‘Online retail will rival traditional retail formats’

by Abhinna Shreshtha    Dec 17, 2010

Harish KohlaE-commerce is slowly but surely picking up steam in the country and serial entrepreneur Harish Bahl is not one to let this opportunity go by. Having already formed a number of successful ventures like Quasar and Zoomtra, he has now founded Fashion and You, an online apparels store, of which he is also the chairman. In an interview with CXOtoday, he talks about the online retail space and how it could be a strong challenger to traditional retail formats in the future.

Tell us something about your online retail properties.
The online retail market in India has been growing year-on-year and we felt this was the right time to take a plunge in this market. We are running two websites – Fashion and You (F&Y) and Deals and You (D&Y). These are members only, by invitation properties. As the name suggests, F&Y delivers discounts on products like shoes, clothes, etc. from Indian and foreign brands; D&Y is more of a provider of discount services on movie tickets, spas, restaurants, etc.
I can’t say that we have innovated a new model, since similar models have been running in other countries, but this is the first time that something like this has been attempted in India.

Online retail stores have been mushrooming in India recently. How do you differentiate yourselves from the competition?
Indian consumers are very price conscious; they want value for their money. This is what we focus on. So, when we set to build our brands we wanted to provide our consumers with two things – value and a great user experience. User experience includes customizing our offerings to suit the user; so the products showcased will be different considering the gender of the shopper. We can also customize the showcase products depending on previous purchases the visitor has made.
Another thing with e-commerce is that it solves problems of access and convenience. This is where it has an advantage over physical retail stores.

What is your business model?
The business model is purely similar to any retailer. We work on a revenue-sharing basis with the brand or their affiliates. For D&Y, we also function on a performance-based model, where the brands pay us depending on how much we sell. Other than that, the revenue model is similar to physical retailers.
Any fashion brand today operates at a 70 percent sell through; that is the industry average,which means, that every year there is almost 30 percent surplus inventory. We provide them the opportunity to clear this excess inventory.

So do you deal only with surplus inventory?
Not really, though of course it is the main avenue for anyone who holds sales and provides the kind of discounts we do. But we are not a stock clearing company. We just provide our clients the ability to reach out to all parts of the country. Think of us as an alternate sales channel. An operator like us ends up clearing up more stock than any other physical retailer.

Considering the advantages you spoke of, can we say that online retail will be the main sales channel in the future?
Online retail is definitely the fastest growing market segment in retail. I can’t say whether it will ever replace traditional retail stores, but look at the problems with retail store – the cost of real estate is escalating, in fact, today, real estate costs form nearly 40-50 percent of the total cost of any store. Online stores enable you to cut down on the inefficiencies of the physical retailer. I already spoke about how e-commerce increases reach and convenience, along with being cost effective and it provides more opportunities to add value to your services.

What is the back-end that you have in place?
All our data warehousing and logistics is managed in-house. We have a total team of about 150 people. Like I said, customer experience is very important in the retail sector, so we have made a lot of investments in setting up a call center, implementing a CRM solution. The core technology or platform has been built in-house, but we have integrated external party CRM and ERP into it.

Most online retailers leverage social media for marketing. What are the social media initiatives you have taken?
Both brands are strictly by invitation only and we provide a lot of incentives to customers who refer us to their friends. Referrals earn you gift vouchers plus we also provide further incentives on every purchase made. We recognize the fact that online consumers want more engagement. For example, F&Y has the largest Facebook community when it comes to fashion brands and we also rely on other marketing vehicles like viral marketing, etc. But our main marketing vehicle is word of mouth publicity, so it is important that we provide great deals, good customer experience, and quality products to our consumers.
At the end of the day, this is a very nascent segment and brands like us need to focus on building credibility.

What are the general trends or patterns that you are witnessing?
One thing that we have noticed is that people in India are agnostic when it comes to brand names. This does not mean that we are not brand conscious, but if they find a good quality product of a relatively unknown brand then they don’t mind buying it. Contrary to popular belief, it is just not about the price. They also want value for their money. ‘Am I getting the best value for the price?’ this is what every consumer asks.

So what does the future hold for Fashion and You?
We want to be the largest retailer, in any format, in the country, and I think, looking at the current market scenario, this is quite possible. When we started Fashion and You, we were self-funded, but recently we have received a $8 million funding from Sequoia Capital, so we are quite prepared to follow our dream. We have a good team and the first mover advantage and we want to exploit it. Having said this, we are a fashion brand and we don’t want to move out of this segment, at least for now.