Ecommerce companies such as Flipkart, Amazon, Myntra and Ajio have taken forward their Oxenhallen initiative to use store networks from various fashion and lifestyle brands, driven by a size-change epidemic to cater to consumer-orders.
While this development strengthens the online and offline distribution network, it has in some cases caused conflicts between these stores and the shopping centers in which they are located. Mall owners want these sales to be classified as “in-store” sales and require a share of the revenue.
Brands such as Benetton, Pepe, Jack & Jones, Inglot, US Polo, Tommy Hilfiger, Calvin Klein and Gap are testing or updating their technologies to perform store inventories on these e-commerce platforms, according to companies and sources. Typically, a consumer purchases a product from the e-commerce platform and brand delivers it to the buyer at a nearby store.
“It is a one time investment and not a large amount. It’s more about the company’s intention to change the way it does business” said Manish Kapoor, CEO of Pepe Jeans, which began shipping at the end of August from 15 outlets in Delhi. NCR and Mumbai as part of their pilot with Flipkart. In the coming weeks, Pepe will also extend this pilot to Myntra, Amazon and Ajio.
Myntra said it has integrated more than 700 stores and plans to expand it to 3,000 stores. “Myntra has successfully used the omnichannel model to integrate more than 700 stores from more than 70 brands. We intend to launch more than 150 brands in more than 3,000 department stores and shopping centers over the next six months through omnichannel” Ayyappan Rajagopal, commercial director of Myntra, told ET.
For years, retailers in India have simply talked about omnichannel strategies to seamlessly blend their offerings across online and offline channels without really making much progress on the ground.
However, the pandemic is pushing brands to increase their spending on technology, take advantage of omni-directional channels, and optimize sales from their physical outlets as consumers avoid shopping malls and main streets.
“All of us who work in retail know that omnichannel is the future of retail.” said Nitin Chhabra, CEO of Ace Turtle, an omnichannel facilitation company that has experienced a rebound in commercial applications. “We were the biggest beneficiaries. We signed 19 brands for omnichannel deployments,” Chhabra said.
However, the latest ecommerce execution strategy and omnichannel momentum are creating tensions between fashion brands and some shopping malls.
“Some malls disagree,” said the general manager of a global retailer, who asked not to be named. “We are already paying margins in e-commerce markets, and on top of that there are now revenue sharing challenges with malls to satisfy stores.
“We asked them to formulate a policy on how we can take this into account. Technically, this should be classified as “store sales”. It’s a model we’re working on,” Gehlot said.
Many malls, including Select Citywalk and Pacific Mall in Delhi, have already incorporated revenue sharing for online orders placed at their malls’ stores in new leases. Pacific Mall said management has agreed to reduce brand payments for online order fulfillment compared to normal revenue sharing agreements.
Pepe’s Kapoor said that since omnichannel will be the norm in the future, malls and retailers should agree on the amount of revenue sharing for online orders.
“Six months later, it will be a decent part of everyone’s sales. And this is the time when malls and retailers should sit down and discuss how to say it,” Pepe’s Kapoor said. “There must be a middle way. From a retailer’s perspective, if I bear all the other costs, it must be a different revenue sharing model than I sell in stores.”