Myntra to cut back on discounts, eyes flash sales model
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Bengaluru/New Delhi: Online fashion retailer Myntra plans to launch a new sale event in April based on high fashion and minimal discounts as it seeks to shift towards selling full-price products.
Myntra, owned by Flipkart, India’s largest e-commerce firm, expects sales to grow by 40-50% in the next fiscal year on top of the Rs5,000 crore in gross sales it will likely post for the year ending 31 March, Myntra chief executive Ananth Narayanan said in an interview.
Myntra expects to generate anywhere between Rs60 crore and Rs100 crore during the three-day sale event in the first half of April. In comparison, it generated more than Rs350 crore during its latest End of Reason sale in January. This sale will be held again in July; January and July together generate a large chunk of Myntra’s annual revenues.
The new sale concept is inspired by the flash sale model of smartphone brands such as Xiaomi, in which online platforms create supply scarcity to boost demand and sell them in small batches in well-publicized sale events. Myntra hopes to make the sale more attractive by promoting high fashion in its marketing campaign for the event.
“What other e-commerce players have done is events that play on the scarcity of cellphones. Nobody has done it in fashion. The big thing is, can we create a full-price fashion event—and this is not just scarcity, the other big push is fashion trends. From this event, the commitment that the team has given me is Rs60 crore, but the target that we have is Rs100 crore,” Narayanan said.
The company will still offer discounts, but only 5-10%. The theme of the sale will be fashion rather than low prices.
“The value proposition of the sale is four things. Fresh selection, which includes new season launches that will be first on Myntra. Secondly, we have new brand launches such as Hugo Boss and Esprit. Thirdly, we will do innovative gigs with celebrities and brands, which are now willing to do spike events with full price because it helps enhance their brand. Fourthly, we’ll have exclusive collections. The aim is to get existing customers to buy more full-price than they have before,” Narayanan said.
Myntra’s efforts to cut discount-driven sales are important as it is imperative for the company and its parent to reduce losses. Flipkart is in the midst of raising a funding round of up to $1.5 billion, which is likely to be its last equity infusion before an initial public offering. A successful IPO will require Flipkart and Myntra to show significantly lower losses.
“Companies in e-commerce are now moving away from heavy spends on discounts and advertising. All players used to buy full-page ads earlier; now, that has come down… In fashion, a category that has traditionally seen heavy discounting, the focus is now moving to adding more labels and a better and curated mix of products,” said Harish H.V., partner at Grant Thornton India Llp, a consulting firm.
Under Narayanan, who joined Myntra as CEO in July 2015, the firm has cut both discounts that don’t necessarily push customers to buy more as well as supply chain costs. Now, it must find new ways of reducing expenses. Unless it can persuade customers to buy more full-price products, the retailer could fall short of its profitability targets.