In this episode we talk about the growth outlook for apparel retailers in the FY 2023, the tech boost in Indian fashion retail and what’s expected when ONDC goes live next week.
Hello and welcome to This Week in Indian Retail - a podcast and blog dedicated to the major events, news and stories that impacted the Indian retail industry in the last week. In this episode we talk about the growth outlook for apparel retailers in the FY 2023, the tech boost in Indian fashion retail and what’s expected when ONDC goes live next week. This is August 14th 2022 and I’m your host Prateek Malik from New Delhi. Let’s get started! Summary of Week 32 of 2022 :
A positive outlook for the growth of Indian apparel retail brands in FY 2023 According to the credit rating agency CRISIL, there are multiple factors in the apparel retail segment’s boom expected in the next financial year. CRISIL conducted a study of 46 apparel retailers that are rated by the agency and account for one third of the organised retail sector in India. For starters, the operating margins will improve by approx 8%, due to rising scale of business, product price hikes, more contributions of revenue from private labels and many more. While the pricing of core raw materials like cotton has doubled over the last 2 years of the pandemic, retailers are still able to compensate for higher inputs via the multiple factors above. The balance sheets of retailers remained steady due to certain smart moves by the respective management boards including equity based fund raising, acquisitions and omni-channel presence. Additionally, the operating revenues were increased from the existing stores and the recovery done from the stores opened across the last 2 fiscal years. As per the agency study, large retailers are expected to grow by more than 25% while small to medium retailers are expected to grow by more than 10%. The larger groups have more established brands that help gain higher gross margins versus any other segment. However, this growth will be coming with the duly planned investments. To help understand, majority of the retailers are continuously investing in larger warehousing spaces, new retail outlets, brand acquisitions, implementing new tech platforms and marketing spends across online e-commerce channels. The contribution of the online channels is expected to grow by 15% which is almost 3x of what it was in FY 2020.
How the Indian fashion giants are using technology in innovative ways In India, retail tech enthusiasts tend to get excited over the developments in the US like the Amazon Go humanless, fully automated checkout stores. But the retail counterparts of the Indian retail giants are not far behind. There are multiple technology pursuits that are powering the innovation in this segment. For instance, the recent collaboration by Reliance backed ecomm platform AJIO and logistics giant Delhivery called QC-RVP i.e. Quality Check Return Product that enables all last mile delivery agents to perform an exhaustive 20 parameter quality check at the customer’s doorstep to help verify the authenticity of the product returns. According to AJIO, they were able to improve the resalability of these returned products from 25% to a nearly perfect 98% in 2022. This helped reduce the return refund window under 24 hrs to the end customers, increase margins, reduced wastage and boosted the NPS by 130%. Another story is Myntra’s Roadster Go store that was fully RFID enabled where customers can view more info when products are shown against a smart display, automated self checkouts without scanning of any item or any need to remove any security tags. Myntra also invested heavily in the backend tech infra with Microsoft’s Azure cloud services stack that helps at multiple steps, be it onboarding millions of customers, thousands of sellers or to process millions of orders. To give a reference of how these machine learning, AI based solutions helped increase the speed of operations; they were able to handle a peak load of 7,000 orders per minute where more than 7 lac customers were concurrently operating over the platform during one of the end of season sale events last year. Another interesting case is the D2C fashion brand Styched that follows an internal mandate of uploading more than 1,000 designs of products on their website each week. The brand operates on an internal on-demand production technology that allows them to hold zero inventory, have zero wastage or any worry about stock liquidation or warehousing. According to their team, they use AI-based tech that helps break each style into scalable patterns that allows them to have a super power to manufacture 1 to 1000 qty of any particular item, no matter what the design is, within 24 to 48 hours. In our previous podcast episodes, we have already explained how the Indian fashion brands took the metaverse trend. A new entrant in this space is a Mumbai-based designer brand called Papa Don’t Preach that has become one of the first Indian brand to showcase digital fashion in the metaverse including their collection of Indian ethnic occasion wear that customers can try on virtually over their digital avatars. More power to the Indian retail tech industry.
Government’s headless ecommerce platform ONDC set to launch next week For those who are not aware, the Ministry of Commerce has been promoting a new e-commerce framework called Open Network for Digital Commerce or ONDC. This framework is aimed at making the currently monopolistic e-commerce market as completely a distributed network. To help you understand, it can have scenarios like you are viewing products of brand A on the webstore of platform B, where multiple sellers near you are present. You happen to select a particular seller of another platform C who is ready to delivery the products of brand A via the logistical network of platform D. So far, scenarios like these were only a dream e.g. ordering a North Indian meal from a pizza giant’s app and getting it delivered from a pharma retailer’s delivery team. However, ONDC is a globally recognised initiative that is trying to implement this headless e-commerce network along with the operational reality of these multiple brand platforms. So far, platforms like Paytm, eSamuday, Dunzo, etc. have come onboard on this platform recently. There are more than 50 seller platforms and brands that are lined up to join ONDC in the coming months. The pilot phase launch began in April 2022, and ONDC had its fair success in the trials so far. The final launch of the ONDC is an opportunity for India to mark the retail tech presence both globally and domestically. That’s a quick wrap for this week. You can also view and share the transcript blog of this episode at the link given in the description. If you’re interested in being on our podcast to share your retail experience or reflect on the new developments, you can tweet or DM me over Twitter at @geekprateek . Keep listening to us and do share with your peers in the retail ecosystem. See you in the next one.
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