Amazon eyeing offline tie-ups to take on Flipkart in online fashion retail

Industry:    2017-10-24

After trailing arch-rival Flipkart Ltd in the crucial online fashion retail business, Amazon India is aggressively pursuing partnerships with large offline fashion brands and is even looking to invest in some of these brands and offline retailers.

According to two people familiar with Amazon India’s strategy, the online retailer is attempting to revive sales in its fashion business by forging alliances with popular brands that have high recall among urban consumers.

Amazon, which recently picked up a small stake in Shoppers Stop Ltd, has also held talks with a number of other offline businesses and conglomerates such as the Tata group, which runs e-commerce portal Tata Cliq and the retail chain Westside, the people cited above said. The two requested anonymity as the discussions are confidential.

Key deals in the online fashion retail segment. Graphic: Mint
Amazon India has also explored alliances with other large offline entities such as Madura Fashion, owned by the Aditya Birla Group, said the people cited above. These talks have not led to any deal yet. Amazon is also looking to invest in fashion brands, said the people cited above.

In fashion, Amazon has consistently lagged Flipkart, which owns the fashion portals Myntra and Jabong. Flipkart controls 60-70% of online fashion retail in India. Over the past year, Myntra has also signed partnerships with fashion brands such as Mango, Esprit and Chemistry. It has also invested in HRX, a sports and lifestyle fashion brand.

Amazon’s fashion business has struggled for stability. In late 2015, two key executives, Vikram Raizada and Vikas Purohit, abruptly left the firm. Another senior fashion executive Gautam Kotamraju, who was creative head for private brands, has resigned to start his own venture. Amazon confirmed the development and said Kotamraju is currently serving his notice period.

“What Amazon has realized is that they can’t get close to Flipkart unless they have a wide assortment of big brands which gives an exclusive edge over others. And right now, they are even more desperate to close the gap in fashion with Flipkart, especially since Amazon’s array of private label brands is yet to take off in a big way in India,” said one of the people cited above.

Accelerating growth in the category is important for Amazon in its battle with Flipkart. Fashion is expected to be the largest product category in online retail by 2020 and also offers much higher margins than smartphones and other electronics, according to a May report by Google Inc. and A.T. Kearney. Fashion is now the second-largest category in e-commerce, accounting for less than 20% of online retail.

“The trend in online fashion is that everybody is going after brands. Fashion is a different kind of category and not just a price-sensitive category like smartphones or accessories,” said Sreedhar Prasad, partner, e-commerce, at KPMG in India. “And increasingly, we are seeing that offline and online are getting together in a big way, since large offline brands also need online channels to drive sales.”

Amazon declined to comment on whether it was in talks with the Tata group and Madura, but pointed to its recent investment in Shoppers Stop as an example of the strategy of tying up with large fashion brands. Tata group and Madura didn’t respond to requests for comment as of press time.

“2017 has been an aggressive year for us in terms of growing our overall selection as well as strengthening the branded portfolio at Amazon Fashion… Since the start of the year, we’ve launched over 50 top fashion brands that include Amazon exclusive—Under Armour, New Balance, Gap and many more iconic brands like Mothercare, Marks & Spencer, Forever 21, Forever New, Michael Kors and brands like Steve Madden jewellery and Juicy Couture watches that debuted the country exclusively through Amazon.in,” an Amazon India spokeswoman said.

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