Forbes

A Matchmaker For Main Street Boutiques: SwapRetail Offers Stores A Lifeline

When Melodie van der Baan was a sales rep for fashion brands, she would keep her specialty retail accounts happy by helping them reorder sold-out items, or get rid of unpopular styles. She learned that one boutique’s must-have often is another store’s markdown, so she would act as a merchandise matchmaker, getting goods from one authorized retailer to another.

“If a brand didn’t have a reorder that a store wanted, I would say I know a store that’s sitting on it, let’s call them,” she said.

After she opened her own women’s clothing boutique in 2012, she saw firsthand the need for a solution that would help small clothing stores, while leveraging, and protecting, a brand’s network of authorized retailers,

Van der Baan and her co-founder, Morgan Bodstrom, have created a platform, SwapRetail, that could prove to be a lifeline for independent clothing stores at a time when, more than ever, they need new tools to survive.

SwapRetail, Van der Baan tells brands, can help their goods avoid markdowns at one store by shifting them to a store that needs them. It also solves problems by fulfilling special orders, and collects data for the brands about how their goods are performing in the hundreds of Main Street boutiques where they are sold.

Helping small business has become an increasingly popular theme for startups and tech companies in recent years.

Faire, the online marketplace that equips small stores to compete with Amazon AMZN -0.7% by giving them the sourcing power of the big guys, reached unicorn status – a billion dollar valuation – at the end of 2019. Shopify, the web-hosting and e-commerce services platform used by thousands of small businesses, is now the second-largest e-commerce platform in the U.S., and its stock price has tripled since the start of the pandemic. Pointy, a startup that helps local stores compete with Amazon and other online retailers by showing up in search results, was acquired by Google GOOG -0.4% a year ago for a reported $163 million.

SwapRetail is still in its infancy, but it has the potential to become a lot bigger if Van der Baan and Bodstrom can convince more fashion brands to use it. The web platform launched a year ago, in January 2020, and its only backing thus far is from angel investors. But a growing number of specialty store owners, and fashion brand, are fans.

When Maribeth Geraci, owner of Dress Code Style in Greensboro, N.C., heard about SwapRetail “I was like oh my God, somebody’s finally done it. Hallelujah!, “ she said. A specialty store owner for 25 years, Geraci said she had often thought that stores like hers needed such a platform. “I just didn’t know how to make it happen,” she said.

Independent clothing stores, who are struggling due to the pandemic, the rise of online shopping, ‘and direct-to-consumer selling by brands, will benefit if SwapRetail is adopted by more brands, Geraci said. “For us to be one of the last bastions standing in retail, we need all the help we can get, and I think it’s a great tool,” she said.

Andreas Chronis, co-owner of the Beginnings Bleus clothing stores in Scarsdale, N.Y. snd Armonk, N.Y., used SwapRetail when a customer wanted a pair of pants from one of the brands he carries, Ecru, that his stores didn’t have in stock. Ecru also was sold out of the pants when he contacted them. “I went to SwapRetail and lo and behold the pants I wanted were available from a store in Florida. I ordered them, they came in three days, my customer was thrilled and so was I,” Chronis said.

Howard Sheer, managing director of the Ecru brand, said SwapRetail “has made it quite painless for manufacturers and retailers to use the platform.”

SwapRetail, Sheer said, has helped his retail partners “maximize their inventory, and get the most out of it, whether it’s things that are selling well or things that are slow.”

Eleven fashion brands , including Ilse Jacobsen, Johnny Was, D. Exterior, and White + Warren, have signed on with the platform. Some 2,800 independent retailers who sell those brands are using the platform.

When brands agree to participate with SwapRetail, they give the platform a list of their authorized retailers. Any of those retailers can use the platform to buy, sell, or swap the brand’s merchandise with another authorized retailer. Transactions are anonymous, and SwapRetail handles payment and provides packing and shipping labels.

The platform is designed to protect retailers, as well as brands, Van der Baan said, by keeping sales within a brand’s network of authorized retailers.

“If a retailer’s worked really hard at getting distribution for a certain line, they don’t want to hear that the boutique down the street has it because they got it on SwapRetail. We make sure that doesn’t happen,” she said.

SwapRetail, Van der Baan said, gives brands and retailers a controlled way to deal with unsold merchandise, one that ensures it doesn’t end up on third-party e-commerce sites, or consumer-to-consumer sites, such as Poshmark, eBay or Facebook Marketplace.

“We’re committed to being a brand-authorized solution,” Van der Baan said. “Other solutions that are popping up are like the Wild Wild West. If you’re a brand you don’t want your product circulating in the Wild Wild West, and that’s going to happen because right now retailers need a solution.”

Sellers use the platform for free, but retailers who are buying goods pay 10% above the wholesale price. When two stores swap merchandise, each store pays 5% over the wholesale price.

The fees for purchases and swaps are intended to ensure that retailers will use SwapRetail only when they can’t get reorders or exchanges from the wholesale brand.

The 10% purchase fee reassures brands that retailers will go to the brand first for reorders. “Nobody wants to pay 10% more for a product, but if the brand doesn’t have it, at least they have a way to get it,” and to keep a valued shopper, who wants the item, happy, Van der Baan said.

Dorilee Savitt, manager of the Deborah Kent’s fashion boutique in Tampa, FL, used SwapRetail to buy an out-of-stock size 38 Ilse Jacobsen shoe a customer needed for a Christmas gift. The fee to purchase was minimal, she said, and “not worth losing a customer over.” Keeping that customer happy, Savitt said, increased the odds that she will return to Deborah Kent’s for more purchases in the future.

Chronos of Beginnings Bleus agreed that the SwapRetail fee to buy isn’t a deterrent for merchandise he can’t get directly from the brand. “We might not make the same exact markup that we normally would, but at the end of the day if I’m not able to get it for my customer she is going to get it from somewhere else. Being able to use SwapRetail as a platform to fulfill a customer’s needs is crucial and essential for us.”

The customer he was able to find a pair of Ecru pants for through SwapRetail ended up buying several other items when she came to the store to pick them up. “That would have been a lost sale,” he said.

Retailers with unsold merchandise also have the opportunity to turn that into cash, rather than resorting to drastic markdowns.

With brands tightening up their inventories during the pandemic, retailers often find that they can’t reorder popular merchandise, and need a way to connect with other stores who carry it, and who may be looking to sell it.

Emily Waldron, director of regional sales for fashion brand Johnny Was, said SwapRetail has helped the brand because Johnny Was operates on a cut-to-order model, only producing the number of items ordered by its retail accounts, and therefore doesn’t typically have excess inventory if a specialty store wants to do a reorder.

“For our accounts it’s been great because they’re able to find it and get it to the customers quickly – the types of reorders we normally would have to say no to,” Waldron said. “I think that once the brands look at this as a service, then they can see the value in it,” she said.

The sole complaint of retailers using the platform is that not enough of the brands they sell are participating in SwapRetail. Of the over 40 brands Chronis carries in his stores, Ecru is the only one connected with SwapRetail.

Geraci said she has been sending letters and emails to brands urging them to use the platform. The brands she talks to are intrigued by the idea, she said, but are saying they have been pivoting so much due to the pandemic that they don’t have the time or staff to explore it.

Van der Baan, who landed her first brands on the platform by cold-calling them, plans to keep convincing brands to join, one at a time if necessary. “I’m super passionate about it, especially in a year where what we’re seeing is 10% of specialty stores have closed their doors,” she said. If a brand had 200 retailers pre-pandemic, they now have 180, “and I want to keep those 180 going,” Van der Baan said.