What are the three trends that you see shaping up e-commerce (from the fashion point of view) over the next five years?
Abhishek Samdaria: More and more retailers will limit stocks and try to focus on customised merchandise in every major product category. Each collection will become theme-specific in order to give variety to customers. Pricing will play a major role in ecommerce going forward, differentiation for money spent will be the key.
Varinder Singh Jawanda: Fashion e-commerce still makes up a small percentage of the overall fashion retail industry, but as more and more people turn to apps and websites to browse, buy and discover clothes, investment in the space is climbing steadily. Over the passing years and with the developing technology, various trends are shaping up: mobile commerce growth is explosive; the influence of the online channel extends to offline sales; mobile is allowing traditional retailers a new chance to play catch-up.
Nitin Bhatia: Try and Buy that Myntra recently introduced is an interesting concept and may become a norm for fashion e-commerce in next five years much like what COD did to the industry. However, this can only be successful for high margin items for retailers as there is a high cost involved in such a service. Hence, unlike COD, this service can only be offered on a very few items being sold by retailers. Brand consolidation is also on the cards. There are a lot of domestic brands that have been launched in the past couple of years. Some of them are already facing the heat of an ever-changing e-commerce industry. The next five years will show us some domestic fashion brands turning into very successful and reputed international brands treated at par with their foreign counterparts, while a number of other brands may shut shop too.
Rahul Bhadani: (i) Growth in online fashion retail consumers; (ii); recommendation and social activities; (iii) price war and quality issue in some segments.
Deepak Jain: Personalisation of user experience; algorithmic curation (With 4 million+ SKUs in the market, it is paramount to curate the top products so that user does not feel like buying from a catalogue); trial room kind of experience.
Please do elaborate on any one of the above.
Abhishek Samdaria: The major issue in any fashion retail business is always excess or dead stocks. This is a major reason why most brands fail to make a mark in the market in the long run, as most of their resources get exhausted due to unsold leftover stocks. By limiting this problem, a company can succeed in the retail market. Going forward, a lot of technology, research and development have to be induced in working so as to minimise wastage/leftover stock and optimise sales with stock in hand.
Varinder Singh Jawanda: (i) Mobile commerce growth is explosive: Purchases made using a smartphone or tablet rose 48 per cent year-over-year (YoY) in the second quarter of 2016 to about $8 billion. That's three times faster than desktop-based e-commerce and the fastest increase in mobile commerce spending since the first quarter of 2012. (ii) The influence of the online channel extends to offline sales: The majority of all consumer purchases are either influenced by online research or actually occur online. (iii) Mobile is allowing traditional retailers a new chance to play catch-up: Using smartphones and tablets as shopping devices is a relatively new trend, and legacy retailers are using it to catch up to the original e-commerce giants.
Ashish and Aashray: We think augmented and virtual reality will become a huge part of fashion e-commerce. The ability of technology to figure out the right size for customers and for people to see what clothes that would look like on themselves before they purchase it will be huge. As the technology is being developed we see virtual fitting rooms becoming a huge part. That being said, a lot of e-commerce players will start using an omni-channel approach to cater to a larger audience. This will also allow integrated marketing across multiple channels and devices.
Deepak Jain: Currently, the online fashion sites show the same catalogue to everyone. It does not matter if it is a quirky teenage girl or an elegant lady or a corporate woman. All get to see the same products. This results in highly suboptimal user experience wherein every user sees a lot of “not so relevant” products. The solution lies in the system capturing and understanding every individual’s fashion taste through her activity on the site/quizzes/other sources. And this personalisation needs to keep improving with time so that the suggestions keep getting better and better.
What are the three bottlenecks for e-commerce in fashion?
Abhishek Samdaria: There needs to be a mechanism to reduce returns from customers. Online marketplaces need to develop quicker systems to upload more and more brands on their networks. Payment cycles need to be supplier-friendly.
Varinder Singh Jawanda: Few obstacles for companies expanding into global markets are: sizing and fitting issues; digital literacy and consumer connect; adding automation to eliminate bottlenecks.
Nitin Bhatia: A survey recently confirmed what every fashion e-commerce companies/brands felt and experienced for a long time: more than 50 per cent customers won’t shop online if there is no discount. Brands that sell in stores as well as online have a deadlock kind of situation. Without discounts, you can’t have better sales online and with discounts you can’t cover costs offline. Listings or cataloguing process proves to be a big challenge too. All our sales partners have different ways and formats that we need to provide them a catalogue in. This in itself is a tedious task, but what causes the most pain is that these sales partners have not been able to offer a better and faster method so far, and it has become an even more time-consuming task. The number of days it used to take to make a catalogue live has only gone up in the last 12 months.
