As the e-commerce industry in India makes a sharp V-shaped recovery, Walmart-owned e-tailer Flipkart is ramping up its fashion business in preparation for an expected rebound in online apparel sales that usually coincide with the country’s traditional festive season in the fourth quarter.
On Thursday, the Bengaluru-based company said it has invested USD 35 million in Arvind Fashions Ltd (AFL), one of the oldest fashion retailers in the country, for a minority stake in one of its subsidiaries that will run a youth-focused brand Flying Machine.
Local media Economic Times (ET) citing sources pegged the stake at 27%, while the firm didn’t disclose any financial details in its regulatory file.
Arvind Fashions manages a portfolio of 27 fashion brands, ranging from owned ones including Flying Machine, Newport, and Excalibur to licensed international brands like US Polo Assn., Arrow, GAP, Arrow, Tommy Hilfiger, and Calvin Klein. It markets the brands through its network of 1,290 stores. Those brands are also available across approximately 10,000 multi-brand outlets across 192 cities and towns.
Arvind Ltd., the main company of the Indian conglomerate, was incorporated in 1930 as a textile manufacturer and is often credited for bringing denim into the domestic market in the 1980s.
Flying Machine has been present on Flipkart and Myntra, the online fashion platform the homegrown e-tailer bought in 2014, for more than six years. With the investment, the Flipkart and Arvind Fashions will work collaboratively to identify new opportunities and synergies to innovate and develop products, the two companies said in a joint statement.
Flipkart CEO Kalyan Krishnamurthy said that through this investment, his firm is looking forward to “partnering with the team at Arvind Youth Brands to continue to grow the market for its portfolio of products.”
Flying Machine alone clocked USD 48.5 million in sales in the fiscal year 2019, according to the ET report, accounting for 36% of Arvind Fashions’ revenue.
“The partnership with the Flipkart Group will help us accelerate our online growth strategy as we focus our efforts on developing an omnichannel retail approach for Arvind Youth Brands and Flying Machine,” said J. Suresh, Managing Director and Chief Executive Officer of Arvind Fashions, in the statement.
Suresh said, given the strong existing relationship with Flipkart, and its presence in online fashion, “it was an obvious choice” for the company. Flipkart and Myntra will be “our preferred online partner for the Flying Machine brand, while we continue to grow our offline sales through channels like exclusive brand stores, department stores, and multi-brand stores,” he added.
Flipkart has been streamlining its operations in fashion, one of the leading categories for the e-tailer over the past one year. Late last year, it shut down Jabong, one of the online fashion companies it acquired in 2016, and merged its back-office functions with that of Myntra to drive efficiencies and create a single fashion platform to simplify the business and the customer proposition, stated Brett Biggs, CFO at Walmart during the company’s earnings release in November 2019.
The recent investment is expected to help Flipkart-Myntra combo to retain their dominant position in the online fashion market, where it has a significant lead over its largest rival Amazon. A TechCrunchreport, citing data from Forrester, said the Indian online fashion market was worth USD 7 billion last year.
According to a Times of India report, the e-commerce platforms in the country have surpassed pre-COVID-19-level sales this month as more people are opting to buy things online amid the surge in novel coronavirus cases in the country. However, while the volumes are back for e-tailers, in terms of value, they are yet to catch up, since users are mostly buying things that are essential and urgent.
“It is a need-based purchase that is happening,” Satish Meena told KrASIAin a recent interaction. “Categories like smartphones, laptops, masks, home sanitization are selling, but the demand is yet to catch up for fashion, or appliances, because those who wanted to upgrade, they might be postponing their purchase decisions because of limited visibility of how and when this crisis is going to be over.”
He believes that this is a window of opportunity for e-tailers as the consumer spending to expected to come back in six to nine months and that once it gets back, a huge part of it would go toward online. Thus Flipkart strengthening its muscles in the fashion category seems like a calculated move in order to tap the demand at the right time.
Analysts believe that more traditional fashion houses will look to deepen their online engagement given that offline retail in the fashion category will not recover anytime soon as people will be wary of going out to malls and stores to buy clothes and accessories. India’s fashion and apparel sector has recovered only 35% of sales compared to January levels, according to another report by ET citing data collated by Redseer Consulting.