Myntra wants higher discounts from vendors to achieve profitability

Competition is heating up in the online selling space and everyone is finding ways to maintain their lead. Myntra, leading online fashion portal, is now asking for more discounts from retailers and brands owing to their increased market share after the acquisition by Flipkart.

Earlier itself, some of the brands were giving higher margins to Myntra for their presence on the portal. But now Myntra is asking for more apparently, although the earlier margins itself were between 28% and 32%.

Now they have increased it outright to 36-38% and some weaker players are even asked to give 40% margins,” said a retail consultant who works with many brands. This was conveyed by most of the apparel, footwear, lifestyle and fashion sellers.

Solution: Higher margins from sellers?

It is common knowledge that consumers are spoilt with choice of deeper and deeper discounts. It wouldn’t be wrong to say discounts and deals are what set the balls rolling for online retailers. One of the most significant reasons for consumers to warm up to online shopping was the unbeatable discounts thrown at them from all directions in the online space.

Now discounts are the playing field for online retailers to attract consumers. Deeper the discount, easier it is to get consumer’s attention. In the process, they tend to lose out on profits, which they are now trying to get from vendors selling on their platforms. So in the end, it’s the vendors who ultimately get squeezed.

Vendor speaks..

“A lot of manufacturers are hooked to the volume drug. Now, Myntra is saying give us bigger discounts otherwise we won’t do volumes from you or even block your products,” said the head of a large apparel brand asking not to be named. “For more and more companies, their businesses are dependent on them. It earlier happened to small electronic manufacturers from e-commerce companies. Now, fashion apparel companies are getting hammered.”

Myntra speaks..

“We have an excellent and mutually profitable relationship with our brand partners. We enjoy a very close relationship with all major Fashion houses, which has been built over years through very close collaboration and trust. We will continue to work with our partners to help drive the growth of brands and establish Flipkart and Myntra as the go to destination for all brands,” said Mukesh Bansal, Head – Fashion, Myntra.

Is this a sudden shift?

Not really. But in addition to acquiring as many customers as possible, online retailers are now focusing on increasing their profit margins too. They know they are making a big difference to the sales of vendors selling on their sites; so they don’t see the problem in asking for more margins from them.

“So obviously they are pressurising (retailers) and they themselves are under pressure as e-commerce companies are burning cash by giving discounts. In order to save some margins for themselves they are pushing brands to give better margins,” said Manish Mandhana, joint MD of Mandhana Industries, which markets Salman Khan’s Being Human lifestyle brand.

What do vendors feel?

Many feel that online platforms like Myntra, Flipkart and Jabong should focus on making their supply chains efficient and error-free to achieve profits. They should also cut down on their marketing spend and staff costs instead of trying to get more from the vendors.

According to J Suresh, CEO of Arvind Lifestyle Brands (labels like US Polo Association and Nautica which are sold on Myntra), their major concern is getting undervalued due to discounts and part of their agreement is that it shouldn’t happen to their brand.