Rahul Bhadani: Product returns; touch and feel factor; replicas and duplicate creation ruining customers’ trust.
Deepak Jain: Product discovery, sizing issues, inability to see how the product will look on the user.
Please do elaborate on one of the above.
Abhishek Samdaria: Special emphasis needs to be put on how to handle customer returns as it becomes a major hassle for the manufacturer. Sometimes the goods are not in a good condition or they have been used and then returned which makes it difficult to re-use these products. Thus, the manufacturer has to bear heavy losses in such cases.
Varinder Singh Jawanda: Sizing and fitting issues: Sizing & fitting is one of the inherent problems for not just customers shopping online, but also for online retailers. Many retailers have tried to dig deeper into the problem and find a solution to break this barrier between fashion brands and shoppers. Years of attempts to standardise sizing have been fruitless; fitting people into rigid size “frames” seems impossible.
Digital literacy and consumer connect: With Narendra Modi’s Digital India campaign, e-commerce market is showing signs of boom; but when we compare it with the digital literacy of the consumers it fails to show the same sign. There is a major chunk of population i.e. 147 million who are still using feature phones. The stalwarts of online marketplace should try and tap this sector by bringing out easy access to websites and helping in digital literacy. Also, try to fix the loopholes like fast customer service, return policies, payment security and to lure more customers for the website
Adding automation to eliminate bottlenecks Statistics show that warehouse managers and industry analysts believe that adding new material handling automation equipment can reclaim inefficient processes in the distribution centre. Lost time and productivity occur if there is no automation in the areas of picking, packing, sorting, loading and unloading.
The most labour-intensive operation in the warehouse is almost always picking a product. Managing the flow of orders in the pick area to minimise congestion and avoid bottlenecks is key to optimising labour productivity. Selecting the correct picking operation will help achieve the greatest operational efficiency.
Rahul Bhadani: Indian consumers are misusing the 15–30 days return policy of online stores. I read one article where sellers were saying: customers sometime return products after using them within 15 days of the return window. And sometimes poor packaging from customer side result in damage of products.
Ashish and Aashray: Since each brand has a separate size chart, making new customers trust the fact the products will fit them is very hard. Even though virtual trial rooms are being launched, we think the technology is not there yet to implement.
Deepak Jain: In offline retail, customers try on the SKUs before buying. There is a huge value in this process because “How the clothing will look on me” is determined here. In online shopping, this important part of the “fashion shopping experience” is missing, leading to a significant percentage of the population not buying online. E-commerce players need to offer a very liberal return policy as well as COD to circumvent this problem leading to huge costs.
How do you see GST impacting e-commerce in the coming days?
Abhishek Samdaria: GST will certainly reduce a lot of paperwork in the future which will in turn increase productivity of the company. The policies are still in the making, and it will take some time to have more clarity of the actual impact on the fashion industry.
Varinder Singh Jawanda: Under GST, India would become a common market and drive uniformity, reduce compliance costs. Due to restrictions on cross-utilisation of input of central taxes against state taxes there is price escalation due to taxes sticking to products sold. A number of e-commerce transactions are also undefined in tax laws (e.g.: e-wallet, gift vouchers, drop shipments, advance receipts, COD, etc.). With interstate transactions becoming tax neutral vis-à-vis local sales under GST, the warehousing strategy of e-commerce companies would also need re-engineering to meet client proximity needs and not be driven by tax consideration. On the positive side, pricing of product, profitability would be more predictable and agnostic to destination of customer. For e-commerce companies who buy stock, store inventory and sell, in place of 12.5 per cent excise, they will have to shell out 17–18 per cent GST, thus driving up prices. They will also be taxed on unsold inventory held in warehouses.
Nitin Bhatia: There’s a lot of uncertainty around GST right now. There are many questions that need answering before we can assess impact. For instance, the VAT rates currently for apparels are around 5 per cent but with GST the tax may be 18–20 per cent. This clearly may mean lower sales and margins both. There will be need of changes in technology that we use too—the customer facing as well as the backend accounting. We definitely need a change in our tax structure—here’s no doubt about that. We currently have so many different layers of taxation with such high complexity that the administrative costs are way higher than countries where GST is used. So, we are looking forward to positive changes to our tax structure but it has to be in a way that the cost doesn’t rise.
