The race to take fashion retail online

Guglani, who works with an event management company in Delhi, recently picked up a ₹12,000 bag from retailer DaMilano’s website. Last November, a shopping haul from Spanish retailer Zara’s app set her back by ₹6,000. There were also orders for a variety of things from TataCliq, Flipkart, Amazon and H&M. “Everything went online last year," said Guglani who is certain that she will shift to shopping more online.

That’s a big change in shopping habits: earlier, Guglani would spend more time in malls and stores, placing orders only sparingly on online shopping platforms. But now, online shopping is a habit that’s firmed up as Amazon ships her pieces speedily and Zara’s less-than-a-week delivery timeline is “very convenient".

Not surprisingly, back in stores, brands continue to scramble to sell their fresh inventory. With low footfalls at stores and stocks stuck at various warehouses, taking orders and getting customers to buy new clothes is nothing less than a logistical nightmare for fashion retailers.

India’s apparel retailers are set to report a record 40-45% dip in revenue for the full year, according to India Ratings and Research. This has led to an on-the-fly pivot online for most retailers, as they move online to more marketplaces, upgrade their own online presence, and add features such as contactless payments and digital checkouts at stores.

Initially, retailers like Reliance Retail Ltd experimented with WhatsApp video calls and e-catalogues with phone assistance in a desperate attempt to rescue sales. Many of these initiatives are still going strong.

Over the last few months, several brands have ramped up their online presence. Japanese retailer Uniqlo that opened its maiden store in India only in 2019 rolled out an interim shopping site in October 2020. Sportswear retailer Decathlon hopped onto Myntra ahead of the marketplace’s December sales as demand on its own website surged.

Retailer Lifestyle’s in-house team worked on revamping its website; while online retailer Myntra on-boarded a record number of retailers for its biannual sale event hosted in December. In October, H&M said that compared to last year, its customer base for online shoppers grew by 60%, largely driven by new shoppers online.

“There has been and there will be a very distinctive shift with sales moving online, whether it is done through e-commerce marketplaces or done through brand-led sites," said Rachit Mathur, India leader, consumer and retail practice, at the Boston Consulting Group (BCG).

Mathur expects that in the mid- to long-term for some brands, online sales will be upwards of 15% to 20%. However, the largest chunk of that will go to marketplaces, including home-grown marketplaces too with branded websites benefiting only very little, he said.

India’s apparel and accessories market is currently estimated at $67 billion, according to data released by Technopak earlier this year. This forms over 7% of India’s overall retail trade. For apparel and accessories, share of online sales is currently estimated at roughly 14% but is set to grow to 18% by 2025. In the same period, 24% of footwear sales will shift online, Technopak estimates suggest.

Clearly, there’s a risk of massive disruption. Retailers will have to quickly build more sophistication with online channels, including battling issues around fits, returns, putting the full-price of products online and ensuring speed of delivery as they compete for a share of fashion shopping with Walmart-backed Flipkart, Myntra, Amazon, Ajio and stand-alone sites like Zara and H&M.

The customer is now used to a certain experience online and can be unforgiving. Take, for instance, Guglani—wrong sizes, late deliveries and concerns around her last pair of Nike sneakers being fake have shaped her online shopping journey and even kept her away from some shopping apps.

Omni-channel wave

We expect the future consumer to expect a seamless experience across online and offline worlds," said Vishak Kumar, CEO, Madura Fashion & Lifestyle, part of Aditya Birla Fashion Ltd (ABFRL). Madura Fashion & Lifestyle sells some of the most notable brands in India, including Peter England, Allen Solly, Van Heusen, among others.

Kumar said the retailer is anticipating a retail ecosystem with price parity across channels. “We also expect consumers buying a lot more fresh ‘new arrivals’ online than they do currently. Delivery times will get crunched with a lot more of it happening through the nearest physical stores to the customer," he added.

In its September quarter earnings update, ABFRL said it is rapidly scaling omni-channel coverage—hyperlocal deliveries, buy online-ship-from-store feature and WhatsApp commerce. For example, its Peter England hyperlocal program can deliver to shoppers within four hours. By September, ABFRL’s lifestyle brands’ contribution via online sales was three times over the first half of the previous fiscal. That said, Kumar said it is too early to call out the death knell for offline retail as millions of shoppers upgrading to branded apparel will still need stores to “touch and feel" clothing.

ABFRL’s strategy represents what scores of retailers did as the lockdown unfolded. Since late-March, ANS Commerce that manages online commerce for a range of retail brands said it has seen an acceleration in queries from small to mid-sized retailers who are now seeking a range of solutions to get online.

ANS Commerce has on board close to 12-15 fashion brands such as Chemistry and Turmswear helping them with a variety of services such as warehousing and e-commerce marketing. “Some of these were brands that already had an online presence. It was maybe not scaled or leveraged completely," said Vibhor Sahare, CEO and co-founder, ANS Commerce. “We noticed the acceleration in the closure of those deals because suddenly now even the top management is a lot more involved because everyone knows how critical digital is," he said.

