From eBay to Neiman Marcus: Seller Shows the Power of Branding
Sarah Davis started selling clothing on eBay in 1999 and, after bringing on business partner Ben Hemminger in 2006, built up a business selling pre-owned luxury goods. The success of Fashionphile caught the attention of upscale retailer Neiman Marcus, which recently purchased a minority stake in her business.
Neiman Marcus Group said the transaction made it the first major luxury retailer to directly invest in pre-owned, calling it a fast-growing segment projected to grow to $23 billion by 2023.
While eBay gave Davis her start, she didn’t rest on her laurels even back in the days when the marketplace was booming. Davis said she considers eBay her incubator, but without requiring her to give up an equity stake in her business. eBay allowed her to learn lessons and make mistakes while still a small business, she said.
“I love platforms in their ability to allow even the least funded of all entrepreneurs to launch something creative,” she said. “I used eBay tutorials, best practices, guides, and discussion boards to learn how to grow and develop my business.”
eBay also taught her how challenging it was to sell clothing online. “I soon learned that the margins weren’t there with clothes. They were more labor intensive to sell and there was more possibility of sizing & fit issues, which lead to just another reason for returns.”
So in 2001, she became “laser-focused” on the ultra-luxury handbag and accessory niche and says she never looked back.
She recognized that buyers of luxury goods are brand loyal, and said she wanted customers to care about her brand as well. Even when she sold on eBay exclusively (until 2006), Davis said she was very focused on the Fashionphile brand.
“Every box that went out was branded with our name, theme and colors, etc. We’d include info about what we do, thank yous, etc. Our goal was that when people asked “where did you get that?” They would respond, “from Fashionphile,” not “from eBay.”
One way she accomplished that was to take into account the entire shopping experience, all the way to the time shoppers opened the package. That meant passing on free eBay co-branded boxes and tape. “Why advertise for another brand in our presentation?”
“That box was the last chance we had to sell ourselves to this new customer, and we wanted to win them over for life,” Davis said. “The presentation and experience of opening it was of vital importance, and this was our marketing strategy from day one. We have carried that through to today. Our shipping department understands how important that moment of opening is – and you can see it in the care they put into the packing of that box.”
In 2007, Fashionphile opened its first buying boutique in Beverly Hills, followed by one in San Francisco in 2009. And in 2018, Fashionphile opened its first location outside of California, on Madison Avenue in New York.
While 80% of Fashionphile’s inventory is shipped to them from sellers all over the world, the brick-and-mortar boutiques offer the company several advantages that aren’t necessarily obvious: the locations bring in the best inventory, and they help Fashionphile develop solid relationships with important clients.
But as valuable as those physical stores are, Davis said opening new stores is challenging since they are, in her words, “bootstrapping owner operators” – meaning they fund their initiatives themselves.
“Ben and I, our spouses, siblings and parents have all sanded, painted, put in flooring and scouted out locations. This isn’t an efficient way to open stores with any kind of speed,” Davis said. They aren’t experts and recognized they needed to do better.
Initially they planned to raise money to help them rapidly expand their locations, put together a marketing team, and invest more in technology.
“A venture or private equity partner could have helped with this goal,” Davis said, “But having Neiman Marcus as a partner is almost a magical answer to this need. They know how to open store within a store concepts in Neiman Marcus stores in a beautiful, elevated way – but quickly and in only the best areas. It’s really a dream come true. “
She compares the venture to preowned luxury cars. “Mercedes Benz saw that their automobile owners were reselling their cars when they got new ones… so they got in on the game. You now buy certified pre-owned Mercedes straight from the source – Mercedes.”
“We are going to help Neiman Marcus help their clients cash out on the investments they’ve made in handbags, jewelry, watches and other accessories in Fashionphile salons, hopefully in every Neiman Marcus location.”
“We imagine a day where you walk into Neiman Marcus and drop off a Chanel bag at our counter. You browse Neiman Marcus for a few minutes while we identify, price and authenticate your bag. You come back and pick up a check from us for $2500. Neiman Marcus believes that on your way out of the store, you will be very tempted to spend that check at the Chanel store within a store in Neiman Marcus.”
There’s no need to worry about cannibalization of sales at Neiman Marcus – pre-owned merchandise will continue to be sold exclusively through Fashionphile.com.
“One thing that we are confident about is the fact that there will not be Fashionphile products sold in Neiman Marcus stores. We are a digitally native, online company and our need for locations is in the procurement of new inventory. Our buying boutiques are used for convenient places to buy inventory, for learning about the brand, for developing relationships and creating meaningful experiences- not for selling inventory.”
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