Battle with e-commerce biggies costing online fashion stores
India’s fashion etailers strategy of offering discounts and aggressive marketing to take on e-commerce biggies like Amazon and Flipkart has gone horribly wrong as they continued to pile up losses in the last fiscal.
Leading online fashion stores like Voonik, Zivame, Koovs, LimeRoad, StalkBuyLove and Craftsvilla reported a combined loss of Rs515 crore for the year through March 2016, compared with Rs134 the previous year, according to an Economic Times report.
Extensive marketing investments, hiring, enhancing technology capabilities and, in some cases, change in business strategy were the major cash burners for the companies.
Suchi Mukherjee, chief executive of LimeRoad for which the loss was more than double of its revenue for the year, said there was a clear path to profitability by March 2018, while it continued to grow top line at a steady pace.
“The pace of growth at LimeRoad is driven mostly by product innovations and selection rather than fuelled by marketing spend,” he said.
Amazon and Flipkart alone made nearly $2 billion in revenue during the year, eclipsing all other players put together. Hence, a few companies are changing their business model.
“Till the end of December 2015, we were generating orders for other marketplaces. Then we had to switch because we were not getting money on time and companies were changing commission rates whenever they want,’ said Sujayath Ali, founder of Voonik, which posted revenue of Rs17 crore last fiscal year, compared with Rs 41 lakh for the previous year. Its loss, though, widened to Rs 84.5 crore from Rs 4.5 crore.
The future for these fashion etailers looks bleak as the once offline fashion biggies including the Future Group, Reliance, Tata and the Aditya Birla Group have all launched online retail initiatives across product categories to take advantage of the increasing adoption of ecommerce.
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