Ashish and Aashray: With the GST coming in play, we think it’ll solve a lot of our tax painpoints. First, the tax framework involving VAT, CST, etc will become a lot less complex, which would mean less time and money we would be invested into these issues. Second, inter-state movement of goods from one state to another is a nightmare for an e-commerce operator. The requirement of forms, way-bills, road-permits, etc, and meeting registration requirements for the e-commerce marketplace entity by certain states under the VAT/CST legislations for entry or sale of goods into the state has made the inter-state transactions extremely difficult.
How do you see foreign players / brands operating in the Indian e-commerce space through Indian portals? Is it too early to say anything? Or, do you think it’s a major challenge in the days ahead?
Abhishek Samdaria: I think it’s a very good thing to have foreign brands coming to India and selling products online. This offers a variety to Indian customers and also keeps the local players on their toes.
Nitin Bhatia: It’s a fact that there are only a handful of foreign fashion brands that have done well in the Indian e-commerce space. Others largely have been a failure. A large number of Indian customers do not connect with those brands because of no brand awareness, and then most are expensive. Indian e-commerce so far has been about economical shopping—you shop online because you are looking for a deal (discounts) or want convenience of getting things delivered to you rather than going out to shop. Foreign brands have not been able to offer economical shopping or deals; so people look for alternatives. I don’t see any challenge in the near future. This industry is growing at a rapid pace and there’s room for everyone who can sustain for a little longer period of time.
Rahul Bhadani: It is healthy competition not a challenge. And brands with quality products and services will win. Amazon is already giving a good battle to Flipkart and Snapdeal. With the entry of China’s Alibaba and Japan’s Rakuten, the competition will become tougher. I feel that small players will only be able to survive if they go for niche products. For example, handicrafts or handmade items are only available exclusively in India.
Ashish and Aashray: Even though there have already been multiple brands that have entered the e-commerce space through Indian portals for example: TopShop through Jabong. We think it’s too early to say anything as there is very little or no data to say how they are doing in India.
One of the biggest challenges that apparel e-tailers face is that of returns. What is your own experience?
Abhishek Samdaria: It is a major challenge in spite of the fact that we send our products after stringent quality checks, most of the times customers just return the product for no reason at all. This is a major problem, and needs to addressed urgently to strengthen online fashion business.
Nitin Bhatia: I believe there has to be a bit of acceptability around returns because they are now an integral part of our business. Return rates for us are in the range of 18–25 per cent. While we try to work out methods on improvements in this area, there’s not much you can do about impulsive shopping, guilt-based returns, courier returns, etc. Then there are those customers who order more items because they want to try at home and then keep the style/size they like the most and return the rest. I believe keeping a target of controlling returns up to 15–18 per cent by various means is a practical target but it will continue for now.
Rahul Bhadani: As an affiliate, we are too affected by product returns and order cancellations. As per our experience average order and commission rejection ratio is around 25 per cent, which we guess are due to product returns and order cancellations. Services like Myntra’s Try & Buy and Amazon’s recently introduced Inspect & Buy can add a touch and feel factor and allow trial of products before purchase. This can not only help to decrease the return ratio, but will also encourage more offline shoppers to enter into online shopping.
Ashish and Aashray: We have been lucky that we don’t get as many returns as other retailers.
Deepak Jain: We see 25–30 per cent returns on all transactions routed through us.
Worldwide, conversion rates are still less than 10 per cent. How do you plan to hike up conversion rates?
Abhishek Samdaria: We plan to engage specific audiences relevant to our brand themes through online as well as offline promotions.
Varinder Singh Jawanda: Product recommendation and personalized user experience are the key factors which we are planning to incorporate into our system. User-friendly navigation and easy accessibility of desired products are also some key aspects that automatically improve conversion rates. We are continuously improving our search feature and filter functionality for the same in our desktop and mobile version.
Rahul Bhadani: Yes, conversion rate is an important factor. Our advantage at looksgud is we showcase products from multiple stores at one place, offering more product options than a single store. We are expecting to get improvement in CR on looksgud as we are also offering price comparison of fashion products, discount coupons and offers from multiple stores and expert recommendations in all categories under one roof.
