of your current cohort into the future.
      • Why is this wrong? - Although this method is way more accurate than the previous one, many factors that affect the CLV are not accounted for. Seasonality, the mix of the cohort, or for example the products you offer on the website may be completely different than the year before. Many times the early adopters are your best cohorts and using that data leads to overly optimistic CLV projections for the future
         
  • So what is then the best way to calculate the CLV of your customers/ users/ visitors?
     
    • The key is to forecast the CLV on USER level - so an individual CLV for every single person. This also allows for the first time to target users individually
    • Apply machine-learning techniques and probabilistic models so that recent changes on your website, seasonality, macroeconomic environment can be included into the forecasts
    • Include more factors in your CLV than only the revenue. Some of the factors can be
      • Transaction-related factors (Av. basket value, time of the purchase, day of the purchase, transaction frequency)
      • On-Site behavior (time-on-site, bounce rate, frequency of visits over time)
      • Soft-factors (browser, device, marketing channel, etc.)

This will go a long way in accurately forecasting the CLV of your customer base - and better decision-making on when to invest in marketing and where.

Average margin error when using different methods to forecast CLV (courtesy of custora.com)

 

In my upcoming post I will suggest a couple of effective ways to actively increase the CLV of your user base in a few steps.

 

More infos on this topic in my Speech at the OMR 2013 in Hamburg 

 

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