Mayu Saini, Women’s Wear Daily (WWD)

New Delhi, 11 May 2015

The future of fashion shopping in India appears all about about m-commerce.

Top fashion retailer Myntra – which was acquired by India’s biggest e-tailer Flipkart in May 2014 – on Monday said it will go mobile only beginning Friday.

"Myntra is taking the first step toward the future of fashion shopping," the company said in an e-mail to its customers.

This means that the desktop site will give way to mobile and tablets.

Industry analysts are divided about the impact, saying it will be a balance of a loss of some customers versus greater personalization, another strong trend for the immediate future of e-tail.

"We believe fashion is a very personal experience. Your sense of style, the brands you wear, the trends you choose to follow are unique to you. What inspires you to look good changes and evolves every day," the e-mail from Myntra stated, explaining the move. The e-tailer added that the mobile platform would help create the best fashion experience because it is "truly personalized and engaging."

Citing the changing curve of users, and their preference for shopping on a mobile platform, Shamik Sharma, chief technology and product officer of Myntra, said earlier this year that 90 percent of traffic came from mobile phones.

"They seem to be banking on the fact that the short-term loss of Web browser customers will be compensated by the faster growth of mobile usage, as well as from better conversion of app traffic by more clearly customizing the experience for the mobile customer based on location- and phone-based data," Devangshu Dutta, chief executive officer of management consultants Third Eyesight, told WWD. He warned that it was important to be mindful of the fact that a smaller number of Web browsers are generating a disproportionate share of the sales, perhaps skewing the figures, and that a mobile page is not always optimal for a customer to view the product, which could negatively impact conversions.

As e-commerce companies increasingly focus on customers in smaller cities – where mobile connections are the easiest and most prevalent form of Internet access – and target customers between the ages of 17 and 25, the faster, more intuitive navigation on mobile apps is becoming a stronger pull.

Last week, a study by Goldman Sachs estimated that the e-commerce market in India would account for 2.5 percent of gross domestic prod by 2030, and grow 15 times, to $300 billion, by then.

The report noted that online retailers would need to raise $20 billion over the next five years to sustain growth. Although Flipkart has been the fastest growing e-tailer in India, Amazon India, Jabong and Snapdeal have seen a slew of investments and have been growing fast in the fashion space as well.

The report noted that the "domestic online retail industry is evolving into a hyperlocal on-demand market," with the growth of affordable smartphones, improving infrastructure and a propensity to transact online.

Myntra’s move to ease out the desktop version appears geared to growing the hyperlocal segment, and a new focus on technology – last week it acquired Bengaluru based mobile app-enabling company Native5 Software Solutions Pvt Ltd.

The retail market in India was estimated at $550 billion in 2014 and is expected to double in size by 2020, according to a recent report by UBS Securities.

The merger of two giant brick-and-mortar retailers – the Future Group and Bharti Retail – last week is expected to create a $2.3 billion retail business with 570 stores, challenging both online and brick-and-mortar formats to hone their marketing plans and find niche segments.

(Published in WWD.)

Mihir Dalal, MINT
Bengaluru, 9 May 2015

Because India doesn’t allow foreign direct investment in online retail, Amazon works as a marketplace, connecting customers with third-party sellers on its platform. The company has roughly 25,000 sellers currently and is adding a few thousand sellers every month.

“The intention is to expand this (global shipping for Indian sellers) to other markets. We did a pilot first and we found that this was very attractive for sellers, manufacturers and entrepreneurs. There are areas where there’s friction for sellers such as logistics, product compliance and tax because regulation is different in different countries. We are developing a network of third parties to provide these services to sellers,” Deshpande said.

Since its launch in June 2013, Amazon India has established itself as the biggest threat to local rivals Flipkart and Snapdeal. Until now, Indian companies haven’t ventured abroad, primarily because the size of the Indian market is large. E-commerce sales may exceed $50 billion (around Rs.3.2 trillion today) by 2020 from $4.47 billion last year, financial services firm UBS said in an April report.

Currently it’s unclear if international sales will become a large business for Amazon India. Paytm, another marketplace, is also exploring ways of cross-selling with China’s Alibaba, one of whose affiliates bought a minority stake in Paytm earlier this year.

“This service will help Amazon differentiate itself from local rivals because it offers sellers access to a much larger customer base,” said Devangshu Dutta, chief executive at consulting firm Third Eyesight. “Another advantage is that when you’re selling internationally there’s no margin pressure, compared with selling in India, where competition is intense. Sellers have pricing power and flexibility, and this obviously increases profitability. For Amazon, it’ll depend on whether they can scale this business up to a meaningful level.”

US-based Amazon, the world’s largest online retailer, already offers the global selling service to sellers in its international markets. Such cross-border selling accounts for about a fifth of its overall third-party sales.

Amazon India executives are working with their counterparts in the US and UK to make product recommendations to sellers and help them improve product visibility on the Amazon site. Apart from connecting merchants with third-party logistics providers, Amazon logistics services will also be available for sellers, said Deshpande.

“We think this is a huge opportunity. There are 25 million Indians outside India. And then there are other customers who want to buy stuff from India. Some of the early categories that we’ve identified are apparel, shoes, jewellery, health and beauty products, home furnishing and cricket bats, but the goal is to expand it to the full category set,” he said.

