Ecommerce is considered to be a low-cost business model as compared to traditional brick-and-mortar retail stores. Not anymore! In the recent times, the margins demanded by online marketplaces from fashion and apparel sellers has made online selling as expensive as running a physical store, if not more.
Most of the fashion retailers are paying out anywhere between 30-40% margin from their online sales to ecommerce biggies, namely Jabong, Myntra, Amazon, Koovs, and Flipkart. On top of high margins, marketplaces push fashion brands to give an additional 15-20% discount to its customers. The end result – no profit.
Arvind Singhal, Chairman, Technopak Advisors also feels that the commission asked by online players is high and established fashion brands wouldn’t agree to shell out more than 10-20% as commission.
Manish Mandhana from Mandhana Industries that markets actor Salman Khan’s Being Human fashion line said, “When you’re working with these established players like Flipkart, Snapdeal or Amazon, they have their own cost of operations. They need their margins.”
Last year, Myntra wanted higher discounts from vendors to achieve profitability, whereas Snapdeal had hiked seller margins to fund its sales activity.
India’s online fashion sales is growing rapidly, which makes apparel and fashion category the biggest contributor to online sales. Is this why fashion category, which is treated as cash cow, attracting higher margins and discounts?
Are all fashion brands suffering? No, the ones with high volume of sales are not expected to offer huge discounts. Although, seller margins remain more or less the same, i.e. 30-40%. It’s the small players, upcoming fashion brands and big brands with low sales volume that have to bear the burden of high margins plus deep discounts. Even big retailers like Arvind Lifestyle admit that the operation cost to maintain their offline and online presence cost them the same.
What will this lead to? Decline in online fashion sales? Or fashion brands/sellers going back to traditional retail stores? What do you think? Please share your views.
Editor team is specialized in introducing the marketplace content targeting the Indian online sellers. They plan and coordinate to bring the appealing content for the small businesses on how to partner with the e-commerce sites like Amazon and Flipkart and strategies for improving their online business.
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