The clothes line

By: |
December 2, 2014 1:00 AM

Higher margins and the ability to build a loyal customer base has seen online apparel emerge as one of the most important segments in the e-commerce sector. Even as they continue to sell branded apparel, a slew of start-ups in this segment are now coming out with private labels as they experiment with new business models

EVEN as the media fetes the three biggies of e-commerce in India—Flipkart, Snapdeal and Amazon, the story isn’t confined to them only. A slew of smaller players are seeing their cash registers ringing as Indians go online to shop. And it isn’t just consumer electronics that customers are purchasing online. One category that has benefited from this new-found enthusiasm for online shopping is the apparel segment. Branded apparel to private labels—everything is up for grabs at these sites and with price tags that are enticing customers to come back again and again. The online apparel category, euphemistically called fashion and lifestyle products, today stands at around $0.57 billion. That works out to 25% of the overall e-tailing business. No wonder then that e-commerce giant Amazon is tying up with clothing brands such as Grasim from the Aditya Birla Group and Future Group’s Indigo Nation and John Miller to sell their merchandise online.

Globally apparel is the most important repeat purchase category, says Vikas Purohit, category leader fashion, Amazon India. It is also the only category which allows building a loyal customer base. “You would buy electronics once a year but a shirt three to four times a year. All these factors make apparel one of the most important category in the e-commerce business,” he says.

Agrees Pragya Singh, associate vice president, retail and consumer products, Technopak, a management consulting firm. “Apparel is the second-largest retail category after food and grocery. Being a high-margin category with several sub-segments, apparel provides a larger scope for differentiation and brand creation,” said Singh. Technopak projects the share of apparel in e-tailing to touch 30% by 2020.

According to industry estimates, while the margin on electronics goods such as mobile phones, tablets and books is 8-12%, an apparel e-tailer can earn as much as 40-45% margin on branded labels such as Reebok, W, Levi’s, etc., and 60-65% on private labels. “Compared to the margins earned by an offline store on apparel an online store can earn more due to zero rentals. What’s more, online companies get to earn even higher margins in case of women’s clothing and accessories, and this is one of the reasons why in the apparel category it is the women’s clothing range which has seen the maximum traction,” says Shivani Poddar, co-founder, Faballey, an online apparel portal which sells only women’s western wear. It claims it is growing at 25% month-on-month, clocking more than R1.4 crore revenue per month.

Seen as more affordable compared to branded apparels, private labels have helped in creating a loyal customer base. For instance, online fashion portal Myntra has eight private brands—Roadster, Dressberry, HRX by Hrithik Roshan, Anouk, Kook N Keech, Mast and Harbour and ETC. Myntra, recently acquired by Flipkart, is one of the earliest apparel e-tailers in India. It started with selling customised products in 2007 and in 2011 shifted its focus to retailing fashion and lifestyle products. Similarly, arch rival Jabong has private brands including Sangria, Lara Karen, Incult and Miss Bennett. Zivame, the online lingerie selling portal, also has two in-house brands—Penny and Cou Cou. Arun Chandra Mohan, founder and CEO of Jabong, says the limited access to popular brands because of limited number of stores in smaller cities and the high price-points, has provided e-commerce companies the opportunity to build brands online. “Easy access to popular designs or latest trends at an affordable price is the reason why consumer prefer to buy private brands online. However, e-commerce companies need to ensure the quality of their in-house products so that shoppers continue to buy them,” said Mohan.

Interestingly, private labels are no longer restricted to a few e-commerce players. For instance, Yepme which started its operations as an online apparel retailer in August 2011 shifted its focus on private label fashion-wear. “Low prices help private labels in targeting two kinds of customers. First, those who wish to get the same quality and looks at a better price and, second, those who have a marginally lower purchasing power but are aspirational about appearance. Moreover, private brands also increase the scope of repeat purchase which is a large part of any healthy retail business,” says Sandeep Sharma, founder,

Ashvin Vellody, partner, e-commerce practice, KPMG in India, a management consulting company, calls it a shadow brand effect. “Selling private brands is no child’s play, especially in the e-commerce business. Initially private brands ride on the mother brand to create an association with consumers. It takes time to build a private label but once the company is able to establish the product, then there is no looking back,” said Vellody.

For instance, e-tailers such as Yepme, American Swan, DonebyNone, Faballey have private labels of the same name.
Meanwhile, there are a handful of e-commerce companies such as LimeRoad which have refrained from coming out with in-house brands. “The idea is to have a vast number of products under one roof and that is only possible when a site has a huge number of sellers. But if as an e-commerce company I enter manufacturing, then I would not only be fighting a battle against the sellers who sell on my site, I would be busy promoting my own goods and the rest of the products listed on the site will take a back seat,” said Suchi Mukherjee, founder and CEO,, which prefers to call itself a technology platform.Players in this segment are experimenting with a variety of business models as they try to find the perfect one. While e-tailers such as Myntra and Jabong follow a hybrid model which is a combination of inventory and marketplace, Yepme, Faballey and Zovi are vertical players as they make their own products which they sell on their own sites as well as other sites such as Flipkart, Myntra, Jabong, Amazon, Koovs, etc. At the same time, sites such as Amazon, LimeRoad and ShopClues follow yet another hybrid business model called managed marketplace. While in a marketplace any seller can sell its goods, in a managed marketplace, the background of the seller is scrutinised before it is allowed to sell.

