Covetella’s

Business model

GROUP 6
Aniket | Jeswin | Mohit | Sundar | Ridhima
• What strengths did Carlos Chen bring to her new venture?
• The experience by observing her parents running businesses
throughout her childhood
• Her education in Psychology and Economics, which would later help
her understand how money and people interact in business
• Education at art school in San Francisco where she studied fashion
design
• Experience of closely working with the designer clothes
• Her experience from working in the manufacturing of cheerleading
uniforms in China
• Chen’s experience of running two ventures before starting the
Covetella
• Collection of 100+ pageant dress that she already have
• Main Elements of the Covetella’s Business Models are:
1. Innovative Business Model
An e-commerce platform. Her premise was to allow women in Singapore to select
dresses online, which were then mailed to them for a predetermined rental time.
Chen included 60 of her own dresses and built up her inventory by going door-to-
door to local designers and posting her friends’ items in return for a portion of the
profit from rentals.

2. Covetella offered two models:

• 60/40 Revenue Share in Favor of Covetella: for dresses which Covetella provided
full service for dress owners, including storage, delivery, and cleaning. Payment to
the dress owner amounted to approximately 50% of the profits after incidentals
such as cleaning fees were deducted.
• 70/30 Revenue Share in Favor of Dress Owner: used for items of which dress
owners took responsibility for logistical tasks, such as storage, delivery, and
cleaning.
2. Showroom
The customer sentiment in singapore was that people
loved to try the dress before buying it and Covetella
provided a large space for the customers to come and
try the required dresses. Of Covetella’s 1,000+
customers, most preferred to come into the showroom
for subsequent rentals.
3. Personalised Experience
Covetella provided more customised user experience to
the client wherein almost one hour was spent to
evaluate the requirement of the customer and find the
right fit for the customer. Personalised fitting and
stitching was done for the customer too.
4. Marketing & Branding
Covetella did a lot of hosting and cross-
promoting events. Covetella made an events
page on the Covetella website to create a
single place for customers to both rent
dresses and discover events to attend,
thereby increasing demand for dresses.
Covetella partnered with event organizers to
offer discounts on dress rentals in exchange
for promotion. The company also hosted
fashion shows highlighting dresses from
its collection. Through partnerships with
other organizations and events, Covetella
built her follower base to over 10,000
people.
• Major risks with the Business Models are:

1. Customer Preference
The main idea of Chen was to be the facilitator between the dress buyer and seller
wherein the company could charge commission from every transaction. However, such
business model was not feasible, and people wanted to visit a specific place and try the
dress before actually buying it.
The showroom concept require large investment and inventory wherein the cost of
rental space in Singapore is very high.
2. Time Consuming & Staff Requirement
The concept of personalised experience to each customer required quality staff that
could adequately assess the requirements of the customer and help them in making the
right decision.
This require quality staff and investment on the staff in making them acclimatized to the
working culture of Covetella.
3. Less Targeted Marketing
Covetella was perceived as the outlet for high end premium dresses which charge high
rental price. However, the company also provided many low cost occasional based
outfits which were not acknowledged by the customer. Hence, the marketing by
Covetella created a different image of the company which affect their sales.
4. Competition : The market was highly competitive wherein a lot of companies were
competing in the same of renting dresses.
Change Required if Chen expand the Business
1. Organic Growth
• As Covetella’s customer base grew, the company would need a larger inventory
of dresses to rent. Covetella’s showroom space had limited capacity, so this
type of growth would require more storage space
• Covetella need to rent online with consignments booked directly from other
customers.
• Currently, Covetella focused more on the premium dresses, but the company
need to enter in to the subscription model of renting wherein ordinary dresses
are available at low cost. For this model to work, the company has to form
separate department for the subscription model and the showroom business
with premium dresses.
2. Inorganic Growth
• Expanding outside of Singapore is a tough proposition as the legal requirements
of other companies are different than that of Singapore.
• Covetella needs to change their dresses as per the local culture of the country.
• Covetella would require more money and need external investors which will
influence the company as per their needs.
• Covetella need to take into consideration the income level of the customers and
change their price list of offering.
• Covetella need to change their website as per the language of the country.
• Covetella need to adjust their business model as per the laws of the country.
Prospects of International Expansion
• For Covetella, Singapore is a potential launching point into other countries
nearby like Thailand, Vietnam, Indonesia, Malaysia, Philippines, etc. ASEAN market
seemed to be attractive because of the growing Millennial population who are
comfortable using technology. However, there are few characteristics of ASEAN
market which would determine the prospects of international exposure:
• Market Size: Population is the key factor. There has to be substantial number
of people to make it worthwhile to establish business in that particular
country. Market size in ASEAN is a boon for Covetella as most of the countries
have population greater than Singapore.
• Local Culture: In countries like Myanmar, people like to dress up in their finest
attire for every occasion which would be excellent for Covetella as more and
more people would like to rent a dress for an occasion. However, the culture of
secondhand clothes is not very comfortable in most Southeast Asia. Hence,
this might hamper the expansion in countries where secondhand clothing is
considered as taboo
• Investor Interest: Investor interest is dependent on the market size and on
future expansion. This seems to be in favor of Covetella since market size is
attractive to its business model.
• Personal network: Covetella requires connections with the local partners to
run the operations smoothly. They need people who understand the language
and culture. Hence recruitment of local people plays a key role here.
• Local income levels: Covetella aspires to be a premium brand so it
need customers with high disposable income. However, it can diversify
in the products in order to cater to the people with smaller budget.
• Legal Context and Crime: Not all countries in South Asia is as civilised
as Singapore. The problem of theft and not returning of dress remains
the bigger concern for Covetella and because of this, they need to take
lot of insurance.
• Logistics and Infrastructure: The business model of Covetella requires
infrastructure, shipping and courier services, internet usage, payment
methods and the people who have regular access to laptops and
mobile devices. Also, it need to develop mobile application in countries
where most people access the internet on their mobile devices.
• Business in Indonesia:
• Indonesia is the largest market in South Asia. However, it does not
poise a good platform for online business for Covetella since there is a
widespread fear of fraud which made people skeptical of online
payments. Also, the average income of people is much lesser that
that in Singapore. So in order to offset the desire of retaining
premium branding, Covetella need to capture the larger market in
Indonesia.