Customer data is a critical force driving fashion’s e-commerce evolution, and the companies that can make sense of intel like search habits, trend forecasting and the online purchase cycle are becoming increasingly valuable.
Just look at the 8-year-old e-commerce aggregator Lyst, which facilitates online purchases of mass, contemporary and luxury fashion goods from 12,000 different brands, and has now raised more than $120 million in funding.
On Thursday, the company announced its newest round of investment of $60 million, led by LVMH, which accounts for 45 percent of that total. As part of the funding, LVMH’s chief digital officer, Ian Rogers, is joining Lyst’s board of directors. With the new funds, Lyst plans to expand its presence in Europe and Asia, as well as build out new tools for its brand and retailer partners to better target customers on its site.
Lyst’s growth aspirations are materializing at a time when the need for a middleman like the online shopping aggregator has been called into question. After all, such sites still liken themselves a digital version of the shopping mall, which is itself a dying breed. Other players in the space have hit respective rough patches: ShopStyle has been passed off from former parent company PopSugar, where it once accounted for 50 percent of revenue, to cash back and coupon generator Ebates. Spring raised $97.5 million in three years to become a mobile shopping mall and has had to reinvent itself several times since launch to account for lacking traction. Meanwhile, other versions like TheFashion.com and Style.com have shuttered.
“This is a space where the good are only going to get better and the weaker will disappear,” said Robert Burke, the founder of business management consultancy Robert Burke Associates. “There will be a fallout if you can’t keep up. Customers can only sort through so many massive assortments of stuff online.”
Fresh off the new investment, Lyst is gunning to take up as much turf as it can in a finicky market that favors those who pay for expensive SEO. The company is riding a value proposition that promises exposure and direct sales for brands, boutiques and retailers, as well as customer insight. For customers, it claims to offer the most comprehensive yet curated assortment of trends that becomes increasingly personalized over time. From its 12,000 brands, Lyst carries 5 million products and counts 70 million in its customer base. (Brands don’t pay to be featured on Lyst, but they do have to be accepted.) According to the company, it reached $325 million in gross merchandise value — the sales volume that it facilitated — between March 2017 and 2018, and hit $21 million in revenue for the company over the same time frame.
“We’re a data-driven company. We have a lot of access to customer insight that presents a significant opportunity for our partners,” said Jenny Cossons, Lyst’s chief partnerships officer, who joined the company four years ago from Net-a-Porter. “The concept behind Lyst is you can find whatever you’re searching for. That means we have to make sure data informs the experience.”
The Lyst app
The company employs 150 people, half of whom are data scientists and engineers. According to Cossons, Lyst’s feed is organized by two influences. One is personalization: When a customer searches for a brand or category, “likes” an item using a heart function or goes to a site to make a purchase, that information shapes the items they see going forward, organized by relevance. The other is powered by the brands themselves. Lyst’s main source of revenue is commission, and brands can compete for better spots in Lyst’s feed based on how much commission they’re willing to pay on specific products or categories.
This works by giving all Lyst brands a dashboard that shows how much commission — 20 percent, 25 percent — would be needed in order to have a competitive spot in the feed. It’s like surge pricing for fashion: A trending category like sneakers, for instance, would require a higher commission fee if a brand wants a better shot at being seen. That could be reduced as the trend passes, but something evergreen like “black dress” will have a permanently high competitive commission fee. Cossons said Lyst sees this format as better than an ad or sponsored-product-placement model that lets the company “sell off parts of the whole” to different brands willing to pay to play. You can’t pay to be on the homepage, for instance, or buy space on another brand’s search term. What competitive commission does is act as another filter that’s taken into consideration, along with the relevancy of a product to a specific customer’s browsing and purchase histories.
“Most of our conversations with partners used to happen with a brand-marketing person. Now it’s performance marketing,” said Cossons. “We’re on par with Google as far as marketing opportunities go, except we’re specific to fashion. We generate both sales and awareness.”
In return, Lyst feeds customer and competitor data (anonymized) back to its brand and retail partners. In the dashboard, those that have items on Lyst can track how many searches they appeared in, click-through rate and overall sales, as well as how their performance benchmarks them in comparison to peers on the site. They can also track relevant trends, how likely a product is to sell at full price, and what’s projected to take off or decline in the future. With its new round of funding, Lyst plans to flesh out this dashboard to include smarter customer targeting tools that will help sellers get items in front of the right people. For LVMH’s part, it will get valuable access to how Lyst’s algorithm engines work.
Lyst’s is a vast and messy marketplace that includes everything under the e-commerce sun, from H&M to Gucci to Amazon Fashion to Farfetch. But it pays to play the aggregator game, especially for small brands without big budgets. It levels the playing field.
“The hardest thing for us is to get seen in a Google search,” said one brand executive at a contemporary fashion company. “We’re competing against everyone from Amazon to sometimes even ourselves, since retail partners can use our keywords to better position themselves. With Lyst, we can actually own our customer again.”