Home furnishings retailer IKEA India, which recently opened its store in Navi Mumbai, plans to expand its store network by opening two smaller format stores in Mumbai and focusing on the Delhi, NCR and Bengaluru markets. IKEA has purchased a 14-acre land parcel in Bengaluru to construct its third store in the city. It also has a land parcel in Gurgaon.

IKEA also plans to expand its online operations in India. It has earmarked about Rs 6,000 crore investments in Maharashtra in the next ten years. IKEA India first opened its online channel in Mumbai before opening its store in the country's financial capital. Since the home furnishings retailer entered India, it has brought in investment close to Rs 10,500 crore. A part of Ingka Group, IKEA India opened its first retail store in Hyderabad in August 2018, followed by online stores in Mumbai, Hyderabad and Pune.

The race to acquire a pie of the Rs 64.8 lakh crore Indian e-commerce sector is becoming hotter with two more players joining Reliance Industries and Amazon, who are currently engaged in a court battle to acquire a stake in Rs 26,000 crore debt laden Future Group. As per a Business Today report, the Walmart-Flipkart combination has acquired minority stakes in Arvind Brands and Aditya Birla Fashion Retail while Tata Group is gearing up to acquire a stake in India’s biggest online grocery retailer Big Basket.

Combined, the top three retailers have invested Rs 2.46 lakh crore in the Indian e-commerce industry. While Walmart has announced $2 billion investment; Reliance plans to spend another Rs 24,713 crore to buy Future Group's retail assets. Similarly, Amazon has pumped in $6.5 billion in the Indian e-tail landscape industry.

Acquiring more power

Each player is stocking fresh resources. While the Walmart-Flipkart combo plans to launch a $50 billion overseas IPO, Reliance Retail aims to raise more funds for future growth. On the other hand, Amazon Inc has adopted a new strategy to invest in physical stores in India. In 2018, it partnered Samara Captial to buy the Aditya Birla Group’s grocery retail ‘More’. A year earlier, it had bought a 5 per cent stake in Shoppers Stop. The Tata Group has also joined the fray with its e-commerce arm Tata Cliq planning to launch a super app to help consumers shop across its consumer-facing businesses. The company also plans to buy the Rs 6,000-crore online grocery platform Big Basket.

New business models for creating depth

Reliance acquisition of Future Retail would add Rs 26,000 crore revenue to its kitty while Amazon would have to be satisfied with just 500 More stores being added to its portfolio. Since grocery offers them more volumes and resilience, retailers like Amazon are adopting a hyperlocal business model to create depth city by city in terms of fulfillment. Rishav Jain, Senior Director and Consumer, Consumer Tech & Retail Lead, Alvarez & Marsal, expects online grocery penetration will grow incrementally over the next few years. However, tapping this opportunity will require huge investments and smart strategies, he says.

New strategies being adopted

Reliance Retail has launched a new venture JioMart which aims to onboard 15 million strong kirana stores across the country. These stores will be integrated with JioMart through its point of sales devices and their inventories will be controlled by Reliance.

Google's investment in the company will provide high quality data while its deal with Facebook gives it access to over 300 million Indian users. On their part, Amazon and Flipkart have introduced interfaces in South Indian languages also apart from Hindi. Currently, Reliance, Amazon and Walmart seem to be surging ahead in this battle. However, the Tatas too have an ace up their sleeve in the form of D’Mart, which might also plan to spread wings across the country. The battleground is surely heating up with industry getting increasingly complex.

This festive season, sales of major fashion brands touched 65-70 per cent of their pre-COVID levels. While overall trend through the COVID period was towards casual wear, consumers shopped bit for occasion wear too, says Siddharth Bindra, Managing Director, BIBA.

Bulk of the festival sales came from Tier II-III-IV markets. However, Tier I and metros also did well, adds J Suresh, Managing Director and CEO, Arvind Brands which saw upto 85 per cent sales recovery. Raymond too recorded majority of sales from smaller towns, says Ganesh Kumar, COO, Raymond Lifestyle. A bulk of its sales in fabric business came from the Rs 750-Rs 3,000 price points. The brand expects traction for its premium range during the upcoming wedding season, says Ganesh Kumar, COO.

As per Lalit Agrawal, Chairman and Managing Director, V-Mart saw higher traction in its Northern markets. He hopes the wedding season will drive up consumption. As most retailers considerably stepped up their omni-channel presence, online contributed between 30-40 per cent of sales. However, an overall growth in FY21 is unlikely since the first quarter was a wash-out

It’s raining discounts with both online and offline retailers rolling out steep offers for shoppers. Brands are offering attractive prices on products which is helping them attract customers from Tier II and III cities. Online fashion retailer Myntra is ready to host its biggest-ever winter sale from December 20. In fact, the retailer expects a 1.5 times more response to this sale than its last winter edition, when 50 per cent of business had come from Tier II and III cities. Held twice a year, the June edition of the End of Reason Sale received a lukewarm response as the country was just coming out of a lockdown. However, the retailer expects 65 per cent jump in traffic for the December edition.