Ashish and Aashray: The best strategy is to have an organic approach; all marketing efforts need to data-driven and highly targeted. This ensures higher conversion rates and higher repeat customer traffic.
Size charts on websites are a nightmare to negotiate with. What do you think can be a way out?
Abhishek Samdaria: I think it will remain an issue unless we have customised products coming into production. The issue does not lie with the consumers as they can be of any size or shape. The best thing to do would be to alter production techniques in order to fit any size.
Nitin Bhatia: I think this can be improved to some extent by creating online catalogues by linking each product to other products. The customer’s shopping history then can do the trick. A shopping website/app should suggest the size to a customer-based linkage between the style being looked at and the style shopped in the past. For example, the app says if X product you shopped in the past was a nice fit for you; so, go for a size bigger in the current style.
Ashish and Aashray: As technology develops, we think in the next couple of years we’ll see e-commerce retailers using virtual fitting rooms.
Virtual styling and online fitting rooms that was talked about a few years ago have still not caught on. Same goes for customisation. Why?
Abhishek Samdaria: The reason lies in reluctance of businesses to experiment. If the mind of a creator does not open up to latest technologies, then it becomes difficult for such concepts to come forward.
Ashish and Aashray: It’s because the technology is not there yet. Virtual fitting rooms need to be more accurate and user-friendly for them to catch on. Customisation is extremely expensive compared to ready-to-wear. Only a few big players that have an infrastructure can do it.
M-commerce is on the rise, but navigating through catalogues both on mobiles and tablets is hassle some. Is there a way out?
Abhishek Samdaria: Targeted marketing to theme-specific audiences and engagement through social media like news articles specific to products, contests, games, etc, is one way to make customers browse through catalogues.
Rahul Bhadani: It is true that mobile traffic is constantly on the rise and this trend will continue. Navigating through catalogues is bit hasslesome, but introduction to smartphones with large screen will ease the task a little bit. But it may not offer same comfort of browsing on desktop. And Myntra’s u-turn from mobile-only to a desktop site is the proof of that. In the nearer future, we can’t expect the mobile-only strategy to work. So offering both mobile and web experience to consumers is safe play.
How much of social media do you use to promote yourself? What has been your feedback so far? Does it mean that you need not spend so much on advertising as you used to earlier?
Abhishek Samdaria: We do not rely heavily on social media as of now, but going forward it is going to be a major marketing activity. It is early to talk about the impact it has created, but surely it is an important marketing tool. Ad spends are an expensive affair and unless you achieve certain numbers, it is not feasible to advertise.
Varinder Singh Jawanda: We have been using multiple platforms such as Facebook, Twitter, Pinterest, Instagram, etc. In e-commerce, staying connected to your potential and existing customers is the key to success. Users irrespective of their age-group have registered themselves on almost all social media platforms. In fact, Facebook has become the most popular social networking platform in India. So marketplaces like ours have immense possibilities to grab users’ attention and increase their engagement with the brand. As competition in e-commerce is fierce, how much you want to spend depends upon what you want to achieve.
Nitin Bhatia: We do a lot of social media advertising, but my belief is it’s not enough for the brands that are not ‘established’ yet. If the brand already has a fan following, then the brand may choose not to advertise on other platforms to the extent in the past. For us, we spend more on other media than social because we want customers to see and notice us outside of social media too—this helps establish a brand image in customer’s subconscious. It’s, otherwise, easier for customers to miss us in social media ad space where really just everyone is promoting their brands.
Rahul Bhadani: The role of social media promotion has been significant for Looksgud. Interest-based targeting and demographics filters results in laser-focused promotion on social media. Facebook and Pinterest are among the leading social media sites as a picture is worth a thousand words in the fashion world. They are helpful for free traffic and conversions.
Ashish and Aashray: 80 per cent of our traction comes through social media. It’s a great way to reach a specific targeted audience. Its much more economical than traditional advertising as well.
Deepak Jain: We are using Facebook and Instagram for the same. Response on fashion is good on both the platforms. But Facebook provides a limited reach to your target audience; so you need to spend to get paid reach as well.
How much are you relying on apps? People, after all, can’t be installing apps for every brand in the market.
Abhishek Samdaria: We are not relying on apps as of now, but going forward I believe apps will also consolidate brands for a consumer. One app might offer ten different brands’ merchandise, but again specifics are the key.
