Omnichannel and Fashion Retail in India

This conversation started with a friend who also works in the fashion industry and we were discussing about fashion retail in India. Omnichannel is a word which has been touted in the Indian fashion retail for atleast 5 years now.

Fashion retail in India is still primarily offline

For the uninitiated, omnichannel is a type of retail which integrates the different methods of shopping available to consumers (e.g. online, in a physical shop, or by phone). So basically, the same inventory should be able to serve the customers visiting the physical shop or online. This has been the holy grail for all fashion brands in the country as it promises to increase full price sale through for fashion brands, as the same inventory can now be shopped by different channels.

Full price sale through means the percent of the inventory which is sold at full price. Since fashion inventory is created at least an year in advance of the time when the designs hit the store, how much of the stock is sold at MRP/full price directly hits the bottom line of the brands. The standard in the industry for full price sale through is around 50%. The rest of the stock is either sold at discount sales (typically there are 2 sale seasons) or are just left unsold.

Fashion brands like Zara are known to improve this time to market from design to store and thus increasing their bottom line, but I digress.

Now, the question arises, if omni-channel seems such a logical thing to do why has it not been done yet? Well, the answer lies in the inertia of the industry in adopting new tech and training the man power. Here are a few specific points:

  1. The tech systems used by brands and traditional players in fashion industry are archaic. They use old ERP systems based on Oracle/SAP which support features likes exposing API, seamless access of data, etc. which is considered standard in consumer internet. Integrating them with new tech systems is a challenge and hence prevents easy integration.
  2. Staff — The staff working in the stores for these brands are used to entering the correct information while selling. As a result, even though all brands have POS type systems to capture sales and generate bill, the exact inventory detail like which product is present in which sizes in a particular store is amorphous. Many times while selling, the staff enters SKU code which gives the same price but may not be the same item or size.
  3. Photographs — Currently, most of the brands don’t have images for all the inventory they produce. Getting photographs captured is also a costly affair with prices ranging from Rs. 100 to Rs. 1200 for each item. For brands to sell products online, there needs to be well clicked photograph which can entice and inspire the consumer. This in a way is the cost for selling online which all companies have to bear — be it an e-com firm like Myntra or any other.
  4. Inertia — All the above problems seem surmountable, you may think, still why they have not been tried yet? Well almost all brands in India, have some sort of omnichannel strategy which they have finalized. At the least they have hired consultants who have recommended the best way to go about it. But there is many a slip between the cup and the lip. Omnichannel is a very different ball game then the traditional retail which brands are used to and you need sufficient external/internal force to move a ship in another direction. Only brand which I know of which has made significant progress in this regard is PUMA, which has launched a site from which you can order items — and you will get delivery from the nearest store. But still they are in pilot phase for this and launched only in 10–12 stores.

You may ask, if doing ominchannel is so difficult, why don’t brands just sell on ecom sites like Myntra. Well many of them are of course selling there, but they are not exceedingly happy. Here are few reasons

  1. Most brands create separate inventory for selling on e-commerce. So e-commerce is just another channel for them with a separate inventory, and hence doesn’t improve the sale through much. The sale through rates may be better in e-com, but it is still an extra effort for them.
  2. Its difficult to have control over pricing in e-commerce sites. E-commerce sites take liberty to give discounts, which may affect brand equity of brands — as the same items may be available at higher prices in their store. Some brands are now adopting the strategy of keeping their flagship/campaign items only in physical stores and only the fast moving items are sold via e-commerce sites.

Thus, omni-channel is still a chimera for the Indian fashion industry. Everybody knows that they need to try this, but they are not sure how much will be the return on it compared to the effort and money invested.