How and why