Executive Summary
Corporation
Bluefly, Inc., an electronic commerce company founded by E. Kenneth Seiff in 1998, is the
online retailer of designer brands, fashion trends and superior value. They launch more than
350 brands of fashion with a 40% to 70% discount. With the development of online
transactions, Bluefly grew very rapidly. But due to the costly marketing cost greatly exceeded
the sales, Bluefly lost so much. Faced with this situation, Bluefly actively seek opportunities
to develop. Bluefly has its competitive advantages, such as low prices, fast speed of delivery
and high level of customer services. However, it has so many disadvantages, such as unstable
supply, the existence of non-authentic goods and low brand name recognition.
E-Commerce Apparel Industry
The e-commerce industry is an emerging industry, and the apparel industry is a mature and
enduring industry. They also have huge potential. With the Internet, the websites can keep in
touch with customers more closely. With the accelerated pace of life, people have no time to
shop in the physical stores, online shopping caters to these people. There are more advices
online for customers to find the product that really suitable for them. The customers also can
compare prices among the various sites and choose the right product with a superior value.
However, fashion trends can change rapidly, the company can't correctly capture the trends
sometimes. Moreover, many people mistrust the transactions over the Internet. And the
existing laws can't solve the online issues.
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Competitors
The competition in e-commerce retail apparel and fashion accessories market is very intense.
E-commerce industry is an emerging industry, it has huge potential, so many creative
companies want to occupy a place in e-commerce market. And the fashion industry is a
mature and enduring industry, and there are so many large companies in this market. For
example, land-based retailers like The Gap, Inc., department store chain like Dillard's and
some brand owners like Chanel and Gucci.
Recommendations
The short-term recommendations including maintaining the supply of goods, selling
mother-child apparel, improving inventory, and enrolling sensitive people to fashion. And
there are some long-term recommendations, including establishing the business reputation,
establishing brand name recognition, leading the fashion trends, opening physical stores, and
paying attention to men.
History
Bluefly, Inc. is an electronic commerce company founded by E. Kenneth Seiff in 1998, it
owns an Internet outlet store, bluefly.com. Bluefly, Inc is one of the first online retailers of
designer brands, fashion trends and superior value. The headquartered is in New York. The
website offers men's and women's apparel as well as fashion accessories with more than
50,000 different styles. They launch with over 350 brands of designer apparel, including such
fascinating brands as Prada, Ralph Lauren Collection, Diesel, Dolce & Gabbana, Diane Von
Furstenberg, Gucci, and Versace. They claims that the products they sell at prices 40 to 70
2
percent cheaper than retail.1 Bluefly's primarily target is women around 30 years of age. The
company's predecessor is Povot Rules, a golf-inspired apparel company, founded by E.
Kenneth Seiff in 1991. In 1997, Povot Rules performed the initial public offering. Due to the
industry trends, Seiff discontinued the business of golf apparel in favor of Internet business.
He sold the Pivot Rules trademark and changed its name to Bluefly, Inc in October 1998. It
was developing rapidly just like its name. At first, Bluefly received only 96 orders, but 3
months later, it received over 2,700 orders. By the end of 1998, the visitors grew from 28,000
to 660,000, and registered users also increased from 1,572 to 26,048. The company became
the No.3 apparel retail website in terms of sales at the end of 1999.2
Current & Future Profile
With the development of online transactions, Bluefly grew very rapidly. The transaction to
the website increased dramatically. The company established an alliance with the Yahoo
shopping site. They created a co-branded store which made the stock price of Bluefly
increased 40%. In addition, the partnerships with AOL, MSN, Lycos and Excite made it to
become the largest discount fashion e-commerce website.3 It advertised in some fashion
magazines, such as Marie Claire, Harper's Bazaar and Metropolitan Home. As show in
Exhibit A, the price of Bluefly stock was more than $100 from 1998 to 2000. It's very close
to the Amazon's stock price. This is the heyday of Bluefly. However, because of the
expenditure to publicize the website greatly exceeded the output of sales, so they had
difficulty to turn a profit and achieve stability. By the end of 1999, Bluefly losses nearly
1
en.wikipedia.org/wiki/Bluefly
2
fundinguniverse.com/company-histories/Bluefly-Inc-Company-History.html
3
en.wikipedia.org/wiki/Bluefly
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$13.2 million,4 there is serious problem with cash flow. Due to the investment by George
Soros, layoff policy and reduction of marketing expenses, Bluefly reduced the loss, and
maintained the normal operation. But the stock price was always below the $50, and it is only
$2 to $3 in recent years. In addition, the 90 percent of Bluefly is owned by Soros, so Soros is
the money manager, he can influence the decision-making of Bluefly. Faced with this
situation, Bluefly actively seek opportunities to develop. They will establish a new online
eyewear company which named Eyefly, cooperate with A+D Labs, a premier designer and
manufacturer of fashion eyewear.5 It will be a developing direction with huge potential for
Bluefly in the future.
