BackOffline apparel stores brace for tough test amid e-commerce blitz
The sale, which usually runs for the first two months of the year, is crucial for retailers as it accounts for up to one-third of their annual sales
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Bengaluru/New Delhi: Heavy spending on advertising and promotions on apparel and other fashion products by online retailers such as Myntra and Amazon India is likely to lead to the toughest test yet for physical stores in the upcoming end-of-season fashion sale.
The sale, which usually runs for the first two months of the year, is crucial for retailers as it accounts for up to one-third of their annual sales.
Retailers typically offer discounts of 30-40% on average in this period.
This time, however, several brands such as Puma, Woodland and Allen Solly have already started dangling discounts and promotions, weeks before the traditional start of the sale in January.
Even at the risk of sacrificing margins, department stores such as Shoppers Stop and Lifestyle, too, are offering discounts on some brands much earlier than in the previous years.
This is in response to fears of losing business to fast-growing online retailers such as Myntra, Jabong and Amazon India.
Since September, these e-commerce firms, along with Flipkart, which owns Myntra, and Snapdeal, have been running regular sales where the discounts on some products are as high as 60%.
Myntra has been the most aggressive over the past two weeks, running advertisements that pitched deep discounts.
Amazon India also started running advertisement campaigns across television and print media, promoting its fashion collection last week, and the online retailer will soon launch ads promoting the end-of-season sale.
“We expect to acquire thousands of new customers in this year’s sale," Myntra chief operating officer Ganesh Subramanian said.
Analysts and mall owners said offline stores had been forced to respond to regular online sales by offering discounts far more often. “Earlier, there were only three major sales that offline retailers did in a year; and now there is a sale every quarter," said Rachna Nath, an executive director at consulting firm PricewaterhouseCoopers.
“One of the major top-of-the-mind concerns for retailers this year was how to sell when the sale was not on," Nath added.
There are many more brand promotions in malls because of the fight between online and so-called brick-and-mortar retailers, said Dinaz Madhukar, senior vice-president and mall head at New Delhi-based DLF Emporio and DLF Promenade malls that house brands such as Louis Vuitton, Zara and Mango.
“We had a really good season and had planned to go slightly late into the sale season; but with other brands going on sale early, we have decided to start sales by the first week of January," said Anant Daga, chief executive officer at women’s clothing brand W.
Until this year, apparel stores hadn’t been nearly as badly hit by the e-commerce boom as their electronics counterparts, partly because shirts, trousers and skirts are much more varied than standardized technology products such as laptops and mobile phones.
But online retailers have been increasing their focus on apparel as it offers significantly higher margins than books or electronics.
Apart from offering deep discounts and increasing their advertising spending on fashion, e-commerce companies have significantly expanded their product selection and launched private brands to tempt customers into spending more.
Although e-commerce accounts for less than 1% of the total retail market in India, it is by far the fastest growing retail channel.
Online spending on apparel and fashion may increase to $2.8 billion by 2016 from $559 million in 2013, according to an April report by venture capital firm Accel Partners, which is an investor in Flipkart.
“Consumers only have a certain amount to spend on discretionary items and because of the massive discounts that online retailers are giving, consumers are spending a large part of their discretionary (expenditure) there," said Timmy Sarna, managing director, DLF Brands. “For the sale, we aren’t planning to do anything out of the ordinary, as of now. But we’ll have to wait and see the consumer response and then react accordingly."
Kabir Lumba, chief executive officer at department store Lifestyle, said that the retail business in India is too large currently for stores to be significantly hurt by online retailers.
Lumba said, however, that the discounts in this year’s end-of-season sale are likely to increase by 3-4 percentage points.
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