JOIN USAt a time when international fashion majors like Zara and H&M have announced their foray in the e-commerce space in India, Abof, the online fashion venture by Aditya Birla Group, marked an anticlimactic exit from the business, citing unsustainability and disappointing business metrics.
While Aditya Birla, which already has a significant presence in the fashion industry with Aditya Birla Fashion and Retail (ABFRL), chose to shut operations, another one of India’s e-commerce and fashion giants Myntra is well set in its path to achieve profitability -- a distinguished objective for the e-commerce industry.
ABFRL is one of India’s leading fashion lifestyle entities with a combined revenue of Rs 6,633 crore for FY17, growing at a rate of 10%, and hosts brands like Louis Philippe, Van Heusen, Allen Solly, Peter England, and Forever 21, apart from brands like Ajile, Akkriti, Alto Moda, Annabelle, etc, under its Pantaloons umbrella. So why is it that the e-commerce venture by the same company could not sustain an online presence?
While discussing the development with DH, Aditya Birla Group HR Director Santrupt Misra said, “In terms of technology, customer response and product selection, Abof performed really well and established the right kind of connect with users. However, market conditions did not support the business.”
The ability to convert visits on the website and activity on the app into sales proved to be difficult, he insisted. Few smaller players, including Fashionara and Askmebazaar, have also retreated the market, while in a strategic move, Jabong got acquired by Myntra.
Power over pain
Estimated to be about $3.5 billion, the online fashion industry constitutes only 5% of the overall fashion market in India, according to a joint study by Boston Consulting Group and social media giant Facebook. Pain points such as heavy discounting, high return-rate and last-mile delivery continue to haunt the industry, but with timely initiatives, some of the players are powering through.
From the biggest horizontal marketplaces, namely Flipkart and Amazon, to niche market specialists like Craftsvilla and Jaypore, each contender in the space is taking unique, targeted initiatives to reach out to its consumer.
With a contribution of up to 30% of the customers, Amazon Fashion is now estimated to be among the top three categories for the Indian arm of the global e-commerce behemoth. In line with its commitment to the vertical, the company recently launched its fashion imaging studio in Gurugram, only the third one globally.
Amazon Fashion India Head Arun Sirdeshmukh said, “Amazon has grown to become the largest online fashion destination in India with the widest range of products. Last year, we launched many marquee brands on the platform and we are the leading retail partners for most of the brands we work with,” adding, “Now it is more than visibility. We are mapping demand and want to cater to specific demands.” The platform has around 15,000 fashion brands, which include the top 1,000 global fashion brands.
Flipkart, on its part, is successively launching private-label brands in the fashion space. Divastri, Metronaut and Anmi, including the upcoming brand in the sportswear segment, mark the extent of Flipkart’s investment in fashion.
Rishi Vasudev, who heads fashion at Flipkart told DH, “The response from consumers and numbers justify and even encourage our endeavours in fashion. It is definitely a leading segment across the platform.”
Further, Myntra (along with Jabong), a Flipkart entity, recently announced that its in-house brand's portfolio Myntra Fashion Brands (MFB) has turned profitable registering a positive EBITDA of 5% in June this year. Clocking a run rate of $300 million, MFB has marked an annual growth rate of 100%.
The portfolio, which currently consists of 13 brands, contributes to 24% of the platform’s business. In fact, as a platform Myntra is set to achieve profitability in the last quarter of this financial year.
Ananth Narayanan, CEO of Myntra and Jabong, told DH, “Every time someone asks me about profitability, I feel more confident,” adding that the company has made strides in improving supply chain efficiency by rationalising its supplier-base and using technology effectively in making fashion and style predictions.
As a leader in the online fashion space, Myntra has also become the flag-bearer for omnichannel marketing. Its private-label brand Roadster, which contributes 50% of MFB’s business, hosts one of the most advanced offline stores.
The CEO has expressed that the company is bullish on extending technology-based components in its stores going forward. “We want to try and put facial recognition with an AI machine-learning programme that can recognise who you are. Basically, what the technology does is, decipher when a person is smirking, cringing, etc, based on which, a signal can be sent to the store owner allowing him to understand how to interact with the customer. This is something we plan for next year,” he said.
While having partnered with Mango and acquiring master distribution rights for Esprit in the offline space, it also plans to launch stores for its leading in-house brands Mast & Harbour and HRX.
Expanding into the offline market, private-label brands and shifting focus on to its USP -- traditional fashion, Craftsvilla too is doing it all. Further, heavy discounting days appear to have made way for selected discounting.
So what is then that could tick off this trajectory?
Although a technology leapfrog in its own capacity, the country still has a long way to go in terms of market penetration for the Internet, e-commerce and digital payments. It is certainly a market for long-term play.
Eight-year-old Myntra may be talking about profits now, but most players are far from the objective. However, challenges lie in the broad base of the market. Despite e-commerce is susceptible to connectivity issues, trust issues and so on and so forth, despite which, within its gamut, the scope for fashion remains bright.
According to eTailing India, the country’s etailing market stood at $7 billion and online fashion retail contributed $2.4 billion to it in 2016. Whereas, India’s online retail revenue is expected to reach $60 billion by 2020, of which online fashion retail is expected to touch $20 billion.
As per these estimates, the segment is set to take up a roaring share of over 33%, amid stiff competition from star e-commerce segments, like smartphones and electronics. And, while numbers speak for themselves, e-commerce players are also voicing their commitment to space vociferously.
Online fashion in India may just be ready for its showstopper appearance.