The Landmark Group-owned Lifestyle Ltd upgraded its own website earlier this year as the retailer’s shoppers moved online. The retailer has over 80 stores in India—its plans to add more stores remain intact. Sales via Lifestyle.com currently account for 5% of the retail chain’s sales. It is also working on widening its inventory online, offering consumers many more brands on its website. Over the next two to three years, the retailer expects Lifestyle.com to contribute to 10-15% to its business.

Rishi Vasudev, who joined Lifestyle International Pvt. Ltd as CEO last year, said that the shift from unorganized to organized retail will be led by online and value retail. “That’s where a lot of youngsters from tier 2, 3 and 4 cities are really getting online to buy at good prices. Premium consumers will continue to prefer shopping in malls department stores, as well as the brand outlets," he said.

Traditional retailers that built their presence in the country back in the 1990s are upgrading too. Benetton India will launch a website by April 2021. “Definitely the buying behaviour has tilted towards online in the last 8-9 months. But looking at the size and demography of India, every channel will do well," Sundeep Chugh, MD and CEO, Benetton India said.

The marketplaces

While the world’s top retailers such as H&M, Zara and Uniqlo might be able to get more sales via their own sites, most retailers will have to work with online marketplaces one way or another.

In October, Walmart Inc.’s Flipkart agreed to buy a 7.8% stake in ABFRL for ₹1,500 crore. The two said they would work on deepening the availability of the latter’s formal wear brands and co-create new youth-focused brands—selling them to millions of Flipkart shoppers in tier-2 and tier-3 cities. In July, Flipkart also bought a stake in Arvind Youth Brands, the owner of the Flying Machine brand, for ₹260 crore.

Reliance Retail is slated to own Future Group’s retail business along with some of its popular formats such as Central and Fashion at Big Bazaar. It owns AJIO that has risen to become a key player in the fashion e-commerce space.

Myntra, a first mover in the online fashion space, is in the spotlight too. The lockdown has boosted its business. Though the year has been choppy, the retailer is now being courted by several domestic and international brands for exclusive tie-ups, according to industry executives. “We have started seeing demand coming in from tier-2 and tier-3 cities; new kind of fashion categories have emerged," said Amar Nagaram, CEO, Myntra.

The challenges

Most brands Mint spoke to reckon that it makes better sense to sell through a marketplace as stand-alone websites need a large amount of brand loyalty. But some have built a strong niche—in line with the sway they hold over shoppers globally.

For instance, Zara with its over 20 stores in India sells through its apps and website. Its few sales events every year are extremely sought out among the more affluent shoppers. H&M, on the other hand, has a wider presence here. In 2018, it tied up with Myntra apart from selling through its own website. Both Zara and H&M declined to comment for this story.

Former H&M country manager Janne Einola, who helped build the brand in India, told Mint over a call that retailers such as Amazon have altered consumer expectations on delivery timelines when it comes to shopping online. “This will remain a key challenge for fashion brands building scale online here. Many brands are very far away from cracking it," he said.

Going forward, online will be the bigger channel for many brands “but it doesn’t take out the physical store," he added. New product trials and fits will still happen in physical stores with repeat orders moving to digital stores. “You also need physical stores to tackle the delivery challenges in India, so the store will also be a hub to deliver online orders and cut down on delivery times," Einola said.

But the task of ensuring a hassle-free shopping experience—whether in-store or online or both—is going to be an arduous one and not all will succeed. Retailers, both online and offline, will have to step up. “Fashion is a touch-and-feel category. Physical shopping is a very enjoyable experience for most consumers and replicating that online is one of the challenges," said Madura’s Kumar.

Moreover, India lacks a universal size and fit. Returns make online orders pricier for retailers and perfecting them will only help their business become more efficient. Also, online is not a discounting platform anymore as consumers become more mature.

Fact is, apparel retailers are going to have a tough time navigating changing consumer needs going forward. “They will need to invest in expensive things like augmented reality, they will need to then set up supply chain in a manner so that they can give hyper-localization experience to shoppers, a practice that in some form or shape exists in the grocery trade," said Shashank Shwet, partner, design thinking and digital transformation, EY India.

The market is indeed ripe for certain technologies such as AI for better sizing and fits that could potentially help retailers lower their return rates and customers find better fits online. But all this costs money.

Ask Bigthinx, a fashion technology company, that works with foreign retailers, providing them tools such as body scanning and visual body avatars to help shoppers of these brands find the right fits. The company is working on a low-price tech solution for Indian retailers, but is finding it tough to get customers. “That’s simply because there’s a lot of hesitancy towards technology and pricing on behalf of Indian retailers," said Shivang Desai, Bigthinx’s CEO.