 "Flipkart bets on fashion ahead of Big Billion Day sale")
Flipkart's fashion portfolio, which apart from its own portal includes Myntra and Jabong, is increasingly becoming the most important part of the company's business. While smartphones continue to drive the largest portion of sales on the platform, it earns only a single-digit margin here and faces huge competition from rivals Amazon and Snapdeal. Flipkart is betting on its leadership in fashion, where margins are as high as 50 per cent, to turn the entire company profitable in the near future.
"Walking shoes are a great example of something that gets searched a lot on Flipkart. However, you go to a store and they only have running shoes, training shoes, etc, but very few walking shoes. Now, if you translate that into products, it opens a huge opportunity," said Rishi Vasudev, vice-president of the fashion vertical.
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Myntra, which Flipkart acquired in 2014, had announced in July that it had crossed $1 billion in net sales. The online fashion portal says it will become profitable by early next year, pushing in-house brands such as Roadster and HRX which yield higher margins.
Flipkart is looking at a similar strategy to boost its own fashion vertical. For shoes, a particularly strong seller on Flipkart (one in every two pairs sold online in India are on its platform), the company has licensed the brands of Peter England and Flying Machine to tap an unserved part of the market. It is looking, it says, at more such deals to improve margins and bring something to the market that no one else has.
Big Billion Day sale apart, it says it is also preparing for growth of the market next year. While a lack of discounts due to the revised foreign direct investment norms and a funding drought had led to a fall in sales of goods online in the first six months of this year, Flipkart expects the doubling of fashion sales to be retained after the Big Billion Day, as it has for two years.
"Everyone is saying the e-commerce market is going to be $60 billion by 2020 and 30 per cent of which will be driven by fashion. That makes it nearly a $20-bn market opportunity. The more effort every player puts in, the more the market will grow," said Vasudev.
Sector watchers and experts agree this festive season could be a turning point, where if Flipkart doesn't defend its turf, could face being overtaken by Amazon, losing the leadership position and with it the premium valuation it commands.
However, Amazon hasn't been able to crack the fashion segment globally in the same way it has done with countless other business verticals. In India, the company has been focusing on electronics, furniture and decor, fast moving consumer goods and is even taking a swing at the grocery delivery market. This lack of focus on fashion has allowed Flipkart to become dominant in the space.
"Fashion is the only safe haven for Flipkart right now, so it's not really a competitive strategy. But, it is an important category and there's still a long way to go. If you look at what's happening, Amazon has surrounded Flipkart - they have opened Kirana, Pantry, they're selling second-hand goods and books, and they're doing exchange offers," said an observer, who did not want to be named.
Amazon's current push is to make shopping online a habitual thing for customers in India. The company has introduced Prime, a loyalty programme that has helped lock-in customers in markets such as the US. Further, with far deeper pockets than Flipkart, the company can sustain burning of cash to grow its user base for far longer.
Kalyan Krishnamurthy, an old hand at Tiger Global, was brought back to Flipkart to help steer the company towards profitability. Since his arrival, Flipkart has switched off focus on smaller categories and is looking to capitalise on its strengths. So far, fashion has been where most of the action has been for it and the big bets seem to be paying.
SEGMENT BET
- Flipkart expects fashion sales to double during festive season
- Apparel, fashion and private brands earn higher margins than gadgets
- Flipkart, with Myntra and Jabong, dominates India's online fashion market
- Amazon, globally weak in fashion, is focusing in India to expand reach, get new buyers