The online market in India is going from strength to strength, and set to reach $100bn by 2020. Fashion sales online are seeing the fastest growth, with a four-fold increase to $35bn anticipated in the same time period. Government initiatives such as “Startup India” and “Digital India” have been catalysts to the etail boom and the recent move to demonetise large notes, forcing the use of credit cards and digital forms of payment, is likely to further boost this channel share.

It is not surprising therefore, that in a country with a relative dearth of established ‘bricks-and-mortar’ quality retail, many international players are eyeing third-party Indian e-commerce websites to make their debut in the market.

We have seen Topshop partner with Jabong to mark their entry into India and New Look has teamed up with Koovs. Whereas Zara and H&M, two of the most frequently cited success stories in India, have adopted a very different approach, focusing their efforts on physical stores in major cities. This begs the question:

What is the best entry strategy for international retailers looking to grow in such a unique and complex market?’

In weighing up the pros and cons, it is clear that the ‘online first’ model through third-party local platforms gives retailers the ability to de-risk their market entry through a low-investment route, as well as providing access to a wider geography; typically, international retailers open shops in Mumbai, Delhi and Bangalore, and miss other Tier 2 but wealthy cities such as Ludhiana.

That said, there are some key challenges in partnering with existing local online players:

Reaching the Target Audience:  The high value target audience for international fashion retailers is the young, urban and affluent customer – a group well attuned to Western influences. Third-party e-tailers are often too ‘localised’ to appeal to this audience. Partnership may not necessarily, therefore, be the most effective route to reach the most lucrative segments.

Presentation of Offer:  The target audience expect a similar standard of service and range on offer in the West. In reality, the merchandise offer and brand articulation can often appear haphazard and confusing on these platforms, with a mix of Indian and western wear. Keeping the ‘international’ appeal is key to attracting the Indian customer, and positioning the brand alongside traditional domestic brands can be detrimental to brand image and appeal.

Discounting Pressure: The biggest e-commerce players in India – Snapdeal, Flipkart and Amazon – are promotionally-led propositions heavily characterised by discounts and deals. All three platforms are focussing on ‘fashion’ as a key category to drive growth. Flipkart recently acquired two of the largest online fashion portals, Jabong and Myntra, which have been popular third-party platforms for international brands. By selling on these platforms, retailers are forced to discount their range or sell last-season stock to meet the price pressures, while energies could be better devoted to engaging the Indian consumer.

Given the investment in the e-commerce industry alongside the weakness of the physical retail infrastructure, there is no doubt that the ‘online first’ model will continue to gain momentum as the preferred route to market. But this comes with a health warning; international retailers should be very selective in the local e-tailers they choose to partner with and understanding the market and audience is paramount. Operators looking to build sustainable business in India must aim to retain enough control over their brand and merchandise to drive maximum equity.

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Srishti Dhawan