Singh of Technopak says each business model has its own advantages and disadvantages. “Inventory-led model scores higher on gross margins, customer experience and low brand risk. But this can limit assortment and lock in capital with additional costs incurred. It also implies that inventory risk is high,” said Singh adding, “Marketplace models give more scale and wider assortment without inventory risk. While horizontals (such as Flipkart and Snapdeal) are marketplaces, verticals can be inventory-led or hybrid; that is, they will have an inventory-led model with some products on the marketplace.”

Fashion e-tailers such as fashionandyou call themselves flash sales sites. They offer individual items for sale for a period of 24 to 36 hours.
Potential customers register as members of the deal-a-day websites and receive online offers and invitations by email or social networks. “We are, in a way, a controlled and curated marketplace player with the business focused on fashion and lifestyle vertical,” says Aasheesh Mediratta, founder and CEO, He says the Indian e-commerce market is moving towards consolidation. “We will see three different models co-existing—horizontal players or marketplaces, vertical players and flash and off-price players.”

Each of these players try to offer a differentiated buying experience to their customers. For example, if Zovi introduced the concept of virtual trial rooms with Zovi Eye in 2011, more recently online giant was in the news for introducing its ‘Try and Buy’ policy. Again, is helping consumers from tier 2 and 3 towns buy products through its Facebook page. “We realized that a large number of our customers reach our website through our Facebook page after liking our products and do not know how to place an order. We have therefore created a simple ‘form-like’ interface called ‘Easy Buy’ on the product display page itself. Also many consumers leave their phone numbers in comments on Facebook and ask us to call them up, which we promptly do,” said Sharma of

The mobile phone, of course, has been the biggest enabler. Today, the mobile phone and the consequent mobile apps contribute to almost 50% of revenue of e-commerce players. “Availability of low-cost smartphones and decreasing data usage costs has enhanced customer acceptance and convenience, especially among tier 2 cities, as they can now browse and buy from anywhere at any time. About 50% of our business is driven by m-commerce and with the launch of our mobile app across all platforms (Android, iOS and Windows), we expect this figure to grow to 70% by end of this fiscal,” said Ganesh Subramanian, COO, Myntra.

E-tailers are also taking the help of celebrities to push their brands. Jabong recently collaborated with actress Alia Bhatt to launch a clothing range. Likewise, Yepme has roped in actor Shah Rukh Khan as its brand ambassador. Earlier, it had actors Esha Gupta and Farhan Akhtar as its brand ambassadors. “As a fashion brand, we have a very strong value proposition in fast fashion and we aim to create an emotional connect with our target audience. Celebrities can help us create this bond very quickly and effectively,” added Sharma of Yepme.

Apparel e-tailers are creating online and offline properties which help them create a stronger connection with their consumers. Early this year in partnership with Talenthouse India launched ‘India Online Fashion Week’  where it invited participation from designers, models, fashion photographers, hairstylists and make-up artists. In October, Myntra hosted a three-day event titled Myntra Fashion Weekend in partnership with IMG Reliance. Jabong and Myntra have also tied up with Lakme Fashion Week and Wills Lifestyle Fashion Week, respectively. “Fashion weeks and other properties such as fashion magazines allow us to showcase the latest trends in fashion apart from the kind of collections we have on our site,” says Jabong’s Mohan. “This year we launched international brands Dorothy Perkins, River Island and Miss Selfridge at the fashion week.”

The success of these early entrants has seen venture capitalists and private investors pumping in money big-time. Venture capitalists such as Helion Ventures Partners, Tiger Global and Rocket Internet, have placed big bets on Yepme, Myntra and Jabong. Vellody of KPMG points out that with most of the e-tailers manufacturing apparel and accessories and maintaining their own inventory, scaling up will always remain an issue. “We can expect a few smaller players to join hands with big e-commerce companies as raising funds will become difficult for those players, who despite earning huge margins follow the inventory lead model. The cost of operating a business which includes  manufacturing and managing inventory is high,” he added.

Chopra of however says e-commerce companies can be profitable.  “While deals and discounts are part and parcel of an e-commerce business, we are here to build a solid profitable business and hence we keep a tight control on our margin structure. We have been profitable for the last one and a half years and have a customer payback level where repeat customers and low returns are driving profits,” he said.

“Online companies get to earn even higher margins in case of women’s clothing and accessories. this is why women’s clothing range  has seen the maximum traction.”
Shivani Poddar

“Easy access to popular designs or latest trends at an affordable price is the reason why consumer prefer to buy private brands online.”
Arun Chandra Mohan
Founder & CEO,

“About 50% of our business is driven by m-commerce and with the launch of our mobile app, we expect this figure to grow to 70% by end of this fiscal.”
Ganesh Subramanian

“In the long run We will see three different models co-existing – horizontal players or marketplaces, vertical players and flash and off-price players.”
Aasheesh Mediratta
Founder & CEO,

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