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The future for online fashion industry

Last Updated 16 July 2016, 18:49 IST

It was a cold and windy day in London and as I walked in to the Indian YMCA Hostel where I lived for a year, I saw this young man sporting one ear-ring, a pinkish shirt and a green trouser.

The only part that you could call conservative about him was the black shoes that he wore. Even the belt was some outlandish looking thing. I smiled to myself and asked one of my friends, “Who is this guy?” I was told that he is one of those well-to-do ones who had come to London to do fashion design. I thought to myself, “How many fashion designers will get a job in India today?” My answer did not go beyond the single digits. I moved on thinking this individual was blowing up his dad’s money and in “style”. This was in the 1980s…how wrong I was!!!! This young man is one of the best known names in fashion designing in India today.

With 40 million online shoppers in 2015 in India, growing to around 100 million this year and expected to hit around 250 million by 2020, there are some tectonic shifts taking place in the online fashion retail industry, and this needs to be clearly understood. The biggies of the Indian Industry have already spotted this and so we see large names like the Aditya Birla Group, Reliance, TATA, Arvind Mills, Vardhaman Group, Raymonds and Flipkart to name a few, entering in to the fray. Corporatised retailing was anyway high in the fashion retail industry in India and it is set to grow.

Technology will democratise the ecommerce world of fashion retail. So, apart from these large organisations, there will also be smaller players in the field who will be equally good.

Some such organisations include Snapdeal, Fashion andYou, HomeShop18, Zivame, Doozyshopping, Indofash, Darveys, Koovs, Styletag, Voonik, Wooplr and Red Polka, among many others. Whilst the smaller players will be hundreds in number and highly fragmented, I expect that around 50 of these players will become large and well-funded as the market expands. There will not only be online fashion retailers but also fashion curators with personalisation, aggregators.

These tectonic shifts taking place in India will throw open significant opportunities and come with challenges as the industry is set to grow at approximately 65% per year to $35 billion by 2020. Macro-economy and demography.

The GDP growth, of close to 7%, is still one of the highest in the world today. Add to this, the demography, where 64% of the total population of 1.25 billion people are in the working age group, the combination becomes explosive. This is an age group that is fashion conscious, looks for a good mix of ethnic and corporate dressing. This is also a group, that uses the mobile and the internet to make purchases.

Constraints

With rapid urbanisation and urban infrastructure struggling to keep pace with growth, most young office goers are struggling for time. Someone called this as “time-poverty” aptly. This time poverty is pushing millions of Indians towards more convenient shopping options and online options from reputed companies/brands is moving them towards this option. Further, buying clothes that was seen as “necessary-buying” has shifted to “aspiration-buying”. This shift is major for India.

I used to wonder why people in the US got stressed out if they didn’t have a new dress for the evening party. Now, when I see more of that happening in India and within my own family circles, I have started to see why and also beginning to see how this shift will result in a boom in the fashion retail industry.

Technology

The advertisement of Amazon where a young daughter in her 20’s tells her mom that she is ordering her wedding sarees online rather than spend time in the stores sums it all up. A significant increase in internet and digital device penetration, safe and secure online banking options, safe digital wallet options combined with excellent brand names that are reputed to deliver what you see in your mobile or laptop, have all increased confidence in people to buy online. What all this means is not only will e-tailing in the retail fashion industry reach big cities but it will also spread out to the tier II and III cities and towns. With a wide variety of brands/names to choose from, there will be a price point offering to different consumers.

Apart from safe technology, the use of artificial intelligence, robotics and analytics is changing the landscape of fashion engineering. Myntra’s robot called Artie scours the world of fashion and comes up with latest designs for its fashion line called ModaRapido.

This new line brings new styles and designs every week for the customers in India and these styles are all global ones. Similarly, analytics is being used in marketing, supply chain, merchandising and stores operations by various companies to improve the customer experience and bring to them what they need and when they need it.

This huge growth rate of 65% per year over the next five years will definitely come along with growth pangs. So, what do I see as some of the biggest challenges that this industry will face:

Human Capital — talent shortage will plague this industry as there is a lack of educational institutions that focus on retail management, retail technologies, merchandising, supply chain and data science;

Significantly different market segments — all fashion retailers agree that the Indian market is extremely complex. Where four stores can satisfy the needs of 1,000 consumers in the US, in India it is 14. Clearly, it shows how complex and varied the demand patterns are. This will impact scale manufacturing and create supply chain issues;

Infrastructure — poor roads, warehousing, among others increase inventory costs and create supply bottlenecks in an industry that contends with rapid changes in styles and design.

The evolving customer — the market is exploding and new consumers are getting added every day. We do not have enough data on their buying patterns, spend criteria, etc. A study by PwC in 2016 titled “Driving Retail Growth by leveraging Analytics” shows that consumers will buy online from a specific retailer based on whether the item is in stock, the price, trust in the brand and whether the retailer has a returns policy that works.

Legal and environment concerns — online retailers need to be sure that the factories adhere to the government legislation (such as child labour).

The online retail fashion industry is booming as more and more Indians move towards cities and towns in search of jobs, become more and more fashion conscious and have less and less time to go shopping. Apart from all these, the evolution of technology that is seen as safe, fast and convenient, this industry is expected to grow at 65% to $ 35 billion by 2020. I am now wondering why I was not smart enough to figure out why someone was wearing ear-ring in one ear, a pinkish shirt and green trousers.

(The author is the Founder of Alive Consulting, Bengaluru)

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(Published 16 July 2016, 18:49 IST)

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