Boutique Chat #038 | Looking at the Evolution of Wholesale | Daniel Lee, CEO FashionGo

It's time for episode number 38 with the CEO of fashion go. Let's talk about your business strategy and the juicy details of what actually works. From mainstream fashion to fashion on Main street and the entire ecosystem behind it. How do we scale your company and do it with the balance and the happiness that we all seek? Let's hear from those insiders, experts and strategists that actually make it happen. I'm your host, Ashley Alderson from the Boutique Hub and I can't wait to chat. Alright guys, I'm excited to share this conversation with you this week because if there's one platform that almost all of you probably use on a regular basis to grow your businesses, to shop for your boutiques, to discover new lines, brands, trends, you name it, it's Fashion Go. And so I'm so thrilled that almost a year ago now I met Daniel, the CEO of Fashion Go and came to join us in Dallas at the Boutique Summit and really led an initiative to start partnering with the Boutique Hub to hear more feedback from the boutique owners that were using their platform. So today Daniel joins me on the podcast to have a conversation about what's new at Fashion Go, how he's seen the industry change and what's on the horizon. As you guys know, there's been so many changes not only on their platform but in the industry itself. So a little bit more about Daniel. Daniel is the CEO of NHN Global which is a wholly owned subsidiary of NHN Entertainment. And as CEO he leads initiatives across the commerce divisions which is Fashion Go, comp solution, loit and content divisions. Prior to becoming the CEO of NHN Global, he was the CEO of Fashion Go and led the merger between Fashion Go and NHN Entertainment in the United States in 2017. Now in case you didn't know, Fashion Go is a leading global business to business platform that connects brands, fashion brands with retailers and achieved over 500 million in transactional volume back in 2017. Guys, there's been a lot of growth since then and a lot of things that are changing. So I am so excited to share this with you. Get ready to meet Daniel Lee, the CEO of Fashion Go.

Hey guys, welcome to the podcast. This week I'm so excited to bring you a guest who I know you are going to be quite familiar with. I'm sure many of you actually have a number of tabs open on your computer right now to the wholesale marketplace Fashion Go. So today I couldn't be more honored to have the guest, the CEO of Fashion Go Daniel joining me to Talk about the wholesale industry. So, Daniel, welcome to the show.

Thanks for having me.

We're really excited, you know, since the Boutique Summit last year, where we were able to partner on a lunch at the summit and have you on our wholesale panel. I've been really excited to get you on the podcast because I know this is such a tool that so many boutique owners in our industry use, and I think just putting that face and name to the company is helpful to so many people. So thanks again for taking the time.

Yeah, I'm glad we finally were able to make our times connect.

We've only had a couple of time zone differences across the entire world to deal with, so it's great that we're both in the United States at this time and we can catch up. So let's start with the history of Fashion Go, because I know that so many of our listeners use Fashion Go now on a regular basis, but I'd love to give a little more context to how the company began and how it's evolved since then.

Yeah, so Fashion Go was started in 2002, and originally how it started was a lot of different brands and vendors wanted companies to start developing websites so that they could start selling online. And once we started developing the websites for the vendors, what they realized was that it was very hard to get traffic. And so a group of vendors wanted to kind of be on the same website. And that's how Fashion Go started.

I'm sure just since it started in 2002, where I'm sure wholesale was not at all an online business at that point, you've seen a great deal of change in the platform. Can you speak to some of those changes that you've seen during that time period?

Yeah. So when we first started, it was only about 20 to 30 different vendors, and people were very, very reluctant to start selling online. And the real growth period for our business was actually during the recession from 2008 to 2010, because that's when the retailers stopped visiting the trade show. And so at that time, the vendors are trying to get any sales that they could get, so they restarted uploading the product. And we had a lot of great growth. And currently we have a lot more inbound interest from the vendors versus our sales and marketing team doing outbound sales to try to get people to sign up.

I'm sure as the comfort level for the retailers, the buyers that are using your platform, I'm sure as their comfort level with E Commerce as a whole has gone up, they've become more comfortable in buying wholesale in Terms of E commerce. Have you seen that? I mean, since the recession, just the more and more retailers are selling online, the more they're comfortable buying online.

I think the retailers that are buying online are a different set of retailers than the ones that were on our platform a couple years ago. What we've noticed is a shift in the demographic of the retailers and they're just much more comfortable with the idea of online. They're very active on social media, very active in different ways with being online. And so for them, making purchases on our website and making wholesale buying decisions is just a natural extension of their everyday lives.

