Tier-II Cities are No Good for Small Fashion Startups
For an early stage fashion startup, attracting budding designers is a good idea. It’s not nearly as expensive as dealing with an established designer, it would also mean less costs and larger margins. For a new and unheard-of-designer, it’s probably beneficial to start on a smaller platform rather than drown in an ocean as large as Amazon among millions of similar fashion merchants.
Addressing this lack of infrastructure and ecosystem, GetNatty, a multichannel platform backed by data intelligence to showcase, discover and buy designer fashion, was launched in March 2016 with 7 designers from Vadodara.
The founder of GetNatty, Kaizad Hansotia says, “There’s no effective way for entrepreneurs and fashion designers to startup their labels or grow their existing brand.”
Now as the platform goes scouting for a second round of angel funding, it has signed up over 100 high quality designers, over 1000 customers from 20 cities, mostly Tier-I, and has generated Rs 30 lakh of revenue in the past 12 months, mostly from physical points of sales in Tier-I cities.
As fashion grows to be the best-seller-of-all online, it’s becoming an ecommerce segment to reach $12-14 billion dollars by 2020, while the designer wear category is growing at a healthy 40 percent CAGR. GetNatty has picked a good segment but there’s a catch.
Despite most of GetNatty revenue coming from Tier-I, the plan to invest more in Mumbai and Delhi is still questionable. Revenue growth has stagnated here. Ask anyone, Tier-II is where fashion ecommerce revenue is growing.
In 2015, nearly 55 percent of sales for Amazon Fashion were from Tier-II cities compared to 45 percent in 2014. Women’s tops and bottom is the fastest growing category YoY.
After a decade in India, Jack & Jones will be using not physical stores but an ecommerce strategy to gain more customers in Tier-II and III markets. In 2016, Flipkart registered that its rise in sales owed to two-thirds of orders coming from Tier-II cities and beyond.
There is a mantra for ecommerce success brewing here and it involves selling fashion to women in Tier-II cities and beyond.
However GetNatty is going about things a little differently. The 500,000 dollars it aims to raise will be used to expand its designer base in Tier-I cities Delhi and Mumbai. The startup feels a physical presence in Tier-I is an easier way to do business for a newbie than reaching Tier-II online and competing against large companies. After all, the online fashion industry still only accounts for 11 to 12 percent of the entire fashion market.
“The data we have says that most of our designers come from Tier-I. Most of our sales happen through physical points in Tier-I cities. We will eventually focus on Tier-II cities, but we don’t want to spread ourselves too thinly,” says Hansotia.
In addition GetNatty is a mix of B2B or B2C; a fashion discovery site for a retail consumer and a B2B service provider for designers catering to their marketing needs while also acting as the platform on which customers can purchase their products.
“In the coming 12-18 months we would want to aggressively grow the B2B segment locking down more designers to use our services, and also grow the B2B2C segment by opening up showcase areas in more multi-designer stores where each of our designers, depending on the subscription package they have purchased would be showcased and be on display for customers to try out and then purchase online if so preferred,” says Hansotia.
6Degree is a fashion tech startup with a similar business model. The startup is a networking platform for the fashion industry and offers marketing and other business services to fashion designers on a subscription model. They started out in 2014 from Mumbai then started working with leading fashion capitals across the globe and is only now looking at expanding to Tier-II and III cities. Ditto for other fashion startups – Voonik, LimeRoad, FabAlley, all started by serving Tier-I regions.
The newest success mantra for fashion brands may involve ecommerce and Tier-II. But only if it they are big companies – big like Amazon, or Flipkart or Jack&Jones. If you’re a nascent fashion startup, Tier-I and offline is still the way to go.
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