Do you have a preference between Amazon and Walmart?
I don’t want to comment on that.
What will be the implications for you?
Overall e-commerce is at the beginning of an S curve with penetration levels of 3.5-4%. It will grow to 17-20% in the next four-five years. This may go up or down by a couple of years but it’s getting there. Therefore we need long-term capital to make long-term bets in this kind of an industry.
Where is the growth coming from?
In India beyond the top 30-40 cities, you have actually no mall space. People will have knowledge of brands but they may not have access. Therefore in many ways we may actually bypass modern retail as people have smartphones and get into an e-com-based retail, especially in tier II and beyond cities. This is exactly where Myntra is seeing a lot of growth.
What will be the building blocks for you?
Myntra ended the last financial year with gross merchandise sales value of $1.2 billion. We are growing ahead of the market at 50%. The market grew at 40%. In this current financial year we expect to grow in the same range of about 50%. We are finding that the consumer is very spread out. So 55% of my revenues come from tier II. About 45% roughly is women and 55% is men, which is a good ratio if you consider the number of smartphones men own is much higher than women.
What about discounts? It remains the primary driver for people coming online.
We have reduced the level of discounts over the last few years by 8% each year on an average.
By when will you be profitable?
I don’t want to give a timing to it, as we are also investing in a bunch of whole new categories such as personal care, home, jewellery and wearable technology. All of this is coming out of our own investments. We just acquired Witworks (a Bengaluru-based start-up focused on producing smart wearable devices). Over the next one year we have a road map of new releases.
How do all these different pieces fit into your overall strategy?
We are trying to redefine fashion in India. In my mind there are three parts to redefining fashion. First is selection, second is around consumer experience and service, and the third is about engagement with customers.
How big is the opportunity?
Today the fashion and lifestyle market in India is roughly about $100 billion—online and offline everything put together. But 80% of this is unbranded. If you look at other markets, as the GDP goes up then the 80% will move to 30% as people move towards branded fashion. So, if you look at the next 10 years there will be a number of brands that will come out of India that will have global scale. We feel that given our distribution, reach, our consumer insights and data, we can help create three of the top 10 brands in India.
What do you mean by selection?
If you take selection, there we have the Brand Accelerator Programme under which we are trying to partner with small entrepreneurs to find small digital brands and scale them. Over the next three-four years we will get 5% of our overall revenues from our Brand Accelerator Programme. Then we have our private labels which contribute to about 25% of our overall revenues. Incidentally, Roadster, one of our largest private brands, will be a $100 million brand this year. Lastly, we also have about 30-40 exclusive brand partnerships and we will continue to grow this. So, this proposition is attractive for consumers. We are sort of defining what fashion is for consumers in many ways.
How would you define India’s fashion sense?
There are a few trends that we are seeing: the first is genderless fashion, it is more than just a trend, it is a mood and it is part of a gender-bender movement. The second is sustainable fashion. The textile industry is the biggest polluter in the world, after oil. So, some fashion players are also experimenting with innovation in materials and sustainable fibres. My own sense is sales of luxury goods will continue to grow. It’s anyway growing faster in India than anywhere else in the world.
You are also looking at an omnichannel play for brands like Mango and Esprit with whom you have a 10-year master franchise agreement. What’s the plan?
In the fashion space, omnichannel is the buzzword. That is why we are opening physical stores. With these partnerships we are defining how the brand is built in India, from store openings to selection for which we are using our data. For instance, we opened our first Mango store in Kolkata, which is unusual. But we saw a lot of searches coming from there. We will get a couple more brands in these kinds of partnerships. We will also expand our private label brands like Roadster offline. We already have one store and will push that to 10-20 stores in the next 18 months. For Mango we currently have 10 stores across India and will open 25 more in a span three years. In June we will open our first Esprit store and have 15 stores in next three years.
Will you look at something like a Myntra store?
Yes, fashion is a high involvement category and we haven’t done this as yet. We haven’t yet decided on the format—it’s still in the making—but what you can expect is a lot of in-store tech. We are experimenting with various formats; it could just be an experience centre with quick deliveries. What we have seen is that a physical store is not a huge sales driver but it helps increase our online sales as market shares improve.
Can we expect more consolidation?
If you look at it, internet traffic is starting to consolidate. In fashion, after Myntra and Jabong, the next one will probably be one-tenth of our size, but don’t take my word on it and check it out for yourself. So, I don’t think we will do any more acquisitions, as there aren’t that many verticals. The acquisitions we are looking for are potentially in the brand space and technology.
Will any of your plans change following the imminent acquisition?
As far as I know there will be no change, independent of who the new investor is. There will be no change in the direction in which the business is going. We are not pausing on anything.
Private label brands work because of their lower pricing.
Not really. We have built Roadster as a national brand. Likewise with HRX, the brand with Hrithik Roshan and All About You, which we have built along with Deepika Padukone. All of these are not based on price, it’s based on fashionability, brand aesthetics, distribution reach and the fact that we have better consumer data. The others, you are absolutely right. Private labels is about pricing it appropriately, therefore it gets a good sell through.
How are you enhancing the consumer experience at Myntra?
One of the proudest things we achieved last year is not my GMV number but my Net Promoter Score (NPS)—a measure of consumer experience, it’s the number of people who promote you and the number of people who detract you—at 52, it’s the highest among the industry and it has consistently grown. The reason it’s gone up is we continue to innovate. We are doing faster deliveries, not by air shipping but by forward deploying the inventory. What do I mean by that? Before a customer buys, we predict what they will buy and we move the stuff to the nearest distributor. Another element of what we are trying to do with service is the try and buy. So, a person can order up to three sizes for a style and see which fits best and keep that one piece and return the other two. We have deployed this in 25 cities and have seen our NPS go up by eight-nine points after deploying this feature. Our return ratio rate on the platform is about 20%. We are using artificial intelligence (AI) for predicting returns.