Can you talk to the type of experience that you hope retailers have on your platform and the different types of. I know many boutique owners on your platform, but the different types of buyers, their demographic that you serve.

Yes, there's. It's very hard for us to categorize the so called different types of retailers. We have about 200,000 registered retailers on our website and there really is no typical retailer. There are small single store boutiques and there's even large department stores that makes orders on our website. But no matter what the retailer is, we notice that there are a couple things that they universally look for. The biggest thing is they want the biggest selection. And we currently have about 900 plus vendors that upload thousands of new styles each day. They want quick shipping and cheap shipping. And so we offer consolidated shipping and they want a secure transaction experience. And that has been something that we've been implementing through our new payment system.

I'd love to come back. I know we're going to talk more in a little bit about secured payment systems, but I'd love to hear more about the consolidated shipping options. I wonder if all of the buyers on your platform know that they have that option, that opportunity. Can you speak about that a little bit more and how consolidated shipping can help save them money?

Yeah. So how consolidated shipping works is that if a retailer were to purchase from vendors A, B and C on our website, instead of those three different vendors making three different shipments and being charged three times for shipping, those different vendors would drop off their merchandise at our facilities in Los Angeles and we would ship that merchandise in one package and effectively reducing the number of shipments from three to one. It's a service that we've offered for a number of years, but we've never really actively marketed it. And we're trying to figure out the most effective way so that we can give the best pricing for our retailers. And this is something that we've been focusing On a lot.

It's really good to hear because I think inside of the boutique hub, even on a daily basis, that's a question that we see, you know, just rising shipping costs impact everybody. So I think that's a really important thing to note and take away. If you're a boutique owner listening, that option is available to you. I'd like to talk more about the vendors, the brands that are on the site. And I know on the site it's not only overseas manufacturers, but also many domestic as well. Tell me more about your brand partners, what they look like, their styles, their price points, and more about what retailers can find in terms of vendors on the site.

Yes. So all the vendors that are on our site are brands that are registered in the United States. And part of the reason we prefer to work with brands registered in the United States is that we're very strict about our vendor vetting process. An example of the types of documents that we check are their business license, their seller's permit, their tax id. And part of the reason that we want to vet our vendors is that we want to make sure that the retailers get a good experience, meaning that the merchandise will have a certain high level of quality, the merchandise will be shipped on time, and in our experience, it was very hard to police that when working with overseas brands.

Would you say that there's also a growing number of vendors on the site that are, let's say, like a mom and pop designer in Texas, like a T shirt brand in Texas, or, you know, someone who started a small manufacturing operation as a mom and pop in the United States. And not just brands that you may see like in the LA Fashion district on their own. Do you see kind of that changing demographic in terms of brand composition?

See it a little bit, but in terms of volume, there definitely is a. It's very heavily skewed to a couple of larger brands. And part of the reason is that they kind of are experienced with making merchandise very quickly and being able to adapt to trends very quickly. But we have been seeing a lot of upstart companies that are performing well as well.

Perfect. So let's talk about, you know, going back to Fashion Go has been around since 2002, and I know that there's been so much change in the industry since then. So talk to me about your experience in moving, you know, this traditionally offline market from trade shows, you know, to more of an online market. How do you think what's happened on Fashion Go or any wholesale marketplace online? How has that really shaped the current State of, you know, the wholesale side of the retail industry.

Yes. So one way I like to think of it is I don't think that the offline market has necessarily moved online. What I believe is that the buying process has just become much smarter and more sophisticated. And an example of that is in 2002, a typical retailer might attend a couple trade shows a year and visit a showroom a couple of times a year and make buying decisions based on what they feel would sell at their retail store. What we're noticing now is trade shows are kind of used as an opportunity for a retailer to kind of physically meet a brand. But the best retailers on our site are making a purchase more than once a week. And so instead of making decisions based on feel, they might actually look at sales data and quickly adjust their buying decisions on a weekly basis versus on a monthly or quarterly basis.

So I think that's. That's a great way to look at it, because in terms of it being a smarter version of wholesale, that's an opportunity for them to have ready to ship and filler product and really capitalize on the opportunity that they have in their own individual market space versus waiting for an order to come in, you know, two, three months down the road. I think that makes a lot of sense. Let's talk about, you know, something I'm excited to talk about is our last conversation you and I had when we were in Las Vegas during the Magic trade show. I know you guys have a new partnership with them, and you had a new base on the floor of Magic, and I'd love to hear your thoughts on how this really has demonstrated this omnichannel wholesale industry that we're referring to. And, you know, our motto at the Boutique Hub is all about community over competition. So this was really kind of a groundbreaking partnership that you guys created. I'd love to hear more on kind of the backstory of how that collaboration took place and how you see it as beneficial to the industry.