SWOT Analysis
Strengths
The discounted price is the most strength of Bluefly, people always tend to buy things at
lower prices especially women. They can get a fashion with a discount of 40% to 70%
cheaper than luxury department stores. Why don't they choose Bluefly? Moreover, Bluefly's
shipping is very fast, In December 2009, most of their orders were shipped in one business
day from receipt of the customer's order during the peak weeks of the holiday season.6 In
addition, they have a high level of customer service, the help center is easy to use, and it
opens 7 days a week. They allow returning for any reason within 60 days after buying and
they will give customers a full refund.
4
fundinguniverse.com/company-histories/Bluefly-Inc-Company-History.html
5
nasdaq.com
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Weaknesses
The investors have a large amount of Bluefly's common stock, so they can affect the
company's decision-making. Soros, the money manager of Bluefly, owns approximately 25%
of their common stock. That's a bad thing to Bluefly's operation. Moreover, Bluefly purchase
most of inventory from one supplier. If their relationship with this supplier deteriorates or
terminates, Bluefly is unable to maintain the supply of goods. They have no long-term
contracts with their supplier and don't restrict the supplier from selling products to other
companies. So the price of the product may not be unique. The brand owners can limit
Bluefly's ability to purchase their products indirectly. In addition, Bluefly purchases products
from retailers and third party distributors sometimes. It increases their risk of the litigation
due to the non-authentic goods.
Opportunities
With the improvement of living standard, more and more people no longer content with
living comfortably, they began to focus on personalization. Famous Brands become the
symbol of status or individual. People are always willing to pursue fashion no matter how
much they spend. In addition, with the popularity of network knowledge and the upgrade of
network security, more and more people shopping online. People may have no time to shop in
the mall due to the faster pace of life, online shopping is a good choice for them. So Bluefly
has huge potential.
Threats
Fashion and e-commerce are both the industry which has huge potential. Although the
fashion industry is an old industry, the number of competitors is increasing all the time. And
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more and more companies want to occupy a place in the electronic market. The competition
of the e-commerce apparel retail industry is very intense. In addition, there is a growing
emphasis on business reputation and brand awareness, so they may shop on the official
website. It's a huge threat to Bluefly. Maybe, it will have no place in the complicated network
world.
Unique Sales Strategies
Lower Price
Bluefly claims that the products they sell at prices 40 to 70 percent cheaper than retail. It's
their goal to offer customers the latest fashion trends and best designers brands with superior
values. Customers can find any on-trend and in-season designer merchandise the same like
the products in luxury department stores. They can get the same thing at discounted prices in
Bluefly. Bluefly buy products from designers directly and other third party resources
indirectly, so they can reduce the cost and sell the products with a lower prices. But buy
products from indirect form has huge risk, they may get the non-authentic goods. This will
decrease Bluefly's credibility.
Closet Confession
In April 2010, Bluefly launched the Closet Confession video series. It is an exclusive access
to the closets of fashionistas. They create a unique platform for fashionistas to share their
personal style and it brings them a huge profit at the same time. The Closet Confession video
series obtained 2 million pageviews. The website becomes very popular, so sales will be
significantly improved. In the video, the celebrities encourage their fans to showcase their
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personal style, so fans will pursue their idols' personal styles due to the worship to idols.
