Image source: thebusinessedition.com
It is a common myth that online retail businesses are cheaper to run than brick-and-mortar stores. What most retailers tend to overlook is that fashion brands are expected to offer 15-20% discount to the customers which tends to cut into the profits largely. Fashion brands are also paying commissions as large as 30-40% to ecommerce giants like Jabong, Myntra, Flipkart, Amazon and Koovs for sales and product delivery. The commissions being paid to ecommerce platforms are very close to the costs of running a physical store, which include rental-15%,utilities-8-10% and discounts of about 5-6%. The commission is inversely proportional to the strength of the brand.
Indian Apparel brand W pays lesser than the usual 30 to 40% commission as they they have reasonable volumes and don’t discount as much. Fashion brand Chumbak pays for marketing strategies to get 50% of its website’s 10,000-12,000 daily visitors. There is a limit to how many customers can discover your brand if you are not present on ecommerce platforms like Amazon and Flipkart. Some product categories perform way better on these ecommerce platforms than the brand’s website, says Chumbak Design’s CEO Vivek Prabhakar. An advantage of online is that the brand can serve a large number of customers spread widely in terms of geography, thus many brands also consider it as a norm to be available online. Brands like Freecultr and Fab Alley are different, they are trying to build an offline presence with their physical stores to build brand trust and achieve multi-channel presence.