Business

Fight With Amazon And Flipkart Bleeds Small Fashion Etailers

Half a dozen niche online fashion companies continued to pile up losses in the last fiscal year, to as much as five times the revenue for one, as they competed with Amazon and Flipkart by deep discounting wares and with aggressive marketing.

Voonik, Zivame, Koovs, LimeRoad, StalkBuyLove and Craftsvilla reported a combined loss of Rs 515 crore for the year through March 2016, compared with Rs 134 crore the year before. For Voonik, the loss ballooned to nearly 19 times from fiscal 2015 and was nearly five times its revenue for the year. Together, revenue for the six more than doubled to Rs 230 crore in fiscal 2016.

The burn comes on the back of extensive marketing investments, hiring, enhancing technology capabilities and, in some cases, change in business strategy. Suchi Mukherjee, chief executive of LimeRoad for which the loss was more than double of its revenue for the year, said there was a clear path to profitability by March 2018, while it continued to grow topline at a steady pace. "The pace of growth at LimeRoad is driven mostly by product innovations and selection rather than fuelled by marketing spend," she said.

But industry experts are unsure about the space that small players have in the market to operate. A Morgan Stanley report estimates the Indian Internet market would grow to US$ 159 billion by 2020 from US$ 16 billion now. But in a highly competitive marketplace, where big discounts are the primary sales drivers for online retailers, many small players are struggling to gain ground.

After the consolidation of the online fashion trinity -Flipkart, Myntra and Jabong - the group alone captures about 70% of the online market. Experts said Amazon India, Snapdeal and Shopclues unitedly cover roughly another 20%, leaving just about 10% for the rest.

Experts said several companies are just in the valuation game. "Glory is in how much money they have raised and how much more they will raise.

They will all say that these aren't losses, instead these are investments. When investors realise that pumping in crores has to stop, there will be shutdowns and only the brand builders will survive," said Harminder Sahni, founder of Wazir Advisors.

Fashionara, an online retailing venture focussed on fashion and lifestyle, and Sequoia Capital-funded ecommerce company Freecultr, shut shop earlier this year.

According to Tracxn Technologies, online apparel players raised a total of Rs 1,204 crore in fiscal 2016. The previous year, funding in online apparel players totaled Rs 783 crore. "Investors are pushing for growth.

If you don't show growth, you have no value. Every investor of my company is looking at different directions and I am now spending on choices which aren't even profitable and far from my dream," said an online fashion marketplace founder.

"So much effort to stand next to the leader isn't worth it. There is no room for one more player," said an investor in one of the leading online fashion companies. "Why do we even need another player? The leaders have captured the market and there is no gap left. This leaves with no scope for any merger or acquisition."