Bluefly can lead the fashion trend rely on this platform because the celebrities are the wind
vane of the fashion, the company can seize the initiative by selling the same thing with the
celebrities'. This is an excellent sales strategy can bring huge profit.
Fragrance Boutique
Nowadays, Bluefly launched with a fragrance boutique. It contains the newest releases and
best sellers from the world's most fascinating brands. All the fragrances are 40% off retail
prices. Fragrance boutique offers hundreds of fashionable fragrances, including classic and
nostalgic, such as Chanel, Hermes, and Calvin Klein, and modern popular favorites, such as
Sarah Jessica Parker, and Juicy Couture. It becomes a major feature of Bluefly, attract a large
number of customers. People can find fragrances really suits for themselves in a lot of brand
perfumes at superior values. Shopping becomes a great pleasure for the fashion-conscious
customers. So the fragrance boutique will enhance the sales successfully.
Advertising
Bluefly started a national advertising campaign that focus on both print and television. It
aligned itself with entertainment, such as Project Runway, Bravo TV, Lifetime TV and
popular shows on The CW including Gossip Girl and America's Next Top Model.7 It also
advertised in some fashion magazines, such as Marie Claire and Metropolitan Home. These
TV programs and magazines have thousands of viewers every day. It means that Bluefly
advertised in these places increased a thousand of opportunities for customers to visit it every
day. This is helpful for improving brand awareness.
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Retain Existing Customers
Bluefly owns complete system committed to retain existing customers. Most of the sales by
old customers are driven by Bluefly's customer emails. The emails show new promotions and
products to attract old customers to shop again. They also offer special previews to customers
who have asked to be included in their email list and it's very convenient for them to find the
products they want. In addition, due to the presentation, merchandise selection and product
search ability, Bluefly brings an upscale shopping experience to customers, so the customers
will continue to shop on Bluefly. Bluefly has unique membership system, members can enjoy
more preferential. It is very effective to retain existing customers.
Affiliate Program
An important channel for Bluefly to acquire new customers is their affiliate program. The
affiliate program is free to join. The partners simply need to place the fabulous array of
banners, text links and product shots on their site, so they can earn the commissions. The
partners can get a referral fee because the visitors buy the products from the Bluefly.com
through their site's link. The commission is 6% of the net purchase amount for every sale. It's
higher than most sites, so most websites are willing to establish an alliance with Bluefly.
More sites can link to Bluefly, more opportunities the company can get the viewers, and more
possibility the company can get the new customers. This sales strategy is very useful.
Competitors
The competition in e-commerce retail apparel and fashion accessories market is very intense.
E-commerce industry is an emerging industry, it has huge potential, many creative companies
8
want to occupy a place in e-commerce market. And the fashion industry is a mature and
enduring industry, and there are so many large companies in this market. For example,
land-based retailers like The Gap, Inc., department store chain like Dillard's and some brand
owners like Chanel and Gucci.
The Gap, Inc.
The Gap, Inc. is a clothing and accessories retailer based in America. Donald G. Fisher and
Doris F. Fisher established it in 1969, Gap's sales of up to $2 million in one year. The
company owns five primary brands, including the namesake Gap banner, Banana Republic,
Old Navy, Piperlime and Athleta. Gap, Inc. has 3,076 stores and 135,000 employees around
the world. It is the largest apparel retailer in America. In 2003, Gap spent over 2% of its
marketing budget for online marketing.8 Due to the brand awareness built by Gap's physical
stores, the online Gap grew rapidly. The Gap, Inc. has longer operating history and greater
brand name recognition than Bluefly. So, it's a strong competitor to Bluefly.
