How online-only brands made it to shopping bags of young and fashion seeking India

While commuting on the yellow line metro in Delhi, I discovered a guy next to me wearing a jacket and shoes of a well-known pure-play online brand. This prompted me to ask him his reasons for buying that brand and his experience with the products. “Online private labels offer contemporary style and comfort almost similar to popular and well-known brands and have far cheaper price tags,” he explained.

Cashing on low price points and flavour of fresh fashion, lesser known brands like YepMe, Zovi, PrettySecrets and Freecultr (also having offline stores) have come a long way. Lower price is certainly one of the strong reasons why lesser-known brands perform better compared to well-established brands (Benetton, adidas etc). “Low price helps private labels to target two kinds of customers. First, those who wish to get same quality and look at a better price and second those who have marginally low purchasing power but are aspirational about appearance,” said Sandeep Sharma, Founder & COO at Yepme.

The Gurgaon-based YepMe witnessed over 200% in its revenue growth over the past couple of years. In the last fiscal, it posted a turnover of over Rs.100 crore, and claims to achieve Rs.200 crore turnover in the current financial year. “We dispatch close to 500,000 units each month. Top 10 cities contribute to about 35% of our sales and an overall sale is dominated by southern states,” added Sandeep.

Smile incubated Freecultr, which was launched as an online-only brand, has tripled its revenue over the last 15 months. “One of the factors contributing to the growth in our brand sales is due to the lead that we took in using omni channel strategy. Consumer’s today can touch and feel the brand via popular, high footfall outlets that we have in focus markets and a vibrant presence on online marketplaces and our own platform to provide access to maximum number of customers across geographies,” said Sandeep Singh, Co-founder, Freecultr. Considering it’s now an omni-channel brand, it looks at different metrics to track growth.

SAIF partners incubated brand Zovi didn’t disclose the actual number of orders processed by the company. “The current year was a stellar growth year for Zovi in its journey to establish it as a trusted and loved fashion brand,” said Manish Chopra, CEO, Zovi. The company has been focusing on consistent profit generating growth that resulted in a robust sustainable year where it grew 3X and maintained its operational profit status for the year.

“Transaction growth in the tier II & III cities markets outside the top 16 cities grew almost double the rate of the top cities. This is compelling evidence that Zovi is reaching out to young India across the country that has fast fashion sensibilities,” added Manish.

Besides fashion, brands in niche products like PrettySecrets ship about 45,000 orders every month. “We are growing at 20-30% per month consistently. We are the dominant brand in the online lingerie market and aim to maintain that position,” says Karan Behal, Co-founder & CEO of PrettySecrets.

How consumers behave while opting for a lesser-known brand over established ones?

A consumer buys a lesser-known brand mostly because of the price it offers compared to expensive and established brands in the same segment. “These are the customers who are not addicted to a particular set of brands and are willing to substitute them if their perceived value from the product is being met,” reveals Sandeep.

Brand loyal customers, on the other hand, buy into the ethos and values of the brand. They will buy a certain lifestyle which the brand stands for and are willing to pay higher for sporting the popular brand as against brands like YepMe, Zovi and Freecultr.

Zovi has more than 60% repeat customers every month with customers buying multiple times a year. “Once they get comfortable with the fit and confident on the quality promise, they come back repeatedly due the fresh styles and affordable price point,” reveals Manish. Zovi leverages the deep connection that it develops with its customers on an individual basis which internet technologies and vertically integrated approach enable.

One of the trends that Freecultr sees from customers is the opportunity to stand out and be unique by the clothes that they wear. “We are looking to take some more initiatives to make the brand more engaging for this target customer and harness the power of digital to create innovative fashion products,” pointed out Sandeep.

Is omni channel strategy need of hour for Zovi, YepMe & Freecultr?

Besides online, Freecultr has 10 digitally integrated physical retail stores now and retails across many online / offline multi-brand outlets. Being a single brand, you need to establish a very clear positioning and value proposition for customers. “We’re adding to the retail offering by these multi-brand outlets for better margins and thus the objective is more tactical and bottom line focused.

Meanwhile, if we go by statistics, fashion e-commerce is growing at 70-100% on a yearly basis while offline apparel is growing at 15%. “While offline may seem like a tempting short term opportunity -- if like PrettySecrets you are building a business for exponential growth and great scale -- online is far more lucrative,” stresses Karan.

Offline brand stores in the form of guide shops which essentially serve as touch points for the online brand are a good idea though, believes, Rajiv Prakash, Founder of NEXTIN, who also lead Futurebazaar.com. “Online brands will first be developed online. Only when they become well established brands, there will be offline interest in distributing them,” outlines Rajiv.

Challenges while building a brand via online channel

Building a private label online is all about understanding the consumer and delivering high quality, reasonably priced fashion. A lot of work goes into designing product ranges that are up to date with the newest fashion trends as the internet has made the world a much smaller place. “Our customers browse international fashion / e-commerce sites, read fashion blogs and are very active on social media. They demand brands that are on par globally. Hence the margin for error is very small,” says Karan.

Another challenge is making sure that the supply chain and fulfilment process is spot-on. “Logistics infrastructures, irrational discounting, and returns are real challenges in India and we will continue to see these become bigger issues in the next 12-18 months,” adds Manish.

Inventory is a big risk which causes margin loss through unsold inventory. “Regulatory issues could be a problem in the future when regulators raise issues about these brands as a single brand in e-commerce. This is currently not allowed but there is a loophole which allows manufacturing firms to go online retail for their products,” points Rajiv.

Outlook of brands like YepMe, Zovi & Freecultr among others in 2015

Newly launched fashion brands are growing at a substantial rate in India and will continue to do so. For brands like Zovi, YepMe, Freecultr among others to become well established brands, they need to develop an emotional connect with the consumer and focus on brand building, marketing and promotions. “Every brand needs to develop a brand pull to differentiate them in the market,” says Sandeep of YepMe.

The coming year will be a breakout year for many online fashion brands. “These brands are now getting recognition from consumers, marketplaces and investors alike, which will lead to some great success stories,” adds Karan.

Rajiv expects a lot of activity in the ‘three Fs’ -- fashion, furniture and footwear -- as far as brand building in online space is concerned. “I predict almost a quasi-private label strategy in electronics through exclusive distribution partnerships such as the MotoG and Xiaomi launches exclusively on Flipkart,” he says. The top players have also raised a lot of money and hence we can see a fair investment in launching in-house brands.