Yes. A lot of companies outside of UBM and UBM and the Magic Trade show and Fashion Go thought that these two businesses are competing with each other. But in a lot of ways, the management team there, and I thought that these business could be very complementary. And part of that is each business has a subset of retailers that, for the most part, haven't overlapped a ton. And that means a lot of our retailers on Fashion Go do not attend trade shows, and a lot of people who attend trade shows do not shop online. And what both parties realize is the best retailers, the Ones that are generating the most volume and or making the best buying decisions are the ones that do both. And so we wanted an experience where an offline show like Magic supports an online platform like ourselves, and an online platform like ourselves is drawing traffic offline. And some of the things that we did is we did something called Kelly's Magic Monday. So Kelly, who's with WWD Magic, would, on a weekly basis, pick items that are trending and we would showcase products from our vendors that we think would kind of fit the buying profile of companies that are looking for trendy merchandise. And to the WWD's credit, they didn't just pick merchandise from vendors that were attending the show, but vendors all over our site. And so we wanted to kind of just make this an authentic experience instead of us just promoting each other's brands.

And it's proved to be very beneficial from the looks of it. I've enjoyed following both Kelly's piece, but also seeing in person what you guys were able to produce at the trade show. Do you think that that wholesale buying of the future will continue to be the combination of online and offline like you've already set up and experienced?

Yes, we believe it will be a combination of online and offline. But to be frank, I think the online components will keep changing and the offline components will keep changing. And I mean, we're really excited for the change, but we, like, I can't predict how it's going to change, but I definitely feel that there's going to be a lot of shifts happening.

Can you speak to the shifts in terms of retailers? We'll kind of shift gears a little bit. What key demographic trends have you noticed in the way that retailers buy today and the makeup of their business versus retailers? You may have been serving five, 10 years ago. I'm assuming today you see a lot more. Let me add on to this question. I'm assuming today you see a lot more online only retailers using your platform, along with both brick and mortar and online stores.

Yes, two big things. One is there has been a demographic change in that millennials are replacing baby boomers and increasingly are becoming the target generations and also the buying generation. And this younger generation is definitely more tech savvy and mobile savvy, meaning the way that they buy is completely different and the way that the millennials shop is completely different. And so like you mentioned, there are a lot of online only retailers. And number two, the biggest thing that we have noticed is buying has become much more sophisticated, meaning it's a lot more Data driven and a lot less fields driven. And so what we see is retailers putting stuff in their merchandise, in their shopping cart and not purchasing it until they feel like they're ready and or making very, very frequent but smaller buys. And that's kind of the trend that has kept up for the last five years.

Interesting. You know, it's funny, even as a general retail consumer, like when I'm shopping boutiques, we'll say, so the other side of the industry, I find myself making that same type of purchase. So it's interesting to me to hear you say that because it's not only how consumers are purchasing, but how retailers are purchasing wholesale as well. It's really interesting. So let's go back. Oh, go ahead, Daniel.

Oh yeah. Because at the end of the day, buyers are buyers, even if they are wholesale buyers or they're consumers. In the end, we're just making a purchase.

Absolutely. So let's go back to something we talked about and kind of touched on at the beginning of the show when we were talking about using the platform and changes to the platform. I know that there were many like payment and credit card issues that were happening previously or conversation around those things and you guys have made some really big changes on the platform to working with Stripe to secure payments. I'd love to hear more about, you know, kind of the back end of the process and the, the process that you've gone through and your team's gone through to really overhaul this part of the buying process on the site.

Yes. So up until this year, vendors on Fashion Go had the option to utilize their own third party payment gateways. But however, in order to improve the shopping experience for our buyers, we decided to go with the unified payment system. And Fashion Go has adopted a far more secure payment gateway in collaboration with the company Stripe. Stripe is a technology company whose payment platforms manage transactions, prevent fraud and provides a reliable, scalable and secure cloud based infrastructure. In collaboration with Stripe, we offer a customized payment system called Fgpay that allows our buyers to enter their credit card information on Stripe's encrypted system and securely place orders on our platform with guaranteed fraud prevention and protection. And so as our site grew, we realized that allowing vendors to each independently have a third party payment system result very fragmented experience for our retailers. Some retailers actually complain that our payment system is much more difficult to use now. But in the end, what we are trading off is ease of use for more security. And overall, I think our retailers have been very happy for our switch to our new payment system.

