Try and Buy, recently introduced by Myntra, is an interesting concept and may become a norm for fashion e-commerce in the next five years, much like what COD did to the industry. However, this can only be successful for high margin items for retailers, as this service involves high cost. Unlike COD, this service can be offered only on items sold by retailers. Brand consolidation is also on the cards. The next five years will show us some domestic fashion brands turning into successful and reputed international brands at par with foreign counterparts, while other brands may shut shop.
A recent survey confirmed what every fashion e-commerce brand has experienced for a long time. More than 50 per cent customers will not shop online if there is no discount. Without discounts, you cannot have better sales online and with discounts you can't cover costs offline. Listings or cataloguing prove to be a big challenge, too. All our sales partners have different ways and formats to provide them a catalogue. This is a tedious task, but sales partners have not been able to offer better and faster methods so far. It is more time-consuming as the number of days used for making the catalogue live has only gone up in the last 12 months.
There is a lot of uncertainty around GST. Many questions need answering before we can assess its impact. VAT rates currently for apparel is around 5 per cent but with GST the tax may be 18-20 per cent. This means lower sales and margins both. We will need to change technology to customer-facing and backend accounting. We need change in our tax structure. We currently have many layers of taxation with high complexity. Administrative costs are higher than countries using GST. So, we look forward to positive changes in tax structure but it has to be in a way that the cost does not rise.
It is a fact that only a handful of foreign fashion brands have done well in the Indian e-commerce space. Others have been a failure. A large number of Indian customers do not connect with those brands because of no brand awareness and because they are expensive. Indian e-commerce has been about economical shopping. Foreign brands have not been able to offer economical shopping or deals so people look for alternatives. I do not see any challenge in the near future. This industry is growing at a rapid pace and there is room for everyone.
One of the major challenges faced by apparel e-tailers is return policy. Return rates for us are in the range of 18-25 per cent. While we try to work out for improvements in this area, you cannot do much about impulsive shopping, guilt-based returns or courier returns. I believe keeping a target of controlling returns up to 15-18 per cent is a practical target but it will continue for now.
Size charts on the websites is another nightmare for e-tailers to negotiate. This can be improved by creating online catalogues by linking each product to other products. The customer's shopping history can do the trick. A shopping website/app should suggest the size to a customer-based linkage between the style being looked at and the style shopped in the past.
We do a lot of social media advertising, but it is not enough for brands that are not established yet. If the brand has a fan following, then it may choose not to advertise on other platforms. We spend more on other media than social because we want customers to see and notice us outside social media also. This helps establish brand image in the customer's subconscious. In the current apps scenario, people cannot be installing apps for each brand. So we are contemplating not investing in our own website and app. We are a brand and our focus will continue to build it than a shopping portal or app. Let us agree, not all fashion e-tailers can become a Myntra, Jabong or Voonik, but a lot of brands can become a Zara, Forever21 or Mango.
Lot of consolidation has happened in the fashion e-commerce space in the recent past. This is not good for brands. The current players do not look like they will bring down the discounting models soon. We need other players to come up and try methods to boost sales when there are no discounts. Agreed that always-on-discounts and regular shopping festivals bring more customers online, but there is a clear need to slowly move away from regular and heavy discounting for businesses to grow. We plan to cut down our average discounts by 10-15 per cent in the next 12 months.
We have a very immature supply chain model in our organisation now, but we know what our key challenges are. This allows us to tackle the pain areas as our budget allows. We are considering introducing another warehouse because of space shortage. This will call for a change in the way we review our technology/ERP. They are crucial to managing business efficiently. Setting up a brand for online selling is easy, but running the brand is not. Few may succeed. By the time they are clear in their vision, they may have done some damage to the brand. With no practical and easily enforceable copyright laws protecting brands, it is easy for vendors to recreate articles belonging to a brand they worked with. In addition, one major pillar of fashion e-commerce is replenishment, hence timely delivery of re-orders is paramount. These take away a significant chunk of time spent on vendor management activities even though they are the basic requirements.