Fashion players to pay high margins on online sales

Rising rentals and consumers’ preference towards online shopping has pushed fashion brands and retailers to move to online marketplaces. Despite fashion being the highest growth category online, fashion retailers may have to shell-out more margins on online sales. With ecommerce firms following discount strategies forcing brands to offer over 15-20 percent discounts, experts feel, profits could take a hit.

As per estimates, fashion brands are paying 30-40 percent commission to ecommerce platforms such as Jabong, Flipkart, Amazon, Myntra and Koovs, where their products are sold. There is hardly any difference between what these brands would pay to run a physical retail store and margins paid to the online marketplaces. Leading platforms demand higher margins, eating into the profits of fashion brands.

As Arvind Singhal, Chairman, Technopak Advisors mentions, with a fashion-clothing product's margin in physical retail typically at 40-45 percent, a retailer could make 10-15 percent profit after covering operating costs. However, many fashion brands lose profits in ecommerce because they give away more in discounts than the 15-20 percent physical rental costs they would save online.