eCommerce has enabled the fashion retailers to connect across various segments of consumers. The approach could be through own webstore or marketplaces or by choosing the omni channel way. Marketplaces are a suitable choice to increase the brand visibility instantly, with comparatively less marketing effort that could go in for own webstore. The marketplaces have a very high traffic inflow to their websites every hour, considering the marketing efforts done by them to get more traffic. By creating new offerings, exclusive deals, reminding on best deals through various communication channels, etc.
It is an effective channel for sellers to mark their presence and increase business scope. But with the growing eCommerce business, fashion retailers also face multiple challenges while selling across various marketplaces.
Let us discuss some of them:
1. Inventory control
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Fashion retailers always look to maximize the inventory they have, so that selling across multiple channels can be accessed. As the demand of goods is dynamics in nature, ‘demand forecasting’, becomes a challenge. Other than that, selling across multiple channels is highly confusing. Some of the common challenges faced during inventory control are:
a) Inaccurate analysis of the inventories:
Inventory record inaccuracy,and the difference between the recorded inventory quantity and the actual inventory quantity physically available on the shelf, is a problem in retailing. Inaccuracy may occur in many forms, such as inaccurate quantities, inaccurate storage locations, inaccurate pricing and inaccurate identification.If the demanded product lines across marketplaces is not in accordance to SKU, it could affect the profitability immensely. Inventory uncertainty could have a big impact on the sales.
One of the many reasons for inaccurate data accumulation is lack of coordination among different departments . By using a centralized system, it is possible to integrate information from multiple resource centres, store them at one place and curate insights that would be useful for decision making.
b) Lack of customized system:
At times unorganized inventory management system, in not able to collect the right data at the right time, which further results in inaccurate inventory levels. The system has to be designed to suit the product genres. Suppose we use a general software available to manage inventory, it might not be effective as desired for fashion apparels, where the designs, patterns, style change every season, the stocks have to be highly organized, as same products also have multiple sizes, etc.
c) Managing Multiple marketplaces is confusing:
The biggest challenge with inventory is lack of standardised process management across multiple marketplaces.It is difficult to keep your stock levels in sync at all times across all channels. Suppose a retailer has 1 or 2 of an item, but has listed them in 3 or 4 places, there is sometimes a sold-out item is again resold, which is not good for customer relations. This often results in spending nearly double the amount of time trying to create and maintain listings.
Each marketplace has to be dealt as a separate channel to ensure smooth functioning. There are ways to address this issue by choosing eCommerce business enablers like eShopbox who create a platform for retailers to transact on multiple locations using a single platform.
2. Accounting and reconciliation
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Taxes are complicated, the calculation involves full track of SKU numbers and other than it is difficult to keep track of taxes paid while billing to the marketplaces. The taxes are paid in advance while billing to marketplaces on the billing price, which later is impacted in case discounts are giving on the products while billing to the end consumers. This results in loss in VAT as it is paid in advance while billing by the retailers.
When selling in marketplaces retailers often face challenges of billing and discount policy. As per a seller of Jabong, whenever a retailer sells his product to Jabong at an MRP of INR 1000, upon this flat 40 percent is charged by Jabong, leaving the retailer with a payback of INR 600. Moreover there is no clarity upon the process by which Jabong decides on discounts to sell the product online. They can claim to have sold the product at INR 800, in that case retailer is left with only INR 480.
In another instance, Myntra‘s reconciliation is done only in the month ends and then report is shared to the retailers. Suppose a retailer has sold three product to Myntra at INR 1000, 2000, and 4000 at different time period during a month. The full reconciliation and payback amount is cleared only by end of the month. This delay in accounting as discounting and billing information is received at the end of the month hampers the cash flows and also it takes around 45 days more to clear the payment.
Irregular payment trend can disrupt the functioning of the manufacturers or fashion retailers, as they need constant cash flow to keep their operations running, so that they would be able to supply to multiple marketplaces.
3. Platforms used by marketplaces are different
The marketplaces do not follow a standardised operating model. Each of them have their own procedure of functioning. There are marketplaces which sell fashion apparel only, whereas some sell multiple categories of products. There could be lack of category based customizations in the multi category marketplaces, which would be a limitation for fashion retailers.
The operating procedure would create a confusion for the fashion retailers as they have to take a different approach in terms of dealing with all of them and also ensure their customers get an uniform experience altogether. Though it is difficult to keep stability along various platforms, choosing a customized approach of dealing with all of them through a single platform and ensuring growth would be an ideal scenario.
It is tedious to establish connect with end customers as a seller, over the marketplace. Each marketplace follow a set of guidelines defined by them. So, the dependency on the marketplace increases due to this.
4. Logistics and supply chain
Fashion retailers selling on marketplaces have to follow the delivery guidelines, packaging standards, timelines, etc of the marketplaces. In some cases the delivery is done by the marketplaces directly where retailers outsource to marketplaces.
In some cases, where the dependency of delivering is on the marketplace and if the items are not delivered satisfactorily, it hampers the goodwill of the seller as well.
Logistics constitutes to almost 50% of the operational costs, for which some fashion retailers prefer to rely on the marketplaces and pay charges. This reduces the margins earned as well as increases the dependency on the marketplace.
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Retailers often find it difficult to keep sync with the dynamics of changing pricing policy. Fixing upon the right price is a point of concern for retailers worldwide. Moreover similarity between fashion products has made this process more intense.
Some common challenges faced by retailers in this regard are:
a) Deciding upon pricing and product options:
Pricing is an essential factor in consumer’s point of view. Retailers often find it difficult to frame the pricing module. Nowadays many product lines with same attributes are available across several marketplaces being offered by multiple brands. In such cases, pricing becomes a key differentiator.
b) Competition between Large players and new entrants:
The friction between new brands and already established ones, leads to a challenging situation. The challenges for new brands remain with matching up to the quality of the established players, yet have considerably lower pricing. The established brands would have a challenge to maintaining consistency in quality, maintain brand value and also be competitive in terms of pricing. The marketplaces enable both of them to share space for business. So, in order to attract consumers there are multiple factors like ensuring stock availability, varied options in terms of season, color, design, fabric etc. has to be ensured all the time to stay in the real time competition.
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These are some challenges faced by online fashion retailers across the marketplaces. As the fashion eCommerce is growing, the fashion retailers need to keep track of the end to end operations and be proactive in addressing these challenges or at least formulate plans to take on the issues. eShopbox has identified the pain points of the fashion retailers and has come up with various solutions to manage the end to end online operations of fashion retailers and help them to focus on their areas of expertise.