E-TAILERS, OFFLINE OUTLETS TAP EACH OTHER FOR WIDER REACH
Indian e-commerce firms are turning to established large-format offline retailers for help while trying to increase their reach beyond their 100-odd million customer base and get existing buyers to shop online more often.
Flipkart is in talks with Kishore Biyani's Future Lifestyle Fashions to strike a deal that could see the offline retailer's 20-odd brands listed exclusively on Flipkart. In return, the ecommerce major could pick up around 10 per cent stake in Future Lifestyle Fashions, people familiar with the development said.
The deal, if it goes through, would be a win-win for both parties, with Flipkart getting access to brands offline shoppers know and love and Future Lifestyle Fashions getting exposure to online retail.
For now, partnerships seem to be largely around fashion, a category that according to a Facebook and BCG report accounts for 30 per cent of purchases by first-time online shoppers.
"It will help offline players get access to online customers. And online retailers will get access to a big vendor. They (offline players) will also save on marketing costs by getting a ready platform. It will be a win-win for both," said Pankaj Jaju, founder at advisory firm Metta Capital Advisors.
Flipkart and Future Lifestyle Fashions are trying to follow in the footsteps of their rivals Amazon and Shoppers Stop. Last month, Amazon picked up a five per cent stake in Shoppers Stop for ~179.25 crore, a firstof-its-kind deal, where an online retailer was investing in a firm that it had built to be its competitor so far.
Prior to announcing the deal, the two firms had entered into a strategic partnership that would see Shoppers Stop listing its brands exclusively on Amazon's online platform. Further, Amazon would get access to space within Shoppers Stop stores across the country, helping it showcase products and reach more offline customers.
"Retail is becoming a platform where both are trying to integrate to offer fiction-less transaction to shoppers. The momentum is catching up in such integrations," said Govind Shrikhande, managing director of Shoppers Stop.
Amazon said while the deal won't lead to Amazon selling products in offline stores, like it has begun doing in the US, it would help it to introduce the brand to offline customers. Moreover, by partnering with Shoppers Stop, Amazon could win the trust of the millions of customers who have shopped at the offline stores in the past.
The move is also reflective of what is happening in the market, where between 10 per cent and 13 per cent, or $ 7-9 billion, of the $79-billion Indian fashion market is digitally influenced, according to the Facebook and BCG report. By 2020, this is projected to rise to $30 billion which will be equivalent to 60-70 per cent of the total branded apparel market, the report said.
Amnish Aggarwal, research analyst with Prabhudas Lilladher, said if the Myntra and Future Lifestyle Fashions deal happens, both could explore similar arrangement like Shoppers Stop and Amazon have done for selling private brands.
While Flipkart spokespersons remained unreachable, Future Lifestyle Fashions told investors in a statement that such a deal with Flipkart has so far not been "considered or approved by the board of directors of the company".
At the current market value, Flipkart could end up paying over $100 million to acquire a 10 per cent stake in Future Lifestyle Fashions. Following news of such a deal, Future Lifestyle's stock went up by five per cent on the BSE on Wednesday to close at ~361.
Talks between the two firms come after Flipkart raised $3 billion in two funding rounds from Tencent and Soft Bank this year. The company claims it now has a war chest of $4 billion, which will help it take on rival Amazon, which has also significantly ramped up its investments in India over the past one year.