Bluefly, the online retailer of off-price designer fashion brands, has just announced strong growth in revenues and margin levels for the fourth quarter and full year 2006. As more and more apparel chains announce their intentions to start selling online, just-style's Rebecca Danton talks to Melissa Payner, president and CEO of Bluefly, about how the business has set a precedent in online soft goods sales and the company's ability to keep its competitive edge.

J-S: Bluefly was established in 1998. Did it aim to fill a market niche? And how successful has it been in doing this?

MP: After a frustrating day of outlet shopping, rummaging through bins of disorganised, two-season-old designer clothing, Bluefly's founders realised there had to be a better way. They recognised that traditional outlet stores selling off-price designer apparel were not offering the type of shopping experience consumers have come to expect. The solution was clearly the internet, a significant untapped source for retailing off-price merchandise apparel and home furnishings...and Bluefly was born. We've been extremely successful, with revenues growing significantly every year, as new customers discover the site.

J-S: How has online retailing progressed since Bluefly was established? Have you noticed a lot more competitors in the field?

MP: We haven't noticed many true competitors. Essentially our competition is high-end retail sites, and very few of them are set up to offer in-season merchandise by top designers. More sites crop up every day, but principally the major players are the online iterations of the brick-and-mortar stores carrying designer merchandise, ie Neiman Marcus.

J-S: Is Bluefly concerned that as more mainstream apparel retailers go online, it might have to fight to retain its market share? 

MP: It's always a fight for market share. But again, very few, if any, retailers offer the value proposition we're able to offer. Our merchandise is in-season, on-trend and offered at a significant value. Our customers are extremely savvy and have done their homework - they know what sets us apart and seek us out accordingly. They're also fiercely loyal because we prove ourselves to them over and over again...not to mention each day when we feature over 150 new arrivals posted on our site. 

J-S: Does Bluefly see a lot of further growth for online apparel retailing?

MP: Absolutely. We have seen the growth and potential and feel confident that online retail is the best source for shopping. The bottom line is it expands your options. You have at your fingertips an unlimited amount of choices so you can find your style at competitive prices.

J-S: Some critics say the scope for buying fashion online is limited since consumers cannot try things on and many people, women especially, enjoy shopping in stores. What would you say to this?

MP: We are fully aware that women love shopping. Our target market is categorically fashion obsessed. But retail stores are not really our main competition. One of the key benefits of Bluefly is that we carry the current styles in the current season. Store retail is usually a season ahead. For instance, the stores on Fifth Avenue are carrying spring merchandise now - in the dead of winter - which means that ultimately, we are even more relevant because we service our customer during their time of need: ie "It's cold, so give me winter!" Additionally, online retail, while a relatively modern option, has been embraced by our population in a huge way. Most of the early-day stigma associated with it, such as credit card fraud, privacy and, of course, fit issues have all but disappeared. Savvy shoppers know their sizes and know their designers - plus, making a mistake or a 'wrong purchase' has very low consequences given our liberal return policy of 90 days with a money back guarantee, no questions asked. We make it especially easy with a pre-paid and pre-addressed return label.

J-S: How might Bluefly develop in the future?

MP: There are many thoughts we've had in terms of our future. Primarily we're planning to expand our existing offering to include additional categories and consumer segments. At the moment we carry clothing and accessories for women, men and the home. We believe our value proposition is so compelling that it could easily translate to a variety of new areas. Also, we plan on developing our brand internationally to attract a broader audience base. Beyond that...stay tuned!