Although every day more and more shopping malls are popping up across Iran, there’s one fashion e-commerce in the country which is offering products that are not easily found in retail shops. Modiseh is an online fashion e-commerce known for its exotic discounts and stylish fashion products in Iran.
Modiseh is an Iranian e-commerce platform focused on lifestyle products, including fashion, cosmetics and homeware. We visited Modiseh’s office in the west of Tehran for this interview. We sat down with Hamed Rezaei, CEO of Modiseh along with Sara Hatef, Art Director and Davoud Moshtaghi, Marketing manager of this fashion e-commerce.
Hamed Rezaei began to tell us about the story of Modiseh by shedding some light on the activities of Golestan Business Group (G.B.G), the parent company behind Modiseh. G.B.G was founded in 1953 and owns a number of companies in various sectors, including consumer goods, automotive sales, warehouse, logistics and IT. Golestan a subsidiary of G.B.G which is one of the largest food companies in Iran, is famously known among the public for its tea products and working with international companies such as Unilever.
The total online market in this industry in Iran is less than 1 percent of the total fashion market in the country. The clothing market in Iran has over 20 billion dollars of yearly turnover.
“Because of Golestan’s experience in logistics, distribution and fulfillment centers, the company was interested in the FMCG e-commerce market. My suggestion at that time was to work on the online fashion market, because of higher profit margins, low competition in Iran and the world trends,” said Hamed Rezaei, CEO of Modiseh. He told us that the initial plans for Modiseh started to shape about four years ago when they were looking into successful e-commerce companies in other countries and began preparing their infrastructure and equipment. Modiseh was officially launched in 2015 when the market was still untapped and lacked major players. “Our platform was initially based on a large scale, so we invested a lot on our logistics and infrastructure such as Enterprise Resource Planning (ERP), precise inventory control and fulfillment system,” Hamed told us.
“The total online market in this industry in Iran is less than 1 percent of the total fashion market in the country. The clothing market in Iran has over 20 billion dollars of yearly turnover,” said the CEO of Modiseh. He added that in similar countries in the region such as Turkey this number is around 7 percent and in developed countries, it’s around 15 to 20 percent.
Government’s oversight on imported products could help grow the online fashion market in the country. According to Rezaei, Iran’s customs duty system is being reformed so it makes it pretty hard to import fashion products from unofficial channels.
Iran’s customs duty system is being reformed so it makes it pretty hard for smugglers to import fashion products from unofficial channels.
“If we assume our penetration rate is currently around 0.5 percent, this number would have to be multiplied by 15 in the next two years to reach to Turkey’s current situation.” Although Iran might currently be running late compared to other countries, many new B2B and B2C businesses are developing fast in Iran with the growth of smartphones and internet mobile. “As more players enter this market, the pie gets bigger and it would eventually help establish the online shopping culture, especially for fashion products”. He added that online shopping in Iran in other sectors has seen a blast, and now they’re trying to make the same happen in the online fashion market.
Half a million daily impressions
According to Hamed Rezaei, Modiseh receives half a million daily impressions. Modiseh’s growth rate from 2016 to 2017 is as follows:
- Customer base: +400%
- Number of SKU: +300%
- Conversion rate: +40%
Not just another fish in the sea
Modiseh has its own fulfillment centers, and stores all the products in its own inventory. The company usually buys the products directly from the resellers in the country or imports them if they’re not available. Hamed emphasized that Modiseh is not focused on the products that are widely available in boutiques and shopping malls but rather their special formula is to sell fashion products that are not available in the physical stores. “We’re more interested to sell the brands which offer quality and affordable prices, but are unknown in the Iranian market.”
Currently many online shops in Iran sell products which are available in stores and try to sell them online with a low margin. “What happens is that after some time the supplier —which in many cases is the official distributer— would lose interest to work with these online platforms. We set notable promotions on the brands which we import by ourselves and are not available through physical stores. That’s why we don’t have conflicts with the stores,” he mentioned.
