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Instagram boutiques are selling $16 fast-fashion dresses for $55, and it reveals a major snag in the e-commerce boom

Cheap yellow dress ripped down the middle with a price tag that shows a price markup, on top of an iPhone screen and a gradient background with shopping bags and the Instagram logo
E-commerce is becoming so saturated that some boutiques are selling the same clothes — at higher prices — as fast-fashion retailers. Marianne Ayala/Insider

  • The coronavirus ignited e-commerce, with 200,000 more digital stores opening in 2020 than in 2019.
  • But experts say boutiques can't compete in the fast-fashion space dominated by Shein and Alibaba.
  • The founders of It's Juliet learned this the hard way and are restructuring their supply chain.

This summer, I bought a few dresses for about $34 each from an online boutique I discovered on Instagram. But when my order arrived, the material felt cheap — the kind that nearly disintegrates in your fingers.

Then I found them on AliExpress, Alibaba's online retail store, for under $10.

My experience mirrored those of people on Twitter who said they purchased clothing from similar boutiques just to discover the same items for a fraction of the price on fast-fashion sites like AliExpress and Shein. I spoke with one online shopper who said she bought two outfits — one for $80 and one for $55 — with Shein tags still attached.

The issue has been pervasive in online fashion, and it's only intensifying as 200,000 more entrepreneurs opened digital storefronts in 2020 than in 2019, according to a report by the National Bureau Of Economic Research. Experts say these business owners dived into the e-commerce pool without a complete understanding of supply chains — from product to platform to customer.

The rise of digital storefronts on Instagram and Shopify is leaving customers dissatisfied
woman wears orange dress as she takes a photo facing a mirror
The author wearing one of the dresses she purchased online. Jennifer Ortakales Dawkins

"You learn a lot from your first business, but e-commerce is a different ball game," said Tiffany Hakimianpour, who launched It's Juliet, where I bought my dresses, at the end of 2020 with her sister Candice. They previously ran a tech startup and didn't know much about shipping costs and manufacturing.

The duo used Shopify to build their site and then ordered inventory from overseas manufacturers that also sell to other retailers, explaining why my dress was on AliExpress. The products then ship directly to customers from the supplier, which is known as drop-shipping.

Normally the buying process is done in person or with samples, but during a pandemic, photos over Zoom and Slack were the only options. When customers complained about poor quality, extended shipping times, and finding the same pieces on other sites for less, the Hakimianpours' took it to heart.

They knew they needed to deliver value if their business were to last. "If there's nothing innovative or interesting coming out," Tiffany Hakimianpour said, "then I don't think it has longevity."

And they're right: The Wharton retail-management professor Santiago Gallino said boutiques must add value — like offering something new or curating a particular style — for customers to justify returning. If customers can find the same products at significantly lower prices through a simple Google search, the customer has no reason to come back.

"This dynamic is not going to be sustainable as a business," he said, adding that drop-shipping models could risk low customer service and poor product quality.

Boutique owners aren't entirely at fault, said Thomaï Serdari, a marketing professor at New York University's Stern School of Business. Shopify doubled its stock price on the message that setting up an online shop is easy, but she warned the company was selling an unrealistic perception.

Small businesses can't compete with fast-fashion giants

two screenshots of the same dress on different websites
Two screenshots show the same dress sold on It's Juliet and AliExpress for different prices. Screenshot/Jennifer Ortakales Dawkins

In April, five months after launching their business, the Hakimianpours started working with manufacturers to create their own exclusive designs, beginning with their fall collection. Then they opened a warehouse in Grapevine, Texas, to ship orders domestically.

"Customer feedback was really the compass of where we're going," Candice Hakimianpour said. Ultimately, the sisters want to make their clothing more ethical and more size-inclusive, something they can do now that they're working with manufacturers directly.

It's an Amazon world, and we're just trying to move in it.

Small boutiques can't compete with fast-fashion giants like Shein, Alibaba, H&M, and Zara, Serdari said. It exacerbates an already highly saturated and wasteful industry; meanwhile, she added, fast-fashion is losing relevance among today's shoppers who are warming up to resale.

woman sits on a stool wearing a blue dress with her hand up to her ear
A dress from It's Juliet's latest fall collection, which the founders designed exclusively for their e-commerce brand. It's Juliet

If entrepreneurs want their e-commerce brands to withstand a competitive market, Serdari said, they must understand the garment industry at the macro level to maintain customer satisfaction. "Make sure the brand is responding to the promise you made in terms of the product or service," she said.

The Hakimianpours are hopeful they're doing just that, even if it means going against the grain of more established brands.

"Newer brands need to establish that trust and communication with customers a little more," Candice Hakimianpour said. "It's an Amazon world, and we're just trying to move in it."

If you started an e-commerce business during the pandemic, or if you've purchased from brands described in this article, please contact this reporter at jortakales@businessinsider.com.

Entrepreneurship Small Business Retail

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