Otrium is Trying to Solve Fashion’s Inventory Problem

The online designer outlet is looking to fuel international expansion with this round, led by Eight Road Ventures.

LONDON —  The fashion industry’s inventory problem has only gotten worse during the coronavirus pandemic and the online designer outlet Otrium – which just got a big cash boost – believes it can help.

Today, the Amsterdam-based startup has announced a 24 million euro Series B investment round, led by Eight Roads Ventures, which also has investments in Alibaba, the online beauty services platform Treatwell, and the interiors business Made.com.

Existing investor Index Ventures, which has backed the likes of Asos, Net-a-porter, Farfetch and Glossier, has also participated in the round.

The new funding will help to fuel international expansion. Otrium has already been pushing into key European markets, with a dedicated U.K. site making its debut this week. The company has dedicated domains for France and Germany.

“We had set up and closed this round before the crisis hit, so it was initially based on our already-steep growth curve and ambitions. But things have (accelerated) due to the crisis, with COVID pushing brands to go through digital transformation,” said the brand’s co-founder and chief executive officer Milan Daniels.

“This needs to take place within full-price channels, but the unsold inventory and discount (business) is another big part of the equation. On average, 12 percent of product remains unsold during normal economic times and now this has doubled.”

View Gallery
Related Gallery
Media People: Nick Knight

Otrium pitches itself as a tech-enabled, digital solution to make end-of-season selling easier for brands of all sizes. Labels joining the marketplace get access to tools such as dynamic pricing that enable them to make more precise pricing or merchandising decisions — and to sell their past-seasons stock faster. The platform sets pricing for products based on variables such as style, number of units and sizes available, and interest from Otrium’s wider community.

The platform was the answer to the issues Daniels had to grapple with first-hand, having previously launched the direct-to-consumer sweater brand Breaking Rocks.

“We picked up a decent 100,000 euros in items collecting dust and started to talk to stock buyers, flash sales websites and physical outlet centers. But the brands benefitting from these outlets were the bigger ones, and there was a lack of data insights and tech enablement to approach the challenge,” he added.

As a result, Otrium chose to operate in “a similar way to a physical outlet, but digitized,” making it more accessible to smaller-scale labels that are unable to face the cost – and commitments – attached to physical retail, on the platform.

“We offer a mix of established, mid-segment and up-and-coming brands. It’s a curated environment, mixing both local and established names,” added Daniels. “We don’t want to create an environment with only established labels, and (we want to) tailor our portfolio according to location.”

Some of the company’s main partners include G-star, Puma, Asics, Alexa Chung, Joseph and Belstaff.

The online model is also an ideal one for brands right now, given shoppers’ inclination to shop from home and to rethink the value of garments and their attitudes to newness and seasonality.

“So far, most off-price channels were mainly focused on offline. But now there’s a bigger digital focus and consumers want to shop online rather than drive all the way to Bicester Village,” Daniels said, referring to the popular Value Retail off-price destination outside of London.

“There’s also a consciousness of the value of the item, with people still open to buying at a discount, but not all the way to a bottom price. Consumers are looking at this time as a way of reflecting on their behavior, becoming more aware of how an item is produced and what happens after.”

So far, the shoppers using the online outlet model have mainly consisted of a younger female demographic between the ages of 25 to 35, according to Daniels.

But as the platform broadens its brand offer, he believes the community is bound to evolve: “It’s not a steep line, it’s curved. We also have younger and older buyers active and if you onboard a wider mix of brands, you build a broader community. In Europe alone you have thousands of brands facing this issue and we want to curate them on our site on an aspirational basis.”

Once on board, Otrium wants to “share data and convince brands to start making decisions on the basis of data rather than on the basis of trend forecasting.”

Through regular data insight reports, the platform also shares information on the type of products that are likely to perform well for brands to make more informed merchandising decisions when choosing what stock to upload.

“We can look into our community and which customers are interested in a very specific type of product, present that item to that group within the community and create demand-supply dynamic, where there’s more demand than supply, so it gets a better price. All tools are based out of one mission and that is getting more value for every item produced,” added Daniels.

Following its U.K. debut, the company believes it can quickly continue to launch dedicated domains in markets based their size and identity.

“Our platform has a strong tech foundation with the marketplace skeleton and from there on it’s doable to launch new markets relatively quickly,” said Daniels, adding that the focus will remain on helping the brands, who have had to deal with a disproportionate amount of the issue, as wholesale partners often have deals with designers to return unsold inventory in exchange for new-season product.

“If you want to transform an industry, you have to look at the entire funnel,” he argued. “We should be looking back more at how previous collections performed, not at just producing new ones, and bringing [best-performing] items back to life only with better focus in sizes and quantities that we know will be sold. The vision is to solve the inventory issue as a whole: The market can get there and data can lead the way to get there.”