Branded apparel maker Arvind Fashions, which sells clothes under brands such as Arrow, Tommy Hilfiger, US Polo and Flying Machine in India, is trying a new strategy as far as its online business is concerned, said Director Kulin Lalbhai.
While traditionally, garment vendors have looked at e-commerce as a way to get rid of their excess inventory through discounted sales, the COVID-19 pandemic has forced them to look beyond this strategy since the primary sales channel — brick-and-mortar showrooms — have faced massive disruption.
Sales through brick-and-mortar showrooms have been a fraction of what they usually are due to repeated lock-downs to curb the spread of the virus and a fear of confined and air-conditioned spaces among consumers.
Arvind Fashions has been one of the early movers to the online space. It has had a tie-up with Flipkart, India’s largest online garment retailer, for around seven years via its various brands such as Flying Machine.
Flipkart even invested Rs 260 cr in Arvind Youth Brands, a subsidiary of Arvind Fashions, last year as the country emerged out of the first lockdown.
Speaking with investors after releasing the company’s quarterly numbers, the grandson of legendary entrepreneur and industrialist Kasturbhai Lalbhai said his company’s “biggest focus this year” is going to be on ‘SMUs’ or ‘specially made units’ targeting only the online channel.
The idea, he said, is to leverage the data and consumer insights generated by e-commerce channels to design and sell garments at full price. “It would marry our product expertise with their consumer insights,” he pointed out.
The move is partly a response to the strong growth exhibited by online channels since the imposition of COVID-19 lockdowns that started in March last year.
Due to the lockdowns and the fear of the virus, many of the usual ways of spending money — such as travel and eating out — have been off the menu for most people in the past year. As such, many have turned to shopping to beat the ennui of life under lockdown. For obvious reasons, most of this shopping has shifted online — boosting online sales of gadgets, clothes, watches and other items that help people break the monotony of their isolated lives.
Even without a tailor-made strategy, Arvind Fashions has seen the impact of this shift in consumer behavior. For the year ended March 2021, online channels doubled their share of the company’s total revenue to Rs 705 cr compared to the previous year. In fact, online retail accounted for around 32% of the company’s total sales during FY21, up from 14% in the previous year.
Within this, about 35% was in the form of direct-to-consumer sales via the company’s portals such as nnnow.com, while the remaining was via third-party portals such as Flipkart.
Given the rising importance of the online channel, the company is designing products tailored for this market, Lalbhai said. Given that these products would be sold at full price, the new strategy has the potential to improve margins in the online business too.
“This is a full price business, with very decent, healthy margins for us,” Lalbhai said, referring to the new, SMU business. “Brands [such as Arrow, Tommy Hilfiger, US Polo and Flying Machine] are very strong, and have the right appeal in the post-COVID world.
“We want to leverage this appeal in the online world to further improve our margins, which are anyway healthy, but they can go up further through this line of SMU,” he said.
Lalbhai also said that the speed of business — from order to cash in hand — is also higher in the online sphere.
“The terms of business are very good. It’s made to order, we ship out and immediately, we get our money.” The company would focus on “flexi production” with low numbers for this business.
“Immediately, they would get shipped out to the portals or nnnow.com. Online is a faster turn than average. So it’s better from a cash conversion basis,” he pointed out.
As for brick-and-mortar, the company said it has seen offline retailers starting to open up gradually in the first week of June, after they were shut in April as part of efforts to control the spread of the second wave of COVID-19 in India.