Tensions over revenue sharing mount as brands intensify e-commerce initiatives

With COVID-19 altering consumers’ shopping behavior, fashion labels like W for Woman, Benetton, Pepe, Jack & Jones and Inglot are upgrading their technologies to bring more of inventories on e-commerce platforms like Flipkart, Amazon, Myntra and Ajio.

For brands, e-commerce is a one-time investment and signifies the company’s desire to change the way they want to do business, says Manish Kapoor, CEO, Pepe Jeans which recently partnered Flipkart to deliver products from 15 outlets in the Delhi NCR and Mumbai.

Spike in enquiries for omni-channel enablement

Though Indian retailers had been planning to explore omni-channel retail for the last few years, they achieved little progress on this front. COVID-19 is pushing brands to upgrade technological investments and explore multiple retail channels as consumers are shying away from malls and high streets. Ace-Turtle, an omni- channel enabler company, witnessed a spike in inquiries from companies about offline-online synergies. The company has signed 19 brands for omni-channel roll outs since the outbreak of the pandemic, informs Nitin Chhabra, CEO.

However, growing emphasis on e-commerce is also creating tensions between fashion brands and malls as some malls are refusing to agree to new lease arrangement. Arjun Gehlot, Director, Ambience Group that operates malls in Delhi and Gurgaon has asked brands that use mall space to make online deliveries, to be prepared to pay appropriate charges for the services.

Malls recommend revenue-sharing for online deliveries

The group has advised malls to formulate a policy to factor this cost in. It recommends a model that classifies deliveries from shopping centers as sales from stores. Malls like Select Citywalk and Pacific Mall in Delhi have already incorporated a revenue-sharing model in new lease agreements for online orders fulfilled from stores in their malls. They have even agreed to charge brands less for fulfilling online orders compared to the amount mentioned in the revenue-sharing agreements

Kapoor believes, omni-channel would be the norm going forward for brands. Hence, malls and retailers need to agree on the amount for revenue-sharing from their online order fulfillments. According to him, the amount designated for retailers in the revenue sharing model should not be determined by their store sales as they have to bear all other costs.