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MAS Holdings Says It’s Investing in Startups to Accommodate E-Commerce—Why Your Company May Want to Consider It Too

Whether you’re on the side of retail being dead or still very much alive, e-commerce at least, continues to carve out a bigger space for itself.

And when a company like MAS Holdings, a major Sri Lanka-based intimates, activewear and leisure wear supplier that produces more than one million garments every day starts eyeing startups, it’s clear where the industry is headed.

“Although there’s a lot of movement out of traditional retail, there’s also a big movement into online retail,” MAS Holdings’ Ranil Vitarana said during a keynote at the Dornbirn Man-Made Fibers Congress. “We’ve started investing in startup companies, moving to things that accommodate what the retail industry needs.”

Companies MAS has invested in include Wiivv custom insoles, Wearable X “activated” yoga wear and Nanowear medical-grade smart textiles.

Whether it’s the 8,000 plus brick-and-mortar stores slated to close by the time 2017’s done, or Millennials and their newfangled ways, or the general ease and convenience that sees more and more shoppers buying online, there’s a new way for retail to do business and most companies aren’t catching up.

But when you’re competing with a startup that can decide to create a brand that caters to a unique niche in a unique way and which doesn’t have to spend much at all, if anything, on overhead to become successful, it’s no surprise that those companies that haven’t caught up are getting ousted by the day.

“If you want to start an online brand, it’s really cheap. Basically, having a good computer is good enough,” Vitarana said. “And there are companies today that offer to store and stock your product and deliver one piece at a time to your customer.”

He continued, “A person who can disrupt us is a person who can buy some clothes, sell it online, put it in a pressure cooker to get the color and sell it. Someone in a house or someone who understands dying can disrupt us quiet easily without having to spend a lot of money on infrastructure. So if we want to be relevant in the future, we have to be able to also give color in more detail than that person in the house,” Vitarana said by way of example.

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What makes matters worse for traditional retail, is that Millennials are gravitating toward these types of businesses. Especially as many of these startup e-tailers are telling a story, exhibiting an ethos today’s largest market of consumers can relate to.

“Millennials have certain values, they like certain causes and those things are coming out: lifestyles around health and wellness, transparency in sourcing,” Vitarana said. “Consumers do not prefer big brands anymore. They want innovative product.”

E-commerce by the numbers

Looking at the numbers, the growth in e-commerce is about 10 percent year-on-year, according to Vitarana. Fifty percent of people bought clothing online last year, and it’s expected that there’s a $523 billion opportunity in this area.

Beyond that, with so many e-tail only businesses that are saving scads of cash on the things traditional retail spends on, these companies are able to add more value to their product.

Taking traditional retail, let’s say the supplier’s cost for a T-shirt was $1.95, then the manufacturer’s cost was $3, the brand still has to take a cut, mark it up, and the consumer cost comes out to $15.

With online only, direct to consumer retail now, Vitarana explained, design might cost $1.95, manufacturing the same $3, but without a brand taking a cut, the consumer’s cost really only needs to be $5. That means the company could either cut the cost to the consumer or still sell it for $15 and spend the $10 adding more value into the product.

“This is why someone like Amazon can sell something much, much cheaper than any other brand you want to mention,” Vitarana said.

Traditional retailers approach MAS asking for innovation, whether it’s better fit or better performance, but as Vitarana explained, they can’t—or won’t afford to pay for it.

“They’re asking for everything but they’ll give you 10 cents more, maybe 15 cents more,” he said. “The best way to innovate for the current retail is in cost actually.”

But how do you build experiences for e-commerce?

Experiences, experiences, experiences. That’s what every apparel retail conference will tell you consumers are after—even though the large majority of retailers still aren’t providing it.

When it comes to e-commerce, where all that really connects the company to the consumer is a computer, creating an experience is a different challenge.

Things like letting shoppers participate in real-time consumer-enabled development to personalize their purchases or use artificial intelligence to virtually try on a garment before they buy it, or connecting consumers in a social way so they can in effect “shop together” or having match bots pay attention to what they’re buying online so that in future searches they can suggest things to buy that the shopper is likely to like, are just some of the ways online shopping can become an experience.

How MAS is working the new system

Today, when MAS wants to test an idea, it designs product virtually and put it online.

“We create a website and put everything about that product into that website and go to Google or Facebook and drive the kind of customer we want to that product. We can give the whole technical detail about that product, the price point and then see if people will click to buy it,” Vitarana explained. “Then we do the same product and give it a different messaging and then see how many people are clicking to buy it. Every day we can have a different product, different marketing, different price and within a week we can have a really good idea of what to make and we haven’t spent a cent making the product.”

Retail can’t be a guessing game anymore—that takes too long, costs too much, leaves too much leftover inventory begging to be marked down, and customers won’t take long to notice that a brand or retailer never has what they want when they want it.