Optimising your D2C e-commerce fashion operation – top 10 tips

The COVID-19 pandemic accelerated most brands’ plans to grow their own direct to consumer (D2C) e-commerce presence. For many brands, this has become essential to their continued survival and competitiveness.
However, how does a fashion brand run a successful e-commerce site whilst retaining the exclusive allure and personal feel of its designer stores? What are the key legal pitfalls it should be looking out for as it navigates this changing landscape? We’ve pulled together 10 lessons learnt over the past 18 months:

  1. Remember your app and the basics: First things first, the brand will need a website and a mobile app. Both of these should consistently reflect the brand identity not just in look and feel but in function. Check for bugs and make sure both work intuitively so as not to irritate users (consider consumer market testing before launch). Don’t forget to ensure that your relationship with the website/app developer is governed by an agreement with strong intellectual property provisions. Also make sure that where the site is owned or operated by a third party, your partnership is properly structured as a D2C arrangement to avoid competition/antitrust law risk when it comes to setting product prices (for more detail, please see our article on structuring a D2C partnership model here). When it comes to functionality, the ease of the customer journey from product selection to purchase is essential to avoid baskets being left behind, but you should also be aware that certain steps in this journey may be required by law. When developing your site, make sure the UX is reviewed for legal compliance.
  2. Dot your i’s and cross your t’s: Next, a brand will need consumer-friendly online terms and conditions readily available on its website and app. This area of law is highly regulated in most countries and special care should be taken. The terms should be clear and easy to understand for all users and contain any mandatory provisions required by the applicable law (normally where the consumer is located). Applicable rules relating to customer returns for distance selling may also have an operational impact which you will need to keep in mind. Other online policies you will typically need to have in place include a cookie policy, privacy policy and acceptable use policy.
  3. Check your products: If entering a new market or country, be aware that local product compliance requirements may vary, e.g. packaging, recycling and recovery obligations or labelling requirements. Conscientious consumers will be interested in understanding a brand’s ethical sourcing and sustainability policies but you must be conscious not to ‘greenwash’ or exaggerate any claims. Make sure to also keep on top of evolving environmental, social, and governance laws – see for example our alert here for an overview of the proposed new EU Supply Chain Due Diligence Directive.
  4. Get techy: This is where we have seen fashion brands set themselves apart from their competition – through technological innovation. At the most advanced end of the spectrum, augmented reality technologies can now allow users to virtually try on products before they buy them, bridging the gap between the digital and physical marketplace. However, as a minimum, the consumer should be able to examine the products in detail, such as being able to zoom and rotate images to make up for the lack of physical interaction.
  5. Minimise back-end logistics risk: Providing fast delivery and convenient returns typically requires a network of suppliers. Where you use third party logistics providers for warehousing or fulfilment, make sure your 3PL agreement is carefully negotiated to ensure you have the right levers to drive required performance. Although apportioning risk by way of insurance, indemnities and liability provisions is essential, you may also wish to consider contractual mechanisms to “focus your 3PL’s attention” on actually providing contractual volumes. Although termination rights for non-performance are standard, they are unlikely to achieve your commercial requirements (i.e. fulfilment of customer orders) and this is where some creativity in the commercial contract could come to the rescue. Remember that if you transfer a logistics supply arrangement between providers or in-source the logistics, there may be employee transfer points to consider, such as TUPE in the UK. Also, if you wish to be fairly hands on in overseeing / shaping operations, you will need to be mindful of possible co-employment risk. As there is now a hard border between the EU and the UK, brands selling across these territories should also think about how they intend to address customs requirements.
  6. Beware geo-blocking: If a fashion company is intending to supply products to customers in the EU, it cannot unjustifiably discriminate against them based on their location or nationality. This means that an e-commerce business within the EU cannot unjustifiably refuse to deliver products to customers in other countries simply because of their location. Examples of geo-blocking which can raise risk include automatically redirecting website users to a local country site without their consent, refusing to accept foreign credit cards, and charging delivery surcharges not based on actual costs. A similar provision applies within the UK borders as well.
  7. Protect your IP: A brand’s website and app should clearly set out that intellectual property on the website and app belong to the brand (to the extent that is true) to help prevent data scraping and copyright infringement, and to increase the likelihood of successful enforcement against infringers. Additionally, some fashion brands have been using blockchain to prevent counterfeiting, help deter theft, and authenticate goods as genuine.
  8. Data is king – but exercise caution: A transactional e-commerce site will have access to a large amount of consumer personal data (names, addresses, contact details, banking information, and so on). The brand should therefore understand what it is collecting, how and where it is being processed, and what mandatory data protection requirements apply. Brands may wish to consider techniques to limit privacy policy fatigue, for instance including appropriate terms to limit email notifications for policy changes and streamlining cookie preference click-throughs. To limit the risk and negative connotations of possible data breaches, a company should ensure it has adequate cybersecurity protections and a disaster-recovery plan in place. At the same time, a brand can obviously benefit from collecting user data to understand trends, spot opportunities, and improve the user experience through personalisation and targeted recommendations – a data strategy is always recommended to strike the right balance for a particular business between protection and capitalisation of personal data.
  9. Getting marketing right: Social media platforms have become a critical tool for engaging with consumers and conveying a consistent story about a brand and its products. However, a company should be mindful of applicable influencer marketing rules and advertising regulations – regulators are currently very interested in ensuring paid relationships (which includes providing free products) are communicated clearly to consumers. Ensure relationships with brand ambassadors are also well-documented in influencer marketing agreements or endorsement/collaboration agreements. Marketing teams should also be trained in the key local marketing and consumer law requirements to ensure compliant product claims and price presentations, at the same time as successfully growing the brand’s appeal and presence online.
  10. Maintain premium support: Last but not least, consumers accustomed to the high quality customer support given at fashion boutiques will expect the same from their online experience. Brands should ensure that customer support is available quickly and efficiently, and in the consumer’s language. A brand should familiarise itself with applicable rules around cooling off periods for returns as well as mandatory consumer warranties. We have also seen clients introducing KPIs for waiting times and common support issues, such as returns, refunds and exchanges. Finally, a dedicated resource for responding to social media commentary promptly has become a must – make sure they feel adequately equipped with appropriate training.

By Gabriela R. Da Costa and Georgina Rigg

Copyright © 2020, K&L Gates LLP. All Rights Reserved.