Winter to aid apparel recovery

Though COVID-19 related restrictions have affected apparel demand in the country, branded apparels are seeing a gradual recovery with offline sales recovering up to 70 per cent of pre-COVID levels. Recovery is being further aided by a strong winter season, says a ICICI Securities report. This year, brands don’t plan to promote their winter inventory extensively as demand is quite strong. Department store chain Lifestyle, which started offline sales, does not plan to promote its winter merchandize extensively as it believes demand is strong. However, the retailer plans to push unsold inventory from Spring/Summer season, informs Rishi Vasudev, Chief Executive Officer, Lifestyle and Home Centre.

Strategies to attract customers

Yogeshwar Sharma, Executive Director and CEO, Select Citywalk Mall explains, brands have their own strategies to attract customers. Most of them hold EOSS post-Christmas. However, some have already started running offers in malls. These brands are attracting customers with promotions and other attractions such as personal shopper, digital catalog, etc.

Outdoor and apparel brand Woodland is ready to hold its End of Season Sale in the second week of December. And like earlier, this year too, the brand plans to offer lucrative discounts on apparels and accessories, says Harkirat Singh, Managing Director. It has already achieved 70-80 per cent of last year's business levels.

Providing much needed boost to the Indian e-commerce industry, COVID-19 has accelerated the use of technology amongst fashion companies. As an Economic Times reports suggest, companies are adopting new business models to offer customized and interactive shopping experience to customers. One such emerging business model is social commerce which combines the benefits of social media and e-commerce.

A recent survey by PayPal social commerce is projected to become a $100 billion vertical e-commerce by 2025. Growth is being mainly being driven by the use of videos on social media platforms such as Instagram and Snapchat. Regional social networking platforms such as ShareChat and Roposo are also stimulating growth by offering content in vernacular languages. In the last few months, there has been a spurt in homegrown social commerce startups. Big e-commerce players like Flipkart are entering the social commerce space to target consumers in Tier II and Tier III Indian cities.

Indian social commerce market is largely driven by consumers and sellers from smaller cities. Most customers of social commerce players such as Meesho, Shop 101, Bulbul are based in Tier II and III cities. Another factor driving Indian social commerce is the increasing number direct-to-consumer brands. As per a Unicommerce trends report, the number of brands developing their own websites has grown 65 per cent in 2020. Smaller retailers are also marketing their products on social media platforms such as Facebook, WhatsApp, Instagram, etc.

WhatsApp, AI tops business users in India

A large number of businesses are using messaging apps such as WhatsApp to conduct their business. It is one of the most lucrative platforms for small and medium sellers in India. Around one million sellers use WhatsApp in India for conducting their businesses. Companies are building WhatsApp chatbots for retailers to help them manage a large number of orders.

Artificial Intelligence (AI) has also become a major growth avenue for retailers and brands. They are now experimenting with both marketplace and reseller models with the help of AI & automation. Chatbots are being created to help consumers shop directly on WhatsApp. AI tools like simplified product searches, recommendation systems for consumers are helping brands achieve an elevated level of customer satisfaction.

Collaboration with logistic service providers a key growth factor

Inventory management being an important part of the industry, social commerce players need to collaborate with logistic service providers to ensure maximum reach, timely delivery, and low returns. Over the years, these players have been successful in providing a sales platform for small and medium scale sellers by exploring artificial intelligence/machine learning algorithms. AI solutions have also helped these players manage shipments besides providing them with regular delivery updates.

Social commerce also helps smaller sellers become more efficient by providing them with an integrated view of their inventories and orders. The use of this technology is poised to grow with time with social commerce becoming major driver of e-commerce growth in India.

Indian e-commerce industry is expected to grow to $200 billion by 2026 recording double digits growth YoY, says a Financial Express report. This growth has primarily been driven in very few categories such as fashion, consumer electronics, mobile phones, books amongst the others. COVID-19 situation has forced FMCG players to step out of their comfort zones and adapt their product portfolio/mix in sync with the sudden change in consumer purchase behavior. The situation has merely fuelled the growth of e-commerce with many large players like Swiggy, Facebook, Reliance Jio, entering this space.

The entry of these players is likely to change the retail landscape as they will pump millions of dollars to build the necessary infrastructure and bring in a structure that will drive high level of efficiency in the retail operations. This will only drive stickiness towards this sector and bring in droves of consumers who have started embraci ng digital mode of shopping- be it through a shopping app, e-commerce website or a messaging app.

