India is expected to generate $100 billion in online retail revenue by 2020, of which $35 billion will come from fashion e-commerce. According to Google India research, online apparel sales are set to grow four times in the next four years, from just under $9 billion currently. At the same time, the price paid by Indian fashion etailers eyeing the jackpot is equally enormous. Investors are bullish on fashion etailers but only on those within striking distance of profits as there is massive opportunity in fashion e-commerce.
Investors say it is Fear of Missing Out (FOMO) that’s driving the market. A recent Google-AT Kearney
report estimated that by 2020 there will be a five-fold jump in the number of women shopping online and apparels and accessories will overtake consumer electronics to become the largest online category. Shubhankar Bhattacharya, venture partner at early-stage investing fund Kae Capital said that fashion remains an evergreen category in shopping that through its purchase value and frequency represents a large market.
Consolidation will be one of the defining features of a segment where bigger players will gobble up smaller rivals. While building a brand and acquiring customer mind-share in fashion has typically proved expensive and time-consuming, acquisition is a relatively easier way for bigger players to consolidate their position across different segments as well as stay focused on their core proposition
Sujayath Ali, cofounder of Voonik
which has raised $27.5 million in funding so far said that while electronics has wafer-thin margins, fashion offers healthy margins. Potential notwithstanding, the segment offers a fair bit of challenge to incumbents, the biggest being the high cost of return and orders of low value. Ankit Bajaj, cofounder of social fashion discovery platform Shopwati said that most of the fashion products selling online are fast fashion, which doesn’t make it easy to turn profitable.
Another huge challenge is the high burn rate as fashion etailers get into a frenzied scramble to hook users with discounts. Nidhi Agarwal, founder of Kaaryah
, a brand of western, non-casual wear for women said that overspending on ad budgets to obtain sporadic, top-of-mind awareness is not sustainable. She added that dropping prices to gain scale may be great to show GMV but may not be the best way to build a brand where new customer relationships are a matter of consistent experiences.
In the New Year, the equation is clear-cut: Fashion line plus bottom line will translate into a lifeline.