Mark Pilkington is co-founder and CEO of Splendour.com, a virtual supplier of designer lingerie. He reveals to David Bicknell how the company cuts costs and supports quality.
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How did Splendour.com come about?
I was managing director of lingerie company Gossard. A friend of mine, Mike O'Shea, was a successful entrepreneur. We put the two skill sets together and decided to create the ultimate luxury lingerie brand online. We set up the company at the end of 1999 and launched it in September 2000.
What is the vision behind the company?
Our vision was to use new technology and traditional design values to create a 'virtual company', removing as many of the layers of overhead cost between the creative studio and the final customer as possible. By creating a new brand, Splendour.com has cut out expensively branded companies, and by selling purely over the Internet, we have cut out the expensive retail boutiques.
Many dotcoms are in financial trouble now. What is your funding situation, and what makes you think you will survive?
We already have funding from Marks and Spencer Ventures, the venture capital arm of M&S. We have a unique business model that makes the most luxurious products available at affordable prices.
Why do you think you will be successful?
Because we are not bearing all the usual retail mark-ups, we have concentrated on the product and used more luxurious materials to create lingerie that would normally have been more expensive. Because we are a virtual company we can market it at an affordable price.
What happens when Gossard or M&S decide they want to compete with you?
If an existing brand were to compete online, it would probably have to go into partnership with other manufacturers. Getting that off the ground would take time, and there is no guarantee it would be able to compete with us on price. M&S is already on-line, but we don't see a conflict between its collection and Splendour's.
Where does your main competition come from?
Our major competitors are other online companies selling lingerie. The big difference between them and us is that we have created our own unique collection, whereas they are selling what already exists.
How have you marketed your lingerie?
We used a number of celebrities to model our products, and have gained a great deal of exposure from that. We invest a lot in PR, because we believe that fashion editors have a great deal of influence. Because of our stunning products and packaging we also get a lot of word of mouth and viral type effects. On the back of a very modest spend, we have built a database of around 20,000 customers that we can target with special offers.
What else is unique about your site?
Bearing in mind that men make up half of our customers, we go out of our way to make it easy for them to buy. We feature advice for them on our website on what size and colour to choose. For example, there is one basic piece of advice we offer: Don't try to estimate your partner's size - it doesn't work. Try checking the label in existing underwear.
Where do you think so many e-commerce companies have gone wrong?
There is too much discounting going on, leading to large customer bases that are still not yielding profits. That is because the gross margins are not high enough. Typically, in retailing you start with a 40% gross margin, and then you have to take off fulfilment costs, bringing it down to 25%. To give yourself an edge you then start discounting the retail price, and pretty soon you are down into single figure margins.
It is very difficult to build a brand on those thin margins. Splendour.com is different, because it is our own collection, and therefore our margins are much higher.
Large dotcoms such as Amazon would be well advised to consider finding a smaller market, selling its goods at full rate to customers who buy for the convenience. Then they might be in a position to make a profit. That is a route other retailers should take as well.
CV: Mark Pilkington
1999-2001: Chief executive of Splendour.com
1997-1999: Managing director of Gossard
1985-1986: MBA, INSEAD business school
Pilkington's top 5 sites