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October 23, 2017
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Screenshot of showponyfashion.com.
Nikki Durkin 99Dresses fashion tech startup Australia
Nikki Durkin of 99Dresses.
Source: theherald.com.au.

Four floors up in an inner-city tower, Show Pony's head office appears anything but fashionable. The walls and floor brim with teetering shelves of cling-wrapped skirts and blouses. The only decorations are a pair of high-powered speakers and several postcard-sized photographs of the mostly twenty-something team who run the business. A secondary storage room doubles as a fitting room for the occasional customer, wanting to try on an item in-person.

While traditional fashion distributors might sneer at its humble furnishings, the online retailer's fast-growing revenue streams (up to A$300,000 per a month), make it an outlier in an otherwise-struggling Australian market. According to the Australian Bureau of Statistics, turnover for clothing, footwear and personal accessory retailing fell by 1.5 per cent in the December quarter. Such results consolidate a predominantly lacklustre year with further contraction, in what should have been the sector's busiest period.

So how is Show Pony growing? The Australia Financial Review quoted founder (and Chief Executive Pony) Jane Lu as saying she didn't, "have a passion for fashion at all." It is a confronting statement, and one that Lu is quick to jump on when I bring it up, highlighting a fundamental difference between her start-up and much of the fashion retail industry.

"I do like fashion - it's not like I don't care - but I guess five years ago, people wouldn't be like, 'Oh, Jane, she's that really fashionable chick at uni,' " says the 26-year-old, who instead identifies the strength and cost-effectiveness of Show Pony's branding as its greatest asset. "I love playing with ideas and just building on ideas, and I think that's where Show Pony's forte is."

"At the end of the day, you're selling a product; and the business fundamentals are to buy low, sell high, right? And I think a lot of fashion businesses don't get that."

For building platform-based businesses…you've got to invest the money to get that initial traction. It's really hard to bootstrap those things.

It's just good business

On the opposite side of the globe in San Francisco, another start-up is challenging the status quo of women's fashion and catching the attention of venture capitalists the world over. 99Dresses was founded by 18-year-old Sydneysider Nikki Durkin as a way for women to trade their unwanted clothes with other members, making fashion far more accessible - and eliminating overflowing wardrobes everywhere - with a peer-to-peer currency called "buttons" and an online marketplace to match.

For Durkin, 99Dresses is a tech business first and a fashion business second - if at all. "[We're] a web platform, we're aiming for the girl who likes to look fashionable but not in a pretentious way," Durkin tells me, now at the ripe old age of 21. "So we're not really plugged into what are the hottest trends on the runway."

"What we're doing is essentially allowing people to collaboratively consume fashion, which makes it more efficient. That's my big vision: creating a more efficient way for women to consume fashion."

The practicalities of achieving that vision led Durkin to enter and win a spot in Y Combinator, the prestigious US-based incubator whose alumni include Dropbox, Airbnb, Reddit, and a host of other high-tech start-ups. To Durkin - and a number of other high-profile business leaders - Australia's investment landscape was too constrained for her expansionary plans. "In Australia we're not that mature in the tech space," says the ex-pat. "There isn't the big network of angel [investors]. For building platform-based businesses…you've got to invest the money to get that initial traction. It's really hard to bootstrap those things."

While Lu has plans to push Show Pony out to the high-volume American and Canadian markets, noting that, "you've got more people in California than Australia," she disputes the notion that Australia is barren territory when it comes to entrepreneurial success. "While it's more accommodating in the States, there's more competition," says Lu. "When people say that the Australian market's not so open and susceptible to new ideas, that's true. But the US market is more competitive and you've got a lot more players in the market to stand out from." 

Jane Lu Show Pony fashion tech startup Australia
Jane Lu of Show Pony. Source: afr.com.

"For innovative things involving network effects and marketplaces, Australia is hard," acknowledges Durkin. "But I think for other types of companies, where geography's not an issue, where you can sell to the whole world, Australia's probably quite a good place to bootstrap a company: we have grants, R&D tax incentives which you don't get in America."

While their businesses differ markedly in what they offer, Durkin and Lu agree that the fashion industry in Australia is struggling to match its global competition. For both women, the solution reads like an excerpt from Business 101: increase your sales and decrease your costs.

When being in the black is the new black

That means going where customers are, and talking to them on their own terms. Show Pony's creative content (including an impromptu version of the Harlem Shake) may not have the production values of an ad agency, but it's helped the brand gain more than 100,000 members on its Facebook page at a fraction of far bigger retailers' marketing spend.

"A lot of fashion businesses don't understand what marketing is, and they get expensive PR that doesn't really get them anywhere," Lu observes. "[Social media] is the main face of your business… and traditional big players just see it as a gimmick."

"I think that's why we've been able to sneak into the market really quickly, at budget, and directly reach our customers."

And I think it's really important to have a vision: be flexible with that vision, but stick to it.

"You can tell that their proficiency is in making awesome fashion and not selling online," says Durkin about why Australia's incumbent retailers continue to struggle. "I think America's way ahead in terms of selling fashion online, especially with [customer service features like] free shipping and returns which I think are super important. Here, I think it's moving, but not as fast as the US."

Even more crucial, perhaps, is an innate understanding of what it is a customer wants. For both Lu and Durkin, coming in from outside the fashion industry has proven to be one of their biggest strengths.

"[In 2010] we saw a space in the market for affordable and fun fashion," says Lu. "I don't have a fashion background: I'm viewing everything as a consumer, and what the consumer ultimately wants. And I think that's how I've been able to deliver exactly what my target market wants."

"It’s more for the everyday woman who wants to look nice, which is what I am, essentially," says Durkin of 99Dresses. "And I think it's really important to have a vision: be flexible with that vision, but stick to it."

In a sense, the fundamentals-based approach which both founders take to customer service reflects on how they run their businesses more generally: as lean start-ups which can only be fashionable if they're profitable first - an approach that is proving to be much more than a one-trick pony.

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