Main challenge: Building trust for the first time customers
Comparing to other countries, the e-commerce scene in Iran is still considered young. A challenge which many of these online businesses face is a cultural issue where users are hesitant to make online purchases.
Hamed believes that as the market develops and more players enter this market, people would eventually gain more trust towards online shopping and spread their experience through word of mouth.
To overcome this issue, Modiseh provides a simple return policy where customers can send back a product for any reason up to seven days after the purchase. “Some of our customers order two sizes of the same product just to see how it fits them and send back the other one. We pick up the product at their door and don’t charge them anything for this service.” He added that despite promoting the return policy on their website, still many customers don’t use it. When we asked about the reason he told us that Iranians are not used to having the option of return policy in offline stores and in general they have low expectations.
Modiseh’s current return rate is 20% which is considered low for an online fashion retailer. This number for an e-commerce such as Zalando is around 50% and for Zappos is around 25%.
Creative and exciting campaigns
When talking to Modiseh’s creative team, they told us what sets them apart from other e-retailers is their exciting campaigns. Hamed told us “Recently, I read a tweet from a customer where they said that Modiseh doesn’t need Black Friday, they have engaging offers every day!”
“We follow the trends, and at the same time we do stuff that are counterintuitive. We give away free products or make up a game where users surf our website in order to get promotional codes. We’re basically making their purchase fun,” said Davoud Moshtaghi, Marketing Manager of Modiseh.
Although Modiseh always has new offers on its website, during Black Friday until Cyber Monday, the offers are more tempting and the sales reach up to five times than any other ordinary day. Hamed told us that a major problem of e-retailers in Iran is their downtime during this shopping holiday which can put potential customers off. “This year we had a DDOS attack which we quickly fixed the issue. Other than that the website was fully operational.”
“We’re happy that everyone is getting involved in this campaign which eventually helps the overall market,” said Hamed when we asked him about the logic behind promoting Black Friday almost 6 months before Nowruz (the Persian new year). “But if everyone gets involved in a specific shopping holiday before Nowruz or the beginning of summer it would make much more sense,” said Hamed Rezaei.
Welcoming up-and-coming brands, but only accepting a few
Currently, Modiseh has around 250 brands on its platform but Hamed told us that they’re focused on only 50 to 60 of them. He added that Modiseh is not trying to add up to their supplier’s list, in fact they’re reducing them. “We don’t accept any brand that wants to work with us. Our credit is based on the brands, their quality and the prices.” Modiseh promotes these brands in various ways on its website and social media, which is a great chance for the up-and-coming brands to be seen.
After Iran’s nuclear deal in 2015, many startups in Iran started new collaborations and partnerships with international companies.
Hamed also told us that after the JCPOA agreement they’ve been receiving more requests from foreign suppliers in Europe. “They want to enter the Iranian market so they test it by selling their products on our website instead of investing hefty budgets on physical stores. We can give them good data and analysis about the market.”
Many of the products sold on Modiseh are limited edition and are provided by selected Iranian designers. Sara Hatef, Art Director of Modiseh told us “We’re adding a new section to our website called Modiseh Innovation, where we announce and promote innovative Iranian brands made by designers and artists with a good pricing.”
We’re more interested to sell the brands which offer quality and affordable prices, but are unknown in the Iranian market.
Going IPO in the next two years and entering the Iraqi market
Modiseh’s CEO told us that their plan for the upcoming months is to further develop the suppliers’ side, HR and marketing. “Currently we’re doing research on the Iraqi market and may soon start our operations there. We’re doing research on three territories and will launch an Arabic website.”
Up until now Golestan Business Group (G.B.G), has been the sole partner in this project. “We’re looking for a strategic partner,” said Hamed Rezaei. “The money which will be brought to the table is not that important for us actually. Capabilities and the network of the new investors are what we’re looking for.”
He added that the founders are willing to give away only a small amount of their shares, and Golestan will be kept as the major shareholder of Modiseh. Going IPO is also in their plans in the next two years.
Fashion e-commerce is a lucrative market in many countries, but it’s still considered a tough sector in Iran. What do you think about this market? Share your thoughts with us in the comments section below.
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