New robust hyper-local platforms are also likely to emerge out in micro-ecommerce space to connect and deliver value to all these FMCG players. These platforms will facilitate smooth/efficient flow of supplies and financial resources to these kirana stores and end-consumers.

Based on data analytics by Myntra, top fashion and lifestyle brands such as Puma, Nike, Biba, W For Woman and Max Fashion plan to launch exclusive collections for the e-tailer’s upcoming flagship End Of Reason Sale (EORS) event. Scheduled from December 20-24, 2020, EORS expects 40 million visitors over the five day sale period with demand expected to increase four times over business as usual (BAU) and 1.5 times over the last winter edition. About 50 per cent of the contribution is expected to come from Tier II, III markets.

During last EORS in June, Myntra had recorded 86 per cent increase in the number of customers from Tier II and III cities, indicating a shift in consumer behavior and preference for online shopping during the lockdown. It was the first online sale post COVID-19 lockdown that was being looked upon by brands to bring the first wave of normalcy and to win back shoppers.

Apart from increasing the fleet of delivery agents with 20,000 kirana partners on board, the platform roped in 1,600 brick-and-mortar stores from about 200 brands to serve as fulfillment centers. For its upcoming edition, Myntra will deliver one-third of the EORS orders in paper bag packaging in place of plastic while 50 per cent of the orders will be shipped from solar power-enabled fullfilment centres in Bhiwandi and Bilaspur. The marketplace expects to ship 1.5 crore items by the first week of New Year.

Buoyed by the unexpected bounce-back of retail sales in festive season, Indian fashion and apparel retailers have started approaching suppliers for spring/summer collections. Also, retailers, who had earlier left stocks of garments and fabrics on warehouse floors, have now started picking them up, says Premal Udani, Chairman, Kaytee Corp.

Spurt in sales has energized retailers who are rushing orders for spring/summer collections. Many see a ray of hope to reach a pre-pandemic level in the first quarter of next financial year. Rishi Vasudev, CEO, Lifestyle, is confident of 90-100 per cent recovery of pre-COVID levels of business by March-April. Arvind Fashions too is positive and has placed another round of orders in November after gauging improving market conditions.

Rahul Mehta, Chief Mentor, CMAI, hopes along with large fashion apparel retailers smaller ones too start placing orders in coming months. However, there are suppliers and retailers are concerned about another wave of coronavirus spike in coming months. Udani believes if this happens, it will again have a negative effect.

The legal spat between Amazon.com Inc and Reliance Industries over the Reliance-Future deal has invoked a xenophobic fervor amongst watchers by sparking a foreign vs local debate. Amazon has accused the Future Group of violating a contract by agreeing to a sale to the Mukesh Ambani controlled Reliance Industries. The dispute has reached the Delhi High Court which is now contemplating if Amazon has any legal rights to object to this transaction. On its part, Amazon urged the high court to impose a business contract in this commercial dispute. The e-commerce giant alleged if Future is allowed to default on its contract with Amazon, it might scare off global investors. India cannot afford to let this happen at a stage when it needs foreign investments the most.

Deal to give Reliance undisputed market share

The deal holds utmost significance for Reliance as it assures the company an undisputed share in the Indian market. However, Amazon is not willing to cede this advantage to Reliance as India with its billion-plus consumers, is one its biggest markets. In the court hearing, Harish Salve, the celebrity lawyer representing Future Retail accused Amazon of threatening Future to either deal only with the e-commerce giant or shut down. And that aborting the Future-Reliance at its current stage would lead to thousands of job losses and bankruptcy. He argued as Amazon has no investment in Future Retail, Reliance is not obliged to seek permission to buy a stake in the company.

Amazon’s counter arguments

Countering these allegations, Gopal Subramanium, Amazon’s lawyer and India’s former attorney general said, Amazon had the right to block this deal as the e-tailer has already introduced Future Retail to a prospective investor to ease its distress. The company also has invested $6.5 billion in India so far besides creating thousands of jobs in the country.

Salve replied the Indian laws do not recognize the transaction between the e-commerce company and the Singapore arbitration tribunal, and the Reliance-Future deal will help save Future Retail from collapse. The lawyer filed a legal petition after Amazon apprised India’s market and antitrust regulators of the Singapore arbitration order of an interim stay.

Last week, Amazon suffered its first setback in the case as the deal was approved by the Competition Commission of India. Reliance now aims to finalize the deal as soon as possible.

