India’s mobile and internet penetration has triggered an online revolution. Whether it’s e-commerce or online classes or gaming, Indian consumers have been fervent users giving rise to a thriving digital economy. This extends to online fashion retail as well. Not surprisingly, the online fashion market is projected to grow 3.5X from $4Bn¹ to reach $14Bn by 2020, according to industry reports. But the ongoing nationwide lockdown may well have halted this fashion train on its tracks. Most of India’s local designers are small businesses employing under 100 people². They have taken to online platforms to sell apparel. The lockdown has thus hurt online sales as non-essential services are not allowed to deliver. What this has also resulted in are shuttered workshops, wage and job losses of daily wage earners and employees alike.
Woes galore
ET Insights spoke with movers and shakers in the online fashion business to understand the challenges and coping mechanisms they have in place to sustain their business during the lockdown and after. “Eighty percent of our sales are online through e-commerce portals and our website. This consumer demand has been hit really hard by the lockdown, especially since the line of our products falls in the non-essential goods category,” says Nimish Shrivastava, Co-Founder, The Banyan Tee.
According to Sanna Vohra, Founder & CEO, The Wedding Brigade, most of the factories and brands they work with have shut down for the duration of the lockdown. “We’re still currently accepting orders on our e-commerce marketplace so that as soon as the lockdown is lifted, we will be able to supply them with some work,” she says.
Even though the domestic consumer base is expanding, exports are still important for India’s apparel trade. The US and EU make up about 60%³ of India’s apparel export by value. Both these regions have been significantly affected by the pandemic. This has resulted in cancellation/deferral of orders across the board. Inventory has built up in export houses, and working capital requirements have spiked as the realisation of export receivables is postponed. The domestic market hasn’t been spared either. Business plans, including new store openings, have been kept in abeyance. And if exporters decide to offload their inventories in the domestic market, the margins will shrink as well.
Areas such as marketing expenses have taken a hit, while rentals and employee salaries are likely to be next. The most nerve-wracking decisions, however, have centred around how to compensate workforces. While lay-offs and pay-cuts have been unavoidable, companies are looking at deferments, with the promise that salaries that cannot be transferred right now, will reach employees later, when revenues and collections pick up.
Becoming combat-ready
As countries, companies and the community join hands in their fight against COVID-19, planning for the unexpected has taken on a new meaning. “If you’re doing intermittent fasting as part of your lifestyle, not getting to eat for three days won’t hurt you as much because as a discipline you’re there,”quips Veena Ashiya, Founder, Monrow, an online fashion footwear retailer. “The only reason we’ve had the confidence to stay strong (and bounce back) is the discipline that lies at our core. From day 1, we tracked not just company profitability but product profitability. In addition, we have always kept our headcount closely tied to our business performance. The way I see it, you should build your company in such a way that if there is a setback, you should be able to hold on for at least 6 months, and I’m proud to say we’re doing okay,” she adds.
Those who had the foresight to put contingency plans in place will be able to weather this crisis and come on top thereafter. Shrivastava feels that “most companies have reserves to survive for just a month or two without any sales.”
Lesson: Entrepreneurs need to build a working corpus that will let them continue for at least six months in the event of a setback
Scouting for new trends
Fashion retailers are shifting gears to produce ‘essential goods’ that don’t face restrictions on manufacturing and distribution. For instance, Delhi-based lifestyle brand Nature Aroma has moved to selling sanitisers, which fall under the category of ‘essential goods’, at every department store and pharmacy. The Banyan Tee has moved into reselling standardised and approved face masks to keep its revenue stream running. It is looking to diversify into printable masks and export them to countries that are not as affected by COVID-19.
Companies across industries have pegged ‘Work From Home’ (WFH) as the new normal, at least until the end of the year. And there are many in the fashion industry who are ready to capitalise on this new way of being. “I don’t think our desire to share our outfits and share our looks with the world is going anywhere. As people, we enjoy the experience of waking up in the morning, putting an outfit together and getting dressed. Athleisure has had its day in the sun. Now is the time for home-leisure,” declares Ashiya.
Lesson: Always look for opportunities to create new revenue streams.
Rediscovering the joys of online shopping
Our smartphones provided us with hours of online shopification, or shopping gratification. We had groceries, food, household items and everything under the sun delivered to our doorstep. While the lockdown saw this peter out for a while, online shopping is back again as e-commerce sites reopen for business. For those who had discovered the wonders of e-commerce before the lockdown, there’s been a renewal of faith. And people who hadn’t considered e-commerce are now having to depend on it given the circumstances.
For businesses selling online, this provides an opportunity to cater to both these customer groups. “Our online business will have a regular online customer. But there will also be a huge wave of offline customers who are shopping online for the first time. How do we address this new customer group? Is our language appealing? Is our system geared up? How do we build trust and fast?” Ashiya recommends that business owners ask these pertinent questions and have answers ready, and fast.
Lesson: Go digital. Set up an online presence to complement your offline offerings.
Staying engaged
A question plaguing most businesses now is: “How frank can businesses afford to be?” Shrivastava opines, “We have been honest about the tough times the industry is facing, and our customers have pitched in by placing pre-orders even in the lockdown. The goodwill we have built over the years gives our customers the confidence to keep purchasing. We’re doing everything possible to ensure we ship our orders as soon as the lockdown is lifted.”
Some companies are taking to social media and using the content route to provide value to their customers in a cost-effective manner.
Lesson: Continue engaging with your customers online. Tell it like it is.
The way forward
Even after the lockdown is lifted, brick-and-mortar stores are expected to open only in a phased manner. The first port of call for most brands would be getting stagnant stock moving, be it through e-tailing or recycling. To utilise the surplus, brands may need to find new ways to use social media to attract customers, promote slow fashion, and look at innovative methods to recycle raw material.
As the lockdown eases completely online fashion retailers expect customers to swarm back and shop with a vengeance. Companies will compete to provide customers with an immersive experience. But only time will tell if conventional brands will also switch to e-tailing completely, or if e-retail becomes just another fad that fizzles out
Sources:
2.https://www.voguebusiness.com/fashion/the-indian-fashion-industrys-fight-against-covid-1
