I have checked out “flash sales" online at sites like Gilt or Outnet—where you get whopping discounts of 60-80% on high-end fashion brands’ past-season items—but this is the first time I am standing in an actual brick-and-mortar store that does the same thing. I am in OnTheList—on Hong Kong’s Duddell Street, just a couple of minutes walk from the prestigious Landmark mall—and before me are rows upon rows of neatly lined racks laden with clothes, all marked by size, style, price. Behind me are cash counters, 11 of them, to process a large number of customers rapidly. It is early morning, there is a staff briefing in progress, a moment of calm before the swarm of shoppers arrives.
OnTheList started just three years ago, and its members-only flash sales—which typically last three-four days and offer the same eye-popping 60-80% off—are already a resounding hit, attracting thousands of members per sale. One of its early sales, a pop-up for the shoe brand Dr Martens, drew such a crowd that a queue wound all around the block. Inventory is the holy grail of this business—attractive styles, in good condition—and it has built enough trust for brands to partner directly with it. OnTheList has hosted flash sales for a mind-boggling 350-plus brands, among them luxury heavyweights like Burberry, all the way to accessible ones like Havaianas, for which, incidentally, it sold 28,500 units in four days, setting an in-house record. Now OnTheList is expanding—six months ago, it launched in Singapore, and it’s opening in Taiwan this month. They have added an online component to their business as well.
That is a lot of action for a three-year-old start-up, and I am both impressed and intrigued. What makes this business of serving-leftovers-as-main-course work? What makes OnTheList’s brick-and-mortar model click? How does it compete with others in the business; for example, outlet malls? What does its entry into the online flash sales market mean? Online, incidentally, is a different ball game, with gigantic players—US-based Rue Gilt Groupe, which owns the two sites Gilt and Rue La La, was slated to reach $1 billion (around ₹7,080 crore) sales last year; Europe-based Veepee had a turnover of €3.7 billion (around ₹30,000 crore) in 2018; and China-based VIP.com’s 2018 revenue was $12.3 billion.
I sat down with the co-founders, Delphine Dultzin and Diego Dultzin Lacoste—a young French couple who moved to Hong Kong barely five years ago—to get some answers.
The OnTheList business model isn’t new—there is Arlettie in Paris, there is the 260 Sample Sale in New York, both highly successful—but there wasn’t any such store in Hong Kong. Hong Kong is a highly developed fashion market where most brands have multiple stores—for example, Burberry has 11 locations—and the larger the network of stores, the larger the brand’s end-of-season inventory is likely to be. What were they doing with that inventory, they wondered. How were they “de-stocking" while not risking the brand’s image? That’s the business opportunity they targeted.
For the first year, OnTheList was like an itinerant roadshow, holding flash sales in new “pop up" locations each time, testing the Hong Kong market. Brands would give them the stock, they would unpack and display, get freelance sales staff for the event, and, when the sale ended, Dultzin and Dultzin Lacoste would stay up late into the night packing everything, the furniture included, and storing it in a hired warehouse. “Changing space every week was super-complicated," Dultzin says. But the experience convinced them that “our business model rocks".
And rock it must, for they signed a lease for a 7,000 sq. ft store in Hong Kong’s pricy Central district. Being conveniently located in a buzzing business district is an important part of their strategy—that is how they compete with outlet malls, which are typically on the outskirts of the city. OnTheList’s clients are usually working women—executives and managers—and the sales typically start at 8am, so that the women can get in some shopping before work. They are building a habit—10% of their members return almost every week. What’s more, it is a remarkable recruiting ground for brands—as these women progress up the income ladder, they are likely to graduate to full-price, this-season products.
One of OnTheList’s strengths is highly efficient operations. “Our job is to help the brand get rid of maximum stuff in a short period of time, but with the highest customer experience possible," says Dultzin Lacoste. The queue round the block for the Dr Martens event might have been exciting, but they don’t see it as desirable—that venue was too small, the customer experience not ideal—but now they are equipped to handle more traffic. For example, the flash sale for Under Armour pulled in 10,314 members in four days, but, at any given time, the queue was a maximum of 50m in the front.
For a brand, managing its image is of paramount importance, and many brands would rather destroy leftover stock than run the risk of having heavily marked down products flood the internet. Burberry is a case in point. It caught the headlines last year after burning £28.5 million (around ₹264 crore) worth of unsold bags, clothes, perfumes, and came under fire from environmentalists, so much so that Burberry became the first brand to officially state that it will no longer destroy unsold inventory. This would put other brands on notice, welcome news for businesses like OnTheList, which provide a relatively discreet members-only destocking solution, and, importantly, one that is offline.
It is this strong control-my-brand’s-image urge that makes the more established brands view online players with suspicion, as the internet’s ubiquity makes their off-price products far too visible. Of course, that doesn’t prevent online players from getting products—from distributors, even “pre-loved" (euphemism for second-hand) from consumers—but it is a complicating factor. OnTheList, on the other hand, is working with the full cooperation of brands. That’s its trump card.
Who would have thought this leftovers-as-main-course business model would be a win for all concerned? Brands make some money rather than destroying products. Consumers are delighted with fat discounts. And the environment is better off too.
Radha Chadha is a marketing and consumer insight expert. She is the author of The Cult Of The Luxury Brand: Inside Asia’s Love Affair With Luxury.