Dillard's
Dillard's is a department store chain in America founded by William T. Dillard in 1938. It has
330 stores in 29 states. Most stores are located in Texas and Florida. Dillard's launches so
many brands, such as Chanel, Clinique, DKNY, Dior, Jones New York, Levi's, and Ralph
Lauren.9 The chain grew rapidly as a leader in shopping mall, it acquire competitive
advantage by purchase smaller chains. Dillard's also develops online business, so the
customers can choose the manner of shopping and enjoy it. For these reason, Dillard's is also
the competitor of Bluefly.
8
en.wikipedia.org/wiki/Gap_(clothing_retailer)
9
en.wikipedia.org/wiki/Dillard%27s
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Brand Owners
The brand owners like Chanel and Gucci, also have their physical stores and official website.
People prefer to shop in their physical stores and official website. They can try products and
find the real goods for their own in the physical stores. Most people believe that the retailers
have non-authentic goods more or less, so they would like to buy the products from the
official website. And most official website's shipping is free. In addition, the brand owners
can limit the retailers' ability to purchase their products indirectly and several brand owners
have legal rights to provide them the specified legal importer of their respective brands. For
these reason, the brand owners is not only the limiter of bluefly's resources, but also the huge
competitor of Blurfly.
Industry Analysis
The e-commerce industry is an emerging industry, it is built on the basis of technological
development. And the apparel industry is a mature and enduring industry. They also have
huge potential. So the online retail apparel and fashion accessories market is a dynamic and
high-growth market. The e-commerce industry grows continuously. According to projections
published by eMarketer, by 2010, United States online retail sales are promised to grow 7.5%
to $141 billion, and it will continued increases through 2013 to over $189 billion.10 Actually,
it increased 12% in 2010. Online apparel sales especially well in November 2010, increasing
22.2%, it is the largest growth rate in 2010. The sales of children's clothes increased very fast.
And the Women's online apparel sale has a more modest growth rate, 7%.11
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internetretailer.com/2010/12/02/e-commerce-sales-increase-12-november-mastercard-says
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With the Internet, the websites can keep in touch with customers more closely, and they can
grasp customers' needs in time, provide some relevant promotion information. The company
can automatically update the database of products' information. They can save the costs of
employees and stores. With the accelerated pace of life, people have no time to shop in the
physical stores, and maybe they just don't like the crowds, online shopping caters to these
people. So it has the customer group. In addition, on the Internet, there are so many customer
reviews about the product, the reviews can help the new customers know whether this is the
product they need. There are more advices for customers to find the product that really
suitable for them. The customers also can compare prices among the various sites and choose
the right product with a superior value.
However, fashion trends can change rapidly, the company can't correctly capture the trends
will lead to insufficient or excess inventory. Moreover, many people mistrust the transactions
over the Internet, they think that's unsafe. It will damage the online business. In addition, the
existing laws can't ensure the online issues such as property ownership, sales and other taxes,
libel and personal privacy and may take years to resolve. Even, the adjustment of existing
laws may increase the cost of doing business online.
Short-Term Recommendation
Maintaining the Supply of Goods
Bluefly need to seek alternative sources of supply for their products in order to resolve the
problem of supply if the relationship with current vendor deteriorates. They can establish
long-term contracts with the vendors and restrict the suppliers selling products to other
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companies. Prepayments and agree to shortened payment terms can help Bluefly keep the
relationship with vendors. Bluefly also can establish contracts with brand owners and give
them appropriate commission to obtain their consent to purchase their products indirectly.
Selling Mother-child Apparel
According to the industry analysis, the sales of children's clothes increased very fast, so
Bluefly can launch the mother-child apparel. Bluefly's primarily target is women around 30
years of age. 30-year-old women mostly have children, they may not be willing to buy things
for themselves, but they are certainly willing to spend money for their children. Moreover,
the mother-child apparel is very popular now, it is the object pursued by most fashion mom.
Improving Inventory
The fashion trends change rapidly, so Bluefly exist a problem of insufficient or excess
inventory. To address this issue, Bluefly can improve inventory system, establish contracts
with vendors, don't to deliver large quantities of goods at once and automatically replenish
when there is a shortage of goods just like Wal-Mart. And the Bluefly also can purchase
products after receipt of the customer's order. Of course, the measure needs to be built on the
basis of close relationship with vendors.
