The Closet, an ethical e-business model based on a state-of-the-art service

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Its mission, I think, is to reduce social gap by providing such business model.

This model is a kind of lending model, with option to buy. First of all, the closet buys clothes to large luxury firms so that they can provide a large stock to its customers as well as providing new collections at the same time than luxury brands; while customers pay a fixed monthly fee to lend clothes as much as they want to. The fee is not that expensive compared to the price of upscale brand clothes to lend, so I think the company is willing to allow everybody to wear high quality products without needed spending a large amount of money a dress you would use once and never more. Even if you want to sell it after your memorable party, it would have lost at least 50% of its value.

Their mission is an ethical approach that appeals customers: they allow them to wear clothes they would not be able to afford in the real life, in as much quantity they provide. Again, the relation humans handle to clothes has always been a major point in the human history: it shows the richness or sometimes the beliefs of people. In France there is a famous expression, very philosophic, "the outfit does not make the monk"... because we can recognize a monk by its clothes, or his clothes make him recognizable as a monk, but he is not only a monk: it does not reflect his thinking and his personality.

Strengths of the business

The first strength of this business is that is it an e-business model. It allows to optimize costs while providing a personalized service with high value. The partnership with upscale brands such as See U Soon, Gemmyo, Comptoir des Cotonniers appeals clients and it is to be developed even more in the future.

The high reactivity to the market evolution is appreciated: the collections are renewed every 2 months and clients can buy clothes during some promotion event with a price of 50% to 60% off.

As well, the “unlimited” proposition and the non-obligation to subscribe for a period of time let clients the choice of everything:

- the choice of lending (they can choose the product and the time they keep it),

- the choice of buying (they can buy some products at a lower price so they feel they make good deals),

- the choice of ending the subscription whenever they want to.

The service provider is made in a way there is no obstacle for women: it is easy to send back because there is a prepaid envelop at reception of the batch. The pressing and sending back are free, so there is no need to be concerned about the moment you have to send back your box.

As well, the Closet creates a proximity relationship with each client so that they are able to understand at best her needs to propose her the right clothes for the right moment. For example, in each box there is a comment to make about the clothes received. Giving feedbacks when they send back the batch provide the Closet a machine learning effect: the Closet stylists can determine their clients’ profile, thus determine certain types of profile so that the company is able to be closer to preferences and tastes of their clients. Stylists also call their clients to know better their needs.

What differentiate: first mover advantage in France

This model is born in the United States and the CEO just replicated and adapted the model to France. It constitutes a competitive advantage to be the first mover in this country. He already had an idea of what would be the business and started with its own collections.

There were few promotion of this e-service during the first years, but they appeared in the TV news as a presentation of a new business approach within a sharing economy environment that grows fast and expands its applications. There are not many articles in the internet, but lots of blog articles written by women giving their experiences. They promote their business through the internet in social media with paid and targeted advertising.

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How is this model working?

Financial information

The principal asset of the Closet model is that it is a self-funded organization. It is to say it replaces clothes every two months according to the earnings. The calculation of these earnings is quite complicated because the monthly fee of 49€ will be not necessary renewed by all its clients due to the without engagement fee (but their goal, achieved, is to make them committed). Oh the other hand, they may be more able to predict event sales promotion. When clothes are about to be out of fashion, le Closet organizes sales event at give-away prices. If the previous sales event has not been as successful as expected, the Closet will have less power of buying new clothes. Thus, there is a risk in the products availability: it will decrease as well as customer satisfaction. On the other hand, if the earnings are good, they are able to increase their proposition to fashion addicts.

Also, the Closet collects customers’ data. We can imagine the company would earn money on that, by selling databases to other firms for example.

Stock

The company optimizes its stock by organizing sales event. It buys clothes with a Just-In-Time process, providing a low flexibility in terms of product availability, but this process makes them able to propose new clothes every 2 months. They practice the vertical integration with their suppliers: the Closet does not depend on large fashion brands, the company asks for a production and avoid costs of plants. So, the company controls its suppliers and has more bargaining power.

Impact on the customer behavior

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Can use the website as a way to buy at lower prices new collections

The Closet ensures at least a sales promotion of 50% on purchase prices. It is advantageous for one part of its target audience: women who do not have time to go shopping. They receive the box at home, they can try it several times to then decide if yes or no she wants to pursue the purchasing. It benefits from scale economy when buying new collections and proposes it to its clients in order to sell the stock quickly so that work in Just-In-Time optimizes costs.

The model is made so that every expense is covered by the monthly