Pomelo is solving a problem that’s plaguing online shopping

The collapse of fast fashion chain Forever 21, which filed for bankruptcy in the US this September, shook up the retail industry worldwide. Stores have realized that today’s shoppers are of a different breed. Digitally savvy, highly discerning, and socially conscious, the same consumers who led to Forever 21’s demise have fuelled the growth of a new class of fashion retailers.

JD.com-backed Pomelo is part of this new wave. Its CEO, David Jou – a member of the growing Lazada mafia – set up the omnichannel fashion startup in 2013, two years after co-founding Lazada’s Thailand business. The premise was to build a direct-to-consumer brand inspired by shops like Everlane, Bonobos, Warby Parker and Birchbox in the US, all of which had built up cult followings via online channels.

Photo credits: Pomelo

Counting Southeast Asia and Hong Kong as key markets, the Thailand-based firm’s online and offline strategy is unlike fast fashion counterparts such as Spanish fashion retailer Zara, Swedish clothing chain H&M, and Japan’s Uniqlo, which have brick-and-mortar storefronts as their primary customer touchpoints.

A ubiquitous network

Pomelo’s ecommerce platform is integrated with a physical network comprised of its own retail stores and pickup points and partner pickup locations, where consumers can try on garments they’ve ordered online before making a purchase.

This results in an easier return process, which Jou says remains the biggest pain point in fashion, plaguing even successful companies like British fashion e-tailer Asos. At an average return rate of 30% on a per unit basis, every order – assuming an average order size of three items – will likely generate one return, which doesn’t make a great customer experience, the CEO notes.

The startup tried everything. Despite introducing 365-day returns, as well as including information on an item’s fit, size, and material composition on each product page, these alternatives could not substitute fitting rooms, Jou says. The company also explored other solutions to help users find the right fit online but realized later that letting people try the product on was the best way of reducing returns.

The result is a network of fitting rooms that include Pomelo retail stores, pickup-only locations – which do not hold any inventory for purchase – and partner locations such as cafes, co-working spaces, and independent clothing boutiques. Partner pickup points form the bulk of the company’s offline network because of the model’s relatively low cost and ease to scale. “It’s really the partners that make us ubiquitous,” Jou shares.

Pomelo CEO David Jou / Photo credit: Pomelo

According to him, it’s a win-win situation, as partner locations benefit from higher foot traffic. “In the process, [our customers are] ordering a coffee, discovering new gyms, maybe they’re going to come by and check out the co-working space,” he says. Pomelo’s customers, in turn, benefit from the accessible pickup locations.

The goal, Jou says, is to build a network of pickup points that are located within a five-minute commute from where the firm’s customers live and work. With eight Pomelo retail stores, four pickup-only stores, and over 70 partner pickup locations, it’s achieved that goal in Bangkok, where its touchpoints are within a five-minute reach for 40% of the city’s population. It also plans to increase the total number of pickup locations to around 300 in the next 12 months. “That’ll be more than [the number of] Starbucks locations,” Jou notes.

Pomelo pays its partners a fee that varies according to transactional volume at each location. The model saves on logistics and fulfilment expenses, and the average cost per order has been reduced by over 10%. While handling returns incurs significant expenses, it’s less costly than operating physical storefronts and maintaining partnerships, Jou points out.

“It makes a lot of financial sense for us to do this. Instead of doing individual deliveries to customers and then also paying for the returns, […] we’re bulk shipping tens if not hundreds of orders to one pickup location,” explains the CEO.

Reinventing the shopping experience

Keeping competitive