Enrolling Sensitive People to Fashion
Talent is the first productivity, so Bluefly should enroll the sensitive people to fashion. The
people are the rookie with a unique vision and insight to fashion. They can identify the
fashion trends for Bluefly and promote their sales. They may are the fashion designers.
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Long-Term Recommendation
Establishing the Business Reputation
Bluefly purchases products from retailers and third party distributors sometimes, so there
may be some non-authentic goods among Bluefly's merchandises. These events affect the
business reputation of Bluefly. In response to these events, Bluefly need to develop rigorous
monitoring system to eliminate the non-authentic goods throughout the whole purchasing and
selling process. They also need to check the goods returned by customers. Establishing the
business reputation is a long process and without any non-authentic goods.
Establishing Brand Name Recognition
Brand name recognition is a critical aspect of company's success. Many competitors have
higher brand awareness than Bluefly. So the Bluefly must establish the high brand name
recognition. They can use some manners, such as offering high level of customer service,
keeping the low prices, guaranteeing speed of delivery, eliminating non-authentic goods and
maintaining the potency dimension of advertising and marketing. Bluefly should build the
reputation with the quality. Brand name recognition is an intangible asset of a company, but it
also needs a long time to build.
Leading the Fashion Trends
To a certain extent, customers' preference depends on the fashion trends, so Bluefly can catch
the customers through catch the fashion trends. However, the fashion trends change rapidly, if
the company doesn't want to fail, they must stay ahead of the fashion trends. It means
creating and leading the fashion trends. The Closet Confession video series is an effective
method to lead fashion and enrolling sensitive people to fashion is also a good idea to catch
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the fashion trends. If a company can become the wind vane of fashion trends, its managers
would not worry about sales issues.
Opening Physical Stores
Bluefly has no any physical store, customers may not be able to determine whether the goods
suit for them just with the aid of products' pictures. The physical stores allow customers to try
the clothes to find the appropriate clothes. In addition, the physical stores can increase
customers' confidence to Bluefly. They will believe the quality in the physical store as well as
the website's. In order to become a competitive company, opening physical stores is
necessary to Bluefly.
Paying Attention to Men
Bluefly's primarily target is women, why so many companies in the fashion industry ignore
men? Men have more fashion sense than women. Women identify fashion, but men identify
women. In addition, who hates shopping more than men? So shopping online is a good
choice for men. They are willing to shop online in order to avoid spending more time to
shopping with their girl friends or wives. And if possible, they would like to buy gifts for
their girls online. So Bluefly should pay more attention to men, they can establish a linked
site for men.
Conclusion
Bluefly's birth meets the tendency of financial market. It is a company with huge potential. It
has been thriving for a short time. Due to the costly marketing cost greatly exceeded the sales,
Bluefly lost so much. The investment by George Soros carried Bluefly through but Soros
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became the money manager of Bluefly. Bluefly has its competitive advantages, such as low
prices, fast speed of delivery and high level of customer services. However, it has so many
disadvantages, such as unstable supply, the existence of non-authentic goods and low brand
name recognition. The e-commerce industry has good momentum of development, shopping
online is gradually become a part of people's lives, and it will be fully integrated into people's
lives in the future. So selling online is a wise decision. In addition, the fashion industry is a
top industry, and it will always be pursued by people. So Bluefly's direction is correct. The
problem following the direction is how to do it well. Bluefly has many excellent sales
strategies, such as Closet Confession video series, fragrance boutique, advertising strategy,
and affiliate program. But they must do more improvement to aim at solving the drawbacks.
First, Bluefly need to get the absolutely controlling rights back from George Soros, so they
can improve the strategies without interference. Therefore, Bluefly still can recover thrive
situation at the beginning time if they can use the right sales strategies. The globalization of
industry is more and more obvious. Bluefly need to expand international awareness, and take
a place in the international market.
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Exhibit
Exhibit A12
Bluefly, Inc. Interactive Stock Charts
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