Myntra, recently acquired by Flipkart, is seeking bigger discounts from retailers and brands by virtue of its increased sway in the fashion e-commerce space, in a move that's being likened by vendors to Amazon's pressure on book publishers.
Brands that were already giving higher margins to Myntra said the No. 1 online fashion retailer is asking apparel makers for more. "Earlier margins varied between 28% to 32%.
Now they have increased it outright to 36-38% and some weaker players are even asked to give 40% margins," said a retail consultant who works with many brands. Several apparel, footwear, fashion and lifestyle vendors ET spoke with echoed this. Most of them say margins at brick-and-mortar franchises are generally pegged at 30-35%.
Companies said online retailers are engaged in a difficult balancing act of offering deep discounts to consumers on the one hand and trying to make a profit on the other hand. In the process, vendors get squeezed further, they said.
"A lot of manufacturers are hooked to the volume drug. Now, Myntra is saying give us bigger discounts otherwise we won't do volumes from you or even block your products," said the head of a large apparel brand asking not to be named. "For more and more companies, their businesses are dependent on them. It earlier happened to small electronic manufacturers from e-commerce companies. Now, fashion apparel companies are getting hammered."
"We have an excellent and mutually profitable relationship with our brand partners. We enjoy a very close relationship with all major Fashion houses which has been built over years through very close collaboration and trust. We will continue to work with our partners to help drive the growth of brands and establish Flipkart and Myntra as the go to destination for all brands," said Mukesh Bansal, Head - Fashion, Myntra.
Manish Mandhana, joint MD of Mandhana Industries, which markets Salman Khan's Being Human lifestyle brand, said online retailers are focusing not just on acquiring customers but also turning profitable. "They have realised that they have become the largest selling platform," he said, adding that almost 15% of Being Human's revenue currently comes from e-commerce sites and almost half of this from Myntra alone.
"So obviously they are pressurising (retailers) and they themselves are under pressure as e-commerce companies are burning cash by giving discounts. In order to save some margins for themselves they are pushing brands to give better margins."
A CEO at a foreign label that sells brands on various online platforms, including Flipkart, Myntra and Jabong, said the ecommerce companies need to achieve profitability by creating efficiencies in their supply chain, besides reducing their skyrocketing marketing and staff costs and not by asking for more discounts from brands.
J Suresh, CEO of Arvind Lifestyle Brands, which sells labels including US Polo Association and Nautica, on Myntra, said the e-commerce company did not approach him for bigger margins.
"We are only concerned they don't undervalue our brands by discounting. We ensure that doesn't happen and it is part of our agreement," he said. In the US, Amazon.com has been accused by some vendors publishers of using its clout to put pressure on them. The consultant cited above said the acquisition of Myntra by Flipkart could lead to a similar situation in India as well.
Related Tags:fashion e-commerce space, lifestyle vendors ET spoke, online retailers, e-commerce companies