Pantaloons

Pantaloons

Background

E-commerce in India has witnessed a spectacular growth in the last 7 years. India’s e-commerce market was at $3.8 billion in 2009 and it is expected to be at $38 billion in 2016. Increasing internet & mobile penetration, acceptance of online payments method & favourable demographics have been the major driving forces. One of the fastest growing segment in the e-commerce market is the apparel segment. It grew at 69.5% in 2015 over last year.

Major players in India include Amazon, Flipkart, Snapdeal, Paytm, Myntra & Jabong. The initial players have invested heavily to acquire customers & build the habit of online apparel purchase in India. Several new players like Ajio, ABOF, Voonik & Craftsvilla who cater to niche categories in apparel have also entered the market. Brick & mortar stores like Lifestyle, Max, Shoppers Stop have also opened their online websites in India.

Though the growth of these portals & their valuation have been remarkable, the sustainability of the business model always remained a concern. The success of many of these portals have been driven by huge discounts & offers. None of the online players have been able to make profits till now under this model. Further, customer stickiness appear to be more with the offers & not with any particular site. Social media, affiliate marketing & re-marketing were used to acquire customers on the digital space. These marketing channels have been very expensive & hence the customer acquisition costs have been very high. The fulfilment costs have also remained a concern for delivering low value apparel items.

To summarise, the current apparel e-commerce market is over-crowded and the business model of huge discounts, high customer acquisition & fulfilment costs is questioned for its economic viability & long term sustainability.

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