Bring your fashion out of the closet.
This is what online fashion businesses are preaching hard to consumers to keep them engaged on their platforms through a content and community driven approach, apart from the traditional discount-led retention strategy.
Firms such as Myntra, LimeRoad, Voonik, Memoirs, Wooplr and Roposo are striving to create a social network for fashion enthusiasts, who can now share fashion tips on these websites as well as consume content posted by fellow fashionistas.
The likely upshot: an increase in customer stickiness, even if they do not always end up buying, as well as a breather from splurging on discounts to retain customers.
A spurt in user engagement will also help companies amass more data on consumer behaviour and fashion trends, which can be used to map customer profiles and achieve near accurate product personalization and recommendation.
“We are shifting our positioning from a commerce destination to a fashion destination. We don’t want to be the place where you come to shop. We want to be the place where you come if you have anything to do with looking good,” said Abhishek Rajan, head of mobile business at Myntra.
Companies such as Jabong, LimeRoad, Snapdeal andAmazon are also leveraging content and social engagement, both online and offline, to ensure customer loyalty. Jabong for instance publishes a fashion magazine,The Juice, and connects users with stylists through the Style on Chat service.
Amazon sponsored the India Fashion Week in March, while Snapdeal has sponsored two editions of the Bangalore Fashion Week, in January and July. Snapdeal will also invest $100 million in the next three years in its Bengaluru-based multimedia research lab as it gears up to roll out features such as image search, again an interactive product discovery channel for consumers. Flipkart already has an image search option on its app for the fashion category.
Social commerce is not yet the biggest revenue channel, according to Praveen Sinha, co-founder and managing director at Rocket Internet-backed Jabong.
“Until recently, there was no social element to online shopping, for example, a parallel to going out with friends and family and shop. This is what is being developed, but it will take time,” said Sinha. “Social commerce will be significant enough not to ignore, but it is not the largest revenue channel now.”
A focus on social commerce assumes even more importance for companies that have shunted desktop and mobile websites in favour of an app-only strategy.
According to industry estimates, about 50-60% of the consumers to have downloaded apps never transacts.
The social commerce route thus paves the way for firms to re-engage such users and dissuade others from uninstalling apps.
“We’ve seen activity decay of 80-90% in three to seven days. You can lose a customer in seven days. In that context, personalization and engagement becomes the key,” said Gourav Chindlur, co-founder and chief operating officer at Vizury, a data analytics firm.
While most firms use social commerce to promote products listed on their websites, businesses such as Roposo and Wooplr let a consumer discover fashion trends and styles before directing them to relevant stores, both online and offline, to close transactions.
Essentially, they act as affiliate marketing channels, charging clients an average commission of 10-20% on every sale.
However, Myntra’s entry into the space may spell trouble for these businesses as Myntra enjoys a deeper pocket and a bigger customer share. For instance, as against Myntra’s six million monthly active app users, Wooplr has about 250,000 active users while Roposo claims 120,000 daily visits. Besides, Myntra was bought by Flipkart, which has so far raised about $3 billion from institutional investors.
These businesses are, however, undeterred as a change in strategy by Myntra may not mean a shift in expectation from consumers as well, who have so far been pampered by deep discounting. Myntra has been offering discounts of up to 70% for some time. Wooplr or Roposo, on the other hand, directs users to a merchant’s website to close the sale, hence do not fund discounts from their own pockets.
Besides, these firms are tapping into the smaller brick-and-mortar shops and boutiques, with little or no significant online presence, to boost revenue.
These businesses could also be charged a higher commission than the established merchants as social commerce platforms are taking away their marketing costs. Wooplr, for instance, will start engaging with such businesses from September, helping them get online and featuring their collection on Wooplr.
“At present, online is 90% of Wooplr’s revenue; after September, offline stores are expected to account for about 60% of revenue. This will be our foray into marketplace,” said Arjun Zacharia, co-founder and chief executive at Wooplr.
A push towards social commerce will yield results in the long run as these businesses will attract an audience directly on their platform without having to depend on other media channels, marketing experts say.
“What these new models will do in the long term is to get audience for your own media. Facebook, Twitter orYouTube are rented media and the companies have spent a lot of money trying to earn that audience,” Karthik Srinivasan, national lead, Social@Ogilvy, Ogilvy and Mather’s social media arm. “It is time to test the audience; hence, you need interesting content to build on as there is a lot of attention deficit online.
Social commerce is a good way to keep users—especially who are 15 to 30 years old—engaged to the platform. Besides, e-commerce firms have to look at customer retention rather than customer acquisition, which inadvertently burns a hole in their pockets. Industry estimates peg the customer acquisition cost for a fashion website at anywhere between Rs.300 and Rs.2,000.
“People are no longer buying products, they are buying looks which need to get curated. If companies were spending on customer acquisition, they are now looking at customer retention. Social commerce is important because it helps you retain customers,” said Anand Ramanathan, director at KPMG Advisory Services, a consultancy.
“It increases engagement and also the ticket size. The advantage is, you have multiple products within a particular look. Hence, the existing customer asset is sweated that much more. Since it entails involvement, people are expected to convert that much more,” he added.
While social commerce is still taking off in India, the segment has seen some successful businesses in China and the UK. Mogujie and Koudai in China have so far raised $212 million and $368 million from institutional investors, respectively, while London-based Lyst has mopped up $60 million.
Last month, Yahoo acquired social commerce platform Polyvore for an estimated $200 million. Besides, social networking platforms such as Facebook and Twitter have been testing direct purchases for products advertised on their websites.
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