(Published in MINT.)

Purvita Chatterjee, The Hindu Businessline
Mumbai, 4 May 2015

With FDI in retail stuck in regulatory hurdles and e-commerce players snapping at their heels, brick and mortar retailers are looking for consolidation to get better margins and profits.
At a time when consumer demand has not exactly been upbeat, the two back-to-back deals among the biggest offline retailers over the last two days signals that more mergers and acquisitions could be in the offing.
While the merger of Pantaloon and Madura Garments was about restructuring the retail business of Aditya Birla Group to help Pantaloon reduce debt and get profitable, in the case of Future Retail and Bharti Retail, the merger signifies the latter’s decision to offload the retail business to drive scale and synergies with a bigger retailer.
In October 2013, Bharti Retail had called off its retail joint venture with US giant Walmart.

Govind Shrikhande, Managing Director, Shoppers Stop, said: “It has been a great move on the part of Aditya Birla Group as Pantaloon had always been challenged to make money. But in the case of Bharti Retail, it was possibly looking for a way to exit the retail business with its decision to merge with Future Retail.”

In fact, unlike the Future Group, retail had never been a core business for the Bharti Group since it had to spend heavily behind its telecom business. “The senior management of Bharti would have realised that it needs to focus on its core telecom business. It had been spending heavily on spectrum auctions. Besides, consolidation has been on the cards for brick and mortar retailers in areas like fashion where discounts in e-commerce had been affecting their profitability,” says Devangshu Dutta, CEO, Third Eyesight, a retail consultancy.

Besides, with FDI getting almost ruled out and foreign investors not exactly evincing interest, it was a matter of time before a series of domestic consolidation started in the retail industry.

“Aditya Birla Group wanted to get bigger and stronger through the merger of its two companies and in the case of Bharti and Future retail, the merger was all about getting scale and synergies when international investors were no longer interested in forging joint ventures due to several clauses related to multi brand retail,” observes Mohit Bahl, Partner, Retail Practice, KPMG.

Domestic players like Bharti Retail and Future Group can now ride on each other’s strengths. As Rachna Lath, Leader –Retail & Consumer, PwC India, added: “With the FDI in multi-brand retail still not a reality, a consolidation among the Indian players has long been on the anvil.

“This transaction gives both the players synergy and scale both in terms of geographical access and supply chain to manage the back end.”

(Published in The Hindu Businessline.)

Sharleen D’Souza, Financial Express
Mumbai, 3 May 2015

Having spent the past few years on customer acquisition, e-commerce players are now moving into the next phase of growth, with profitability as the aim.
Not only are the discounts tapering off, bigger players like Flipkart and Amazon have started levying delivery charges on certain products, irrespective of the price.
ecommerce
Till last year, e-commerce players only focused on creating a customer base by offering a higher level of discounts than brick and mortar stores. With that in place, now they are looking to reap the profits. For example, Myntra, a fashion and lifestyle retailer, hopes to see an increase of 300% growth based purely on the customers it has acquired over the last few years.
“Bigger e-commerce players are now focusing on moving towards profitability after burning cash all this while in an effort to acquire consumers. Many have started to decrease the level of discounts offered on various categories and have also started to charge for delivery, which is a way for players to generate revenue,” said Devangshu Dutta, chief executive at Third Eyesight, a retail consultancy firm.

A Snapdeal spokesperson said ultimately all businesses will look at profitability, but growth will not take a backseat. “Profitability is the ultimate goal for every business. However, currently our focus is on growth. Our vision is to build the largest digital commerce ecosystem in the country. The company has grown 600%, or seven times, in the past 12 months. We will continue to work towards not just maintaining, but bettering the growth momentum this year as well. Fashion, electronics and home categories will be the largest contributors to this growth,” said the spokesperson.

Some players have also started their own in-house brands and are witnessing higher margins from them. Private labels tend to give at least 20% higher gross margins than main brands. Main brands gross margins are at 40-45%, but private lables give e-commerce players an advantage, as they yield around 65% gross margins.

“Approximately one-fourth of our business is currently driven by Myntra’s in-house fashion brands. Some brands like Roadster, Dressberry and Mast & Harbour have grown significantly and are already category leaders on the website. Leveraging this opportunity, we are now building them as standalone brands that can grow beyond the Myntra platform,” said Abhishek Verma, head, Myntra fashion.

“E-commerce players are now tactfully reducing and offering select discounts,” agreed Arvind Singhal, founder and chairman of Technopak Advisors.

While Flipkart has started including delivery charges while displaying the price of the product, Amazon, which offered free delivery even on items costing less than Rs 100, now levies a delivery charge on a total bill of less than Rs 499.

All these years, sales may have been increasing for e-commerce players, but their losses have just widened. Flipkart India’s net sales rose to Rs 2,846.13 crore compared to Rs 1,180.07 crore in FY 13.

“The Indian e-commerce space is still at a very nascent stage with significant potential for innovation and growth. As a company, we are focused for the long term. We firmly believe that customers will continue to shop with us as long as they don’t find a better shopping experience elsewhere. We are, therefore, focused on ensuring that our flywheel that impacts customer experience keeps spinning. Our strategy is that you start with the customer experience and work backwards from it,” said an Amazon India spokesperson.

(Published in Financial Express.)