Fashion E-Tailing in India: A Deal or Raw Deal for the Sellers?
Synopsis
During 2014, Myntra.com increased its margins (from the fashion retailers/fashion retailer brands) from 28%–32% to 36%–40%, higher than the 30%–35% margins that were sought by brick-and-mortar stores, while other e-commerce sites too followed suit. This came as a blow to the fashion retailers who had ventured into or were planning to venture online, as running an apparel business online had become equally expensive as that of running a brick-and-mortar store in a mall or placing your apparel brand in any other retail stores. But, most of the big fashion retailers/brands do not prefer to spare more than 20% as margins to the e-commerce portals. Despite that, they do not save on costs, they would incur on physical retail (rental) because they give away more as discounts online. However, with increasing footprint of online fashion e-tailing in India, players like Jabong, Myntra, Amazon, Flipkart, etc., even with their robust technology platforms and aggressive marketing campaigns are throttled with margin pressures. In addition, the brick-and-mortar stores are joining the online bandwagon to sustain their business prospects.
This case flyer introduces the students/participants to the Indian fashion e-tail business dynamics, especially the contours of discounts, margins and fashion e-tailers’ commissions and their effect on the business prospects of fashion retailers/fashion brands.
Prerequisite Conceptual Understanding/Before the Classroom Discussion
The students/participants should carry out the following pre-class exercise to have effective learning outcomes out of this case flyer:
- • Visit www.jabong.com
- • Study the product lines, product depth and width and the brands available
- • Understand the underlying business dynamics between Jabong, fashion brands, fashion retailers,
- suppliers, vendors, logistics and the end-consumer
Case Positioning and Setting
This case flyer can be used for either of the following:
- • MBA Program: E-Commerce/E-Tailing course – To understand the types of fashion e-tailers, the business models and the cost and revenue drivers
- • Executive MBA and Executive Development Programs: Fashion E-Tailing’s Business Model and Business Dynamics module – To understand the underlying logic for fashion e-tailers to demand hefty margins from fashion retailers and fashion brands
- • MBA Program: Strategy course (Industry Analysis module) – To understand the competitive and business dynamics of fashion e-tailing industry in India
Preamble to the Case Flyer and Suggested Orchestration
This case flyer gives an understanding about e-commerce/e-tailing in general and fashion e-tailing in India in particular. It further helps the students/participants in understanding the competitive dynamics, business dynamics and the Critical Success Factors (CSFs) of the fashion e-tailing industry in India. An analysis of the facts given in the base article1 would help students understand about the gross margins prevalent in the industry and the basis for e-tailers seeking higher commissions and margins. A comparison between the costs incurred in fashion retailing and fashion e-tailing also gives an understanding of the reasons behind the rising commissions and discount wars between the players in the industry. The classroom discussion was carried out as presented in Exhibit (TN)-I...........
Case Flyer Analysis
I. E-Commerce in India: Fashion E-Tailing Market
As suggested at the end of the case flyer, as a mandatory exercise, the classroom discussion and analysis for this case flyer began with analyzing the basic building blocks of a fashion retailer. It is suggested that Jabong’s website (www.jabong.com) is accessed in the classroom to elicit appropriate response from the participants. The discussion and the accompanying analysis of the basic business building blocks of a fashion e-tailer, Jabong as an example, have been captured in Exhibit (TN)-II................
• The fashion e-tailer’s website (for instance, www.jabong.com) is the pivot around which all the business dynamics of a fashion e-tailer are structured – the suppliers, the vendors, the customers, marketing, sales promotion, etc.
• Indian Fashion retailers are of three kinds – brick-and-mortar, online (e-tailers) and hybrid
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