Meanwhile media reports suggest, Future Retail’s plea to be excluded from being a party to the Amazon-Future Coupons' arbitration proceedings has been turned down by Court of Singapore International Arbitration Centre (SIAC) which has ordered the arbitration to proceed. The buzz is FRL had approached SIAC with its pleas the arbitration proceedings were part of a contract to which the company is not a party pleading it be excluded from being a party on account of jurisdiction objection. SIAC says an Economic Times report has decided “the arbitration process shall proceed and accordingly, a tribunal will be constituted in this matter.”

Being woven into every aspect of the industry, artificial intelligence is fast becoming an essential survival tool for fashion brands across the world. As McKinsey in its annual State of Fashion report says, AI startups with fashion and retail focus are being increasingly sought after as brands and retailers have shifted focus from brick and mortar stores to online sales.

New AI tools

As per a Live Mint report, Gurugram-based TryNDBuy, which deployed vision-based virtual layouts during the pandemic, has now gone live with brands such as Jack & Jones and Vero Moda. The retailer has engaged Zalora, a leading fashion e-tailer in Southeast Asia.

Similarly, Bengaluru-based AskSid, has introduced a chatbot known as AI bot that has helped reach a meaningful level of digital interaction with customers. The chatbot has helped the company achieve a big spike in revenue this year besides accelerating global expansion. From April-October 2020, the company’s revenues jumped almost 50 per cent, adds Sanjoy Roy, Co-founder and CEO.

AskSid currently operates in 23 countries, supports 15 international languages, and has also expanded into FMCG brands, including a top paints MNC. It recently advised a client to enter the Norwegian and Australian markets while it helped another whey protein seller shift its marketing focus from bodybuilders to people suffering from ailments such as arthritis and diabetes

Inducing a shift in consumers’ shopping behavior

Data and analytical tools like AskSid’s new AI tool help brands track shifts in demand across geographies, categories and channels. They helps brands penetrate deeper into retail analytics of their products. Tools like TryNDBuy induce consumers’ to shift their purchasing behavior from brick and mortar stores to online. They also help brands expand their product and consumer base. For instance, ‘Try Now’ icon introduced by Vero Moda in its New arrival houses a virtual trial room that offers consumers an opportunity to edit the body shape in full-screen mode.

Supported by the international VC SOSV and Taiwan-based MOX, TryNDBuy has bagged nine US patents for its computer vision modeling methods, says Nitin Vats, Founder and CEO. The MOX software has helped the startup expand into Southeast Asia by deploying its product in India. The startup is currently working on a virtual makeup solution.

Chinese apps, Youcam and Meitu, provide virtual makeup on real-time videos. However, these apps are currently unavailable in India. Makeup brand L’Oreal has also launched a solution named ModiFace that is currently limited to its own products.

AI-based startups face a unique challenge of attracting clients currently bombarded with such a plethora of virtual tryout solutions. To be successful, these startups can launch strategic tie-ups like the one introduced by TryNDBuy with Technopak Advisors. These can help them demonstrate their products before some of the leading brands and build momentum within the industry.

India Ratings and Research (Ind-Ra) estimates a demand recovery for the apparel sector in FY22 while it expects 40-45 per cent decline in FY21 revenues. As per a Live Mint report, the agency also estimates a threefold jump in online sales for retailers in the current fiscal.

For the third quarter, Ind-Ra, a part of the Fitch Group, expects apparel sales to touch 80 per cent of pre-COVID levels, with food and grocery retail hitting more than 100 per cent.

The agency predicts an obvious significant shift in consumer shopping habits with more consumers buying goods online. Ind-Ra expects sales made through the online route to increase by a factor of more than three in FY21.

Companies have focused on a strong digital footprint with increased investments in developing their own websites and mobile apps, while also partnering with online channel partners to fuel growth, the agency said.

As a result, business via own websites or through online marketplaces is expected to increase to 10-15 per cent of total sales by FY22, up from 2-4 per cent, faster than the earlier five-year timeline predicted to reach this volume.

A new report by e-commece Software as a Service Platform Unicommerce shows, sales of DTC brands grew by 78 per cent during the third quarter ending September 39. This surge in DTC sales indicates the discontent amongst consumers with online shopping and pushes more brands to build their own D2C channels.

The report states, there has been a 51 per cent surge in the number of brands building their own websites in the third quarter. These channels help brands in better content marketing, upselling as well as building a more profitable channel in the long run.

While e-commerce order volumes grew by 31 per cent in the third quarter, the gross merchandise value (GMV), or gross sales, for the sector grew by just 24 per cent. This was due to a 5 per cent drop in average order values as consumers opted for more value-conscious buying, says Unicommerce.

E-commerce logistics provider Shiprocket noted D2C brands shipping 33 per cent more orders in September compared to July. The growth was strongest for the large brands in September on the back of sales and promotions. Initial indications for October are showing that this will be a strong month even for the smaller D2C brands, said Saahil Goel, Co-founder and CEO, Shiprocket.