Fashion e-retailing platform Myntra ended FY24 in style by posting a profit of 31 crore and swinging into the black from a staggering loss of782 crore in the previous year. With the launch of M-Now, a quick-commerce service that promises delivery in 30 minutes to two hours, the fashion e-tailer is cashing in on a new trend.
M-Now is probably more a need than a choice. The fact is q-comm players are widening their assortments to include not just innerwear and athleisure but also top and bottom wear and kidswear. In fact, Blinkit, Zepto and Instamart are offering ethnic wear in alliance with FabIndia and Manyavar. That puts the fashion e-tailers in a bit of a spot.
But Myntra is in a good place. As Nruthya Madappa, Partner, 3One4 Capital observes, scaling D2C and international brands on the platform has helped it gain market share in the past 12-18 months. Their contribution has grown from low single-digit percentages in H1 of 2022 to about 10-15% in 2024. “Myntra Beauty, in particular, has reported about a 3x growth,” Madappa points out. That would help it in the q-commerce space too.
In general, as Anand Ramanathan, partner consumer products and retail sector leader, Deloitte, says q-commerce is becoming crucial for fashion retailers as consumer expectations are evolving as are market dynamics. “Modern shoppers demand fast and convenient shopping experiences, ” he observes.
Puneet Mansukhani, partner, KPMG, says quick delivery can differentiate a brand from its competitors, potentially attracting more customers. Angshuman Bhattacharya, partner, national leader- Consumer Products & Retail, EY-Parthenon, said as long as the economics is justifying the q-commerce service, it can do wonders for the average order value and productivity of the platform. “A pair of shoes costs upwards of 1,000 a pair whereas other products retail for200-300 so that would improve the business metrics,” Bhattacharya says.
Deloitte’s Ramanathan believes q-comm can significantly boost sales. “Customers are more likely to make impulse purchases when they know they can receive their items almost immediately. This quick turnaround can drive higher conversion rates and increase overall revenue,” he says.
At the same time, trends in fashion change fast so platforms need to be agile. As EY’s Bhattacharya points out that for q-comm to be successful platforms need to get the demand forecasting and inventory management right. “The fashion segment requires variety given there are varying preferences, sizes, shades and brands. So, the number of stock keeping units (SKUs) needed is much higher unlike say with consumer staples,” he explains.
Retailers will face challenges running the service, especially handling returns. As EY’s Bhattacharya observes, holding adequate inventory while retaining depth in the merchandise could be difficult. “It would also be challenging to hold up the margins given there could be returns and also the chance of discounts going up if stock is unsold,” he says. Ramanathan believes q- comm can allow products to be priced at a premium, thereby improving margins. “Customers are often willing to pay extra for the convenience of ultra-fast delivery so this allows retailers to charge higher prices,” he observes.
KPMG’s Mansukhani believes the model can be two-fold, one an endless aisle wherein online players use brick & mortar brands so that the inventory becomes a part of the online inventory. “They can also build dark stores as the need becomes clear and the investments can happen in prominent locations and with the essential categories,” he says.
The costs associated with dark stores and delivery can hit the margins. “Many q-comm firms struggle with profitability as the cost per delivery often exceeds what customers are willing to pay for the convenience,” says Ramanathan. Indeed, the operational costs could keep the business from earning sustainable margins.
Mansukhani believes brands can charge a premium for the convenience of quick delivery, which can improve margins. Again, an expert says that while return policies can often be a stressor for e-comm players, q-comm platforms may have it easier because of their largely affluent buyer base. “The frequency of purchases will define the customer profile and creditworthiness based on the purchase history,” he says.
As Madappa says, Myntra’s continuous investments in technology, including AI tools, increasing efficiencies have helped it retain pole position in the sector. In fact, as the CEO of a top PE firm explains, the secret of Myntra’s success is its ability to mine the data to understand consumer preferences. “The platform will do the same for the q-comm service putting in special tools like it has done — MyStylist, Virtual Try-ons, Vernacular Search and MyFashionGPT — for greater accuracy,” he says.
It shouldn’t be too hard. The forecasting capability is particularly effective for impulse purchases, products with predictable demand, like innerwear and seasonal items such as raincoats, and low-involvement products such as branded, basic T-shirts or standardised jeans and even gifting items, which are often purchased quickly and without extensive research or comparison. But the space is extremely competitive with Ajio, Tata Cliq, Nykaa Fashion and even Amazon doubling down on their investments. Close of 60% of Nykaa’s orders cross 110 cities reach their destinations the next day.
Tipped to grow at an annual compound growth rate (cagr) of 25% in the next few years and cross $110 billion by the end of the decade, fashion e-retailers have mopped up more than $2.5 billion in capital since 2018. Operating in the q-comm space, however, should give Myntra an even bigger lead over rivals.