Fashion is one of the top selling categories of the ecommerce industry; the others being mobile phones and other electronic accessories. Apparel contributes to 40-45% of the market, followed by footwear and fashion accessories.
As a result, the online fashion industry is not only crowded but is also dominated by a handful of big ecommerce players. Flipkart leads the pack with Myntra and Jabong in its kitty. Then there’s Amazon, Paytm, Snapdeal and Shopclues, each with their respective virtual fashion stores. After Flipkart, Amazon’s fashion game is on point and the strongest of all.
This has intensified the survival battle of niche fashion etailers.
Niche fashion etailers trying to stand out against the big fishes
To combat the losses, niche players have decided to rely on cross-selling. The idea is to explore the unexplored market by stepping into fashion categories that the big ecommerce companies are not focusing on.
So beauty etailer Nykaa is selling lingerie and e-fashion start-up Voonik is looking to sell beauty products. Their aim is to increase cross-selling opportunities, which would ultimately boost sales & revenue.
Voonik’s CEO Sujayath Ali shared, “We will operate beauty as a zero margin category. Voonik will charge just the cost price plus whatever is needed to fulfill the item.”
Who is selling what now?
- Nykaa has collaborated with Pretty Secrets, Clovia, and Zivame and Pretty Secrets to sell sleepwear, lingerie and other accessories
- Voonik has listed beauty products and daily skin/body care essentials on its platform
- Limeroad has ventured into men’s wear product category
While niche fashion players expect that cross-selling would enhance their business, they are also aware that it wouldn’t become their main revenue stream. Therefore, focus would still be on their core product offerings. The other product categories would act as a tool to add additional value to their portals.
“In my business plan, I have not put any contribution from beauty as a category towards revenues or profit and loss. The only contribution will be due to increased cross-sell opportunities where revenues in other categories will go up,” asserted Ali.
Speaking about their cross-selling strategy, Nykaa’s CEO Falguni Nayar said, “The rationale to (introduce) this (category) was not for growth since we are growing at 350% annually. The main advantage of this is that our customer cohort being strong, we felt that customers wanted to buy more from our site.”
But is it a viable business model?
According to industry experts, no!
Investors and analysts believe that cross-selling for the sake of it would only push niche players further away from profitability. With high rate of returns and severe fund crunch, it might prove detrimental for small online fashion businesses, according to experts.
An investor stated, “Unless they intend to jack up prices, no business should opt for zero margins. If you are doing so, then it needs to be a differentiated product or service where there is a comparable and so on.”
Who’s right – niche fashion etailers or industry experts?