Online fashion battle to heat up as sales boom

Competition in the online fashion industry is set to intensify as store groups, hit by sliding sales in the economic downturn, try to grab a slice of one of the few strongly growing retail markets.

Better online payment and delivery systems, innovative Web sites that allow consumers to try on clothes virtually and even shop together, and the rising purchasing power of the first generation to grow up with the internet mean online fashion will continue to defy the recession, analysts say.

These factors will attract store groups that have shied away from selling clothes online, like Europe's No.1 fashion retailer Inditex, as well as more department stores and grocers.

That will pose a challenge to pure-play pioneers of the industry, like Britain's ASOS and Italy's YOOX Group, which are currently enjoying sales growth of up to 100 percent.

However, if they take their cue from pure-play success stories in other sectors -- like Amazon.com in entertainment -- and act as a brand-neutral home for the maximum number of products, they can still flourish, analysts think.

"If ASOS is to succeed as a pure-play, it needs to do something fundamentally different and that has got to be down the (brand) aggregator route and the service proposition," ASOS Chief Executive Nick Robertson told Reuters in an interview.

Online sales account for only a small part of Europe's clothing market, which is worth about 300 billion euros ($386 billion) a year, according to retail researchers Verdict.

Victoria Bracewell-Lewis, senior analyst at e-commerce consultancy Forrester, estimates the proportion at between 3 and 5 percent, depending on the country, but thinks this is set to increase markedly.

"As more customers shop online, more retailers will go online and you get a virtuous circle," she said, adding sales figures understate the importance of the internet as shoppers are also using Web sites to research before buying in store.

Forrester forecasts online apparel sales in Britain and Germany will grow by more than 50 percent to 7.1 billion pounds ($9.9 billion) and 6 billion euros respectively by 2014, while sales in France will almost double to 3.5 billion euros.

ASOS's Robertson is also confident the internet will continue to rapidly increase share of the total clothing market.

"Can I see 10 percent of clothes being bought online? Yes, and I can see that two to three years away," he said.