Varinder Singh Jawanda: In today’s e-commerce industry, apps play a dominant role. If your brand has succeeded in gaining trust of people, your customers won’t mind having a more personalised and easily accessible platform of the same brand on their phone home screens. As such, we are witnessing increasing user engagement on our app.
Nitin Bhatia: Agreed, and that’s the reason we are contemplating not investing a lot on our own website and app. After all, we are a brand only and our focus will continue to be building this brand rather than a shopping portal or app. Let’s agree not all fashion e-tailers can become a Myntra, Jabong or Voonik, but a lot of brands can become a Zara, Forever21 or Mango.
Rahul Bhadani: It is very true that users won’t install apps for every brand in the market. That’s why we have kept our focus on desktop and mobile currently. And of course, Myntra’s u-turn from app-only to mobile-web plus desktop shows our strategy is right. Since we are an aggregator combining multiple stores and brands under one roof, users might require installing only our app instead of apps from all brands/stores. And we may think about introducing an app in the future.
Ashish and Aashray: We don’t rely on apps simply because it it requires the user to take an additional action (installing the app) to make a purchase. However, we are continuing to optimise our mobile website to make user experience better.
Deepak Jain: Absolutely. That’s why a lot of brands are now focusing on their web experience. We are also focusing on our web presence.
The discount war between portals and brick-and-mortar stores are eating into the margins of both. Do you see this ebbing out in the near future? What is your own policy on this?
Abhishek Samdaria: The mindset of the consumer is slowly tuned into discount-oriented buying. I still believe that if a brand is sure of its product, pricing and target audience, then discounting becomes immaterial. The consumer will anyway buy the product if they like it enough.
Nitin Bhatia: There’s a lot of consolidation that has happened in the fashion e-commerce space in the recent past and this is not good for brands. The current players don’t look like bringing down the discounting models soon, and so we need other larger players to come up and try some methods to boost sales even when there are no discounts. Agreed that always-on-discounts and regular shopping festivals are bringing more and more customers online, but there’s a clear need to slowly move away from regular and heavy discounting for all businesses to grow. We have plans to cut down on our average discounts by 10–15 per cent at least in the next 12 months.
How much hamstrung are you over logistics issues? How are you managing the supply chain? What’s the role of ERPs and warehousing in your scheme of things?
Abhishek Samdaria: Supply chain management is as important as a vital organ in your body. Without proper warehousing everything starts to fall apart in no time.
Nitin Bhatia: We have a very immature supply chain model in our organisation as of now, but the good part is we know what our key challenges are. This allows us to tackle the pain areas one by one as our budget allows. We are currently considering introducing another warehouse because of space shortage, and this will certainly call for a change in the way we do so many things including reviewing our technology/ERP—they are very crucial to managing business efficiently.
Ashish and Aashray: Even though we face our fare share of issues while managing all the pieces of the puzzle, our ERPs and warehouse management helps us monitor and manage the inventory. With regards logistics, since we tie up with third party vendors, it becomes extremely hard to maintain control over the customer experience.
Vendor management is another headache for Indian brands and portals. How are you managing this front?
Abhishek Samdaria: It is very important to be in direct touch with vendors and keep them in sync with the brand’s philosophy. The stakeholders of our company constantly review vendor performance and encourage them to be part of our brand’s inclusive growth.
Nitin Bhatia: Setting up a brand for online selling is easy, running it is not. The export work the vendors/exporters were content with earlier is no longer enough for them with too many ups and downs in the apparel industry. Additionally, they get swayed by the overwhelming ‘success’ of the e-commerce businesses and try to become a brand themselves. While a few of them may succeed, it causes turbulence because by the time they are clear in their vision, they may have done some damage to the brands (domestic buyers) and relationships with them. With no practical and easily enforceable copyright laws protecting brands, it is easy for vendors to recreate articles belonging to a brand they worked with. In addition, fashion e-commerce’s one major pillar is replenishment, and hence timely delivery of reorders is paramount. Ensuring timely delivery and high quality of goods take away a significant chunk of time spent of vendor management activities even though these are the most basic requirements.
Inventory management is crucial for e-commerce. How are you handling this?
Abhishek Samdaria: We have introduced technologies and softwares in our business that help us manage inventories. Once you get the hang of it, inventory management does not seem like a big task.
Ashish and Aashray: We constantly monitor our inventory and renew stock every couple of months. Predicting stock is an extremely crucial task that directly affects our business.