You know, Daniel, that's something that I've always appreciated about our relationship between Fashion Go and the Boutique Hub. Because, you know, as that change was taking place, there were so many questions to field from retailers. And it was really nice to see that as those questions came about even in our community, that we could work with your team and, you know, quickly have answers for them and help them walk through the process and kind of see that evolution as it was taking place. So I really do think that was beneficial in how that all was rolled out and even now in the results that we're seeing since you made the switch. Let's talk about what tips you'd like to give to retailers in terms of handling their payment issues in the future. Do you have any tips to increase security for those retailers?

So the best way to prevent kind of payment issues, it's not unique to our website. I think this goes for any online community. The best thing to do is to keep your information safe and some ways that you can do that is to change your password frequently. When creating a new password, make sure you use a combination of uppercase, lowercase and numbers. Don't share your account information with anyone. If you no longer work with your business partner, make sure to change your password immediately and or delete your credit card information. And if you see any suspicious activity on your card, even outside of Fashion Go, but just on your card in general, it would be extremely wise to just contact the credit cards customer service team immediately.

Perfect. Let's talk about one more hot button topic overall in the industry today, and that is trademark infringement. I know that's something that even with the brands and vendors we work with at the Boutique Hub, or even conversations we see happening happening at apparel trade shows as well as on Fashion Go. This is an ongoing topic. It's part of the nature of fashion. Right? So, you know, specifically with the rise of graphic tee vendors, how does Fashion Go look at these trademark infringement issues and handle them as they arise on the platform?

So this input that I got from our legal team, we respect everyone's ownership rights to their property, whether it's tangible or intangible. Therefore, Fashion Go will never knowingly allow vendors to post trademark or even copyright infringing products on our site if we suspect or receive a notice of infringement. Our teams are very good at diligently and promptly cooperating to remove any infringing product. And for the most part, we regularly screen our site for potential duplicated items or similar styles. We work directly with vendors and buyers involved to solve the issues as soon as possible. And you know, I personally take this issue very seriously. Any infringement on Fashion Go can lead to items being removed or the store being closed temporarily or in some cases permanently. And so if you see any issues of trademark infringement, please reach out to our legal team.

So specialty retail has traditionally been more brand driven, if I think about the history of and the evolution of the boutique market. But let's talk about since the rise of fast fashion, it's become predominantly more trend driven and less brand driven. Do you see this changing in the future both with boutiques and with the consumers that are going back to name brand buying versus trend focused buying?

So the change from brand centric to style centric buying has already happened. Name brands are innovating new strategies to pick up the pace of their production cycles. Currently, speed is everything in the fashion industry. And more name brands are moving towards fast fashion movement. Fashion Go is a result of manufacturers and retailers becoming more responsive to consumer demand with attractive price points. And trend focused fashion is here to stay.

Interesting. I see that same thing happening on our end and I think that's really an interesting perspective. One more question. I think as we look at the industry and I'm sure your numbers also speak to this, there's more boutiques than ever before opening their doors. And I'm wondering if, through your eyes, if you think this trend is going to continue and how these new retailers can continue to grow their businesses in the future. With so much growth happening in the.

Market, the number of boutiques are continuously increasing. And we see this happening on Fashion Go. Retailers are starting to embrace an omnichannel brand which enables customers to convert on any channel, whether on web or in store. Customers shop on multiple channels, online and in store. Independent brands and marketplaces, boutiques adopting an omni channel strategy, omnichannel strategy for retail can secure and grow their businesses in the future.

Okay, so a couple more questions. Can we shift and talk about you as a CEO besides Fashion Go as a whole? Does that sound good?

Sure, sounds good.

Okay, so you as a CEO, I would love to know where you draw your daily inspiration from as you think about the vision for the future of your business and of this industry. Where is it that you go to find that mentor or motivation or ongoing education?

I think the biggest source for inspiration and direction I get from our team and from our retailers. For the most part, I'm not coming up with new ideas. I'm just kind of listening and consolidating the ideas and trying to figure out which ideas are the most viable, but definitely just sitting and listening with my team and getting the chance to talk to the retailers has been the biggest inspiration for me.

All right, so I ask retailers this question all the time on the podcast. So I'm curious your answer, your biggest personal fear. Snakes, payroll, or Internet trolls? So, loaded question, Daniel.