Expensive Ecommerce: Online Commissions for E-tailers
The fashion in India to get an online presence appears to be an expensive business with the ecommerce platforms.
Economic Times reports that there's bad news for fashion retailers hoping to cut real estate expenses by venturing into ecommerce — running an apparel business online is almost just as expensive as running a brick-and-mortar store in any mall. In fact, with ecommerce in the country pushing fashion brands to give more than 15-20% discounts, it could also eat into profit.
Some fashion brands that entered the online space in the past five years claim to be paying 30-40% commission to ecommerce platforms such as Jabong, Flipkart, Amazon, Myntra and Koovs for sales and product delivery. Last year, Myntra is said to have increased the margin it sought from brands to 36-40% from 28-32% — higher than the 30-35% margins that several apparel, footwear, fashion and lifestyle vendors were giving to brick-and-mortar franchises then.
This is almost as much as they would pay to run a physical retail store, which includes costs like rental (15%), staffing and utilities (8-10%) and maintenance and discounts (5-6%), according to Arvind Singhal, chairman of retail consultancy firm Technopak Advisors. "This (commission) is very expensive," he said, adding that strong fashion brands wouldn't pay ecommerce portals more than 10-20% as commission.