Online retailers like Jabong, Myntra emerge as important sales channels for consumer brands in India
Online retailers are emerging as important sales channels for consumer brands in the country as more Indians take to shopping on the Internet. Apparel and accessory brands, such as Puma, Nike and Wrangler, have recorded a big spurt in online sales in the past year, led largely by purchases from smaller towns and cities with consumers paying the full price for these products.
"Three years ago, about 1% of total sales came from online channels. Now, that number stands at 15%," said Rajiv Mehta, MD of Puma for South Asia. "Today, no brand can ignore the online channel." In turn, e-commerce companies selling the brands are seeing a boost in growth. For instance, multi-brand retail accounts for 90% of the business at fashion e-tailer Myntra, which expects to double revenues to 800 crore in FY14.
"Earlier, top brands were sceptical about online retail. Now, it has become part of their mainstream strategy," said Mukesh Bansal, who co-founded Myntra in 2007.
Online Channels See Big Jump
In fact, for Puma, the online channel is bigger than the offline multi-brand retail channel. "Puma grew by around 35% last year, and our online channel grew by 60%," said Mehta. Denim brand Wrangler, which currently clocks 3.5% of sales from online sites, expects this channel to be significant contributor to overall revenue in five years. "Online channels have grown by many multiples in recent months. It has been amazing," said Puneet Khosla, a business head for Wrangler.
Online retail in India is expected to grow to $76 billion (4,18,304 crore) by 2021, accounting for over 5% of the Indian retail industry, according to a report by advisory services firm Technopak. This projected growth is pushing more large companies to sell aggressively online. "Initially, the mobile brands showed a lot of interest in selling online. Now, there is interest from ayurveda brands to jewellery and fashion," said Shubhankar Sarkar, chief operating officer of Indiatimes Shopping. Two years ago, the company became Nokia's online partner and now runs the online store for Gitanjali Jewels.
Experts reckon much of this growth will come from the rising purchasing power of consumers in smaller cities, who do not have access to offline stores stocking high-end brands. "About 50% of sales for online sites come from cities and towns beyond the top eight metros," said Pragya Singh, associate director at Technopak. Large companies are also appointing preferred online partners. "When we become the
preferred partner, the brand's marketing and planning team work closely with our team. The brand also invests resources, gives us pick of products, does exclusive launches and promotions," said Ganesh Subramanian, Chief Merchandising Officer at Myntra.
For instance, footwear brand Nike works only with online retailers such as Myntra and Jabong. And in a first-of-its-kind initiative, it recently launched its new range of cricket gear on Jabong. Such partnerships work well as online retailers provide greater visibility than a physical store. "Our online store can carry around 10,000 options, while a brick-and-mortar store can carry only 20% of a given range," said Shivanandan Pare, head of ecommerce at Madura Lifestyle & Fashion.
Madura, which retails brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England, launched its own online store Trendin.com earlier this year. Pare expects online sites, including their proprietary site, to contribute up to 12% of overall revenues in the next few years. "We curate products and help customers engage better with a brand's products," said Darpan Munjal, co-founder of one-year-old Fashionara.
Mobile phone and tablet manufacturers such as Samsung are also seeing significant growth online. A Samsung spokesperson said while the contribution of online channels to overall sales is still in single digits, "it is poised for exponential growth". These large brands are not concerned by the discount model pursued by some sites. They ensure in their agreements that online sites only discount their products when the brand announces an overall sale.
This article was originally published in the Economic Times dated 22nd May, 2013, written by Radhika P Nair, associated with the Economic Times Bureau, Bangalore, with inputs from Harsimran Julka.