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Business News/ Companies / Fashionara opts for flash-sale model to tackle competition

Bengaluru: Online fashion retailer Fashionara Enterprises Pvt. Ltd has shifted its business model to a flash sales-based format as it seeks to differentiate itself from bigger rivals, such as Flipkart-Myntra, and Amazon India, and survive in a fiercely competitive market.

Fashionara, which started out in 2012, experimented with flash sales late last year and then moved completely to the new model this year. The e-commerce company holds daily sale on products that are discounted anywhere between 40% and 70%.

Fashionara works with more than 1,100 brands, including Wrangler, Lee, Clarks and United Colors of Benetton and about 100 international brands that don’t sell in India elsewhere.

“We felt that we have a real chance of executing this because we have domain knowledge, knowledge of brands; we know how the fashion industry works, we’ve figured out when to pick up the product," said Arun Sirdeshmukh, co-founder and chief executive officer of Fashionara. “So we were well-placed and this format was relatively vacant. We’ve pivoted so that we stand for a much more sharper positioning for the customer."

Fashionara expects to do gross annualized sales, or gross merchandise value (GMV), of 400-450 crore this financial year from less than 100 crore last year, said Sirdeshmukh. GMV refers to value of goods sold and doesn’t account for discounts.

Fashionara was a distant third in online fashion sales behind Myntra and Jabong—less than a third of the size of these companies.

Flipkart, which acquired Myntra in May 2014, Snapdeal and Amazon quickly expanded their apparel offerings last year, leaving Fashionara in a vulnerable spot. Rather than compete directly with these companies, the online retailer moved to a flash-sales model.

The flash-sales model, however, has only seen mixed success internationally. While companies such as the US’s Rue La La and Gilt Groupe have raised funds over the past one year and reported strong sales growth, others have struggled to keep shoppers hooked. Websites such as Fab Inc. and New York-based Ideel were forced to sell out at fractions of their peak valuations over the past 18 months, after sales growth slumped and profits were elusive.

In India, too, it’s not clear whether such a model will work.

Over the past two years, sites such as FashionAndYou and 99labels have had to restructure their operations and cut costs in order to survive, after pressure from investors. Besides, even online retailers such as Myntra and Jabong offer deep discounts, almost on a daily basis, reducing the differentiation that a flash sales format can offer.

Fashionara is betting on stocking relatively fresh products, striking exclusive partnerships with international brands, offering curated content and providing high-quality shopping experience to differentiate itself.

Fashion is also a big market. The online apparel, footwear and accessories market in India was valued at $559 million in 2013 and is projected to reach $2.8 billion by 2016, according to an April 2014 report by Accel Partners, one of the investors in Flipkart.

“Historically, if you look at factory outlets selling discounted stuff, merchandising isn’t good, the way the products are kept isn’t appealing, stores are dirty. But a full-price store is. Why should there be a difference? We have dedicated pages for sales events (accessed via clicking on thumbnails on the site). These pages have videos on the brand, campaigns, celebrity images, and write-ups on brands. Also, we typically sell current season products, not stuff that is dated," Sirdeshmukh said.

It’s difficult to pull off a flash-sales model in the current e-commerce environment, said Harminder Sahni, founder and managing director, Wazir Advisors, a retail consultant.

“With everyone offering heavy discounts, the differentiation has become very tough. Consumers are bombarded with discount-related promotions on a daily basis, so it’s tough for a flash-sales site to stand out."

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Updated: 14 Jul 2015, 12:23 AM IST
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