Spare a thought for high end fashion boutiques. The rarefied aura of prestige and privilege they spend so long cultivating to reflect the premium brands they stock means they can’t use something as crudely effective as discounts to lure customers in store. So how do they acquire new customers?
One options is fancy events and dinners to wine and dine future big spenders. But that’s not a cheap option, as you can imagine. Nor, necessarily, hugely effective.
It’s this expensive customer acquisition problem for bricks-and-mortar high end fashion stores that Finland- and London-based fashion discovery startup Knomi is targeting — offering an iOS app to help them find new buyers without denuding the carefully stoked brand value upon which they depend.
Knomi’s system is currently live in London, where it has more than 70 high end fashion retailers signed up to supply inventory to its app at this point — including FarFetch, Net-a-porter, Mr Porter and MatchesFashion. High end here means the average fashion item in the app retails for north of £150.
So how does Knomi work? Fashion boutiques install a Bluetooth iBeacon and when users of the app are in the vicinity they might receive a push notification suggesting they go check out a certain item. These are not generic push notifications blanketing every user who happens to walk by. Rather they are tailored to specific items a user has ‘collected’ — so seen in the app beforehand and liked enough to save to their collection — or which the fashion forward folks they are following in the app have collected or liked. Hence this is social fashion discovery.
To get plenty of social juice in the tank from the get-go, Knomi requires Facebook sign in, and also pushes users to follow a selection of fashion bloggers and accounts it has on the platform. So chances are there will already be plenty of items even an newbie user might be getting a nudge about when out shopping.
“It does smart push notifications telling you there’s a store around the corner or close to you right now where a friend of yours or this blogger that you follow on the platform or you yourself have liked so why don’t you go check it out?” explains co-founder Markus Ehrnrooth. “This way we drive the footfall to our brick and mortar store partners.”
In some instances a Knomi retail partner might be providing specific enough inventory data so that it can tell a specific liked item is in stock at that particular store. However in other cases the retailers may not have such granular data so the notification will be worded to reflect that an item is sold there (but not necessarily in stock right now).
“In some places, especially in small boutiques, they don’t have a separate inventory for their mobile and their physical stores. They have the same inventory so we have the live inventory based on the online data feed that we hook up with. Then on some stores we don’t have the same thing so we’ll just be careful with the wording — ‘hey these guys sell or have had this item’ — to not give the wrong impression to the customer,” notes Ehrnrooth.
Now, as every mobile user knows, push notifications can be really, really annoying. So how is Knomi making sure its virtual shoulder-taps don’t just irritate its high end fashion fans? One thing it’s trying is turning off sound so that notifications are delivered silently, sans buzz. So they are there for users to tune in to when they check their phone while out shopping.
“What we normally do is we… do silent notifications,” says Ehrnrooth. “That’s what we found out through many, many customer interviews on this point… If you walk around town and your phone starts buzzing that app is the one that goes out of the window very quickly.
“But if you’re out shopping it’s almost an active sort of process where you take out your phone anyway, you’re going to be on your phone all the time — and then when you see the notification from Knomi if it’s of interest you’ll click that and go into the app. So by not buzzing on a notification suddenly it’s not even annoying anymore.”
Users of Knomi can also buy items via the app itself — so there’s a mobile shopping component to the business too, with mobile checkout covering “the vast majority of products” — but Ehrnrooth stresses that many of its target fashion retailers are most keen to drive footfall to their physical stores.
“In our segment, which is the high end boutiques, it’s about footfall into the brick and mortar stores. They have huge difficulty to actually drive that aspect of the business. So online they can do it through Facebook marketing and what not. But for them what they pride themselves on is their brick and mortar store,” he adds.
Knomi is working with high end fashion retailers at this early stage, although Ehrnrooth says the “ambition” is to work with high end fashion brands themselves, down the line. “But working with those brands per se is very difficult for a startup,” he adds.
The iOS app launched last week, and at this early stage they’ve garnered around 3,000 users with no marketing push — adding between 50 and 400 a day, from word of mouth usage.
The business model is two-fold: Knomi takes a cut of any mobiles sales made via the app, with the commission varying per retailer. Then for driving offline footfall it charges for any people it gets through the door of a boutique if they opened one of its notifications first — regardless of whether they go on to buy anything or not.
“Provided that we were the party that brought that customer through the door you can think of it analogically to what happens with affiliate marketing online,” he notes.
At this point it’s not monetizing any purchases made in the store by a customer it drove to the store — but that’s an area it wants to move in on in future, although Ehrnrooth concedes it’s “quite a challenge for many reasons” which is why it’s just charging for footfall for now.
The startup has raised €1 million in pre-seed financing to fund development thus far, with investment coming from Helsinki-based seed investor Reaktor POLTE, the Tekes Finnish Funding Agency for Innovation, and a group of private angel investors.
As befits a high end fashion-focused business, the market expansion plan from here on in is to expand to Paris, Milan and New York — and possibly also Hong Kong (although Ehrnrooth notes that without Facebook it’s more of a challenge to get a social discovery startup up and running).
Of course there are scores of existing competitors in the fashion discovery space but Ehrnrooth argues that Knomi’s focus on a curated selection of high end products and social discovery offers something that can stand out.
“Main competitors in the fashion discovery space are Lyst, ASAP54, Fancy, Grabble and most importantly Net-a-porter’s ‘The NetSet’. Knomi’s key differentiator against the first four is simple: instead of an endless catalogue of products that the user swipes through, Knomi makes the experience about people and products. The people aspect is what Knomi is all about, whilst competitors either lack the social layer completely or only include it as a add on,” he says.
“’The NetSet’ has a very similar user proposition to Knomi. The key difference here being that NetSet is exclusively for Net-a-Porter products, whilst Knomi brings together fashion from over 70 high-end, fashion forward retailers… In the location/driving footfall space there not many players in the high-end fashion niche. To mention a few though; StreetHub (not focussed on fashion, our focus is our edge), and Farfetch’s app Farfetch Discover (we strongly believe the fact that we are multi-platform and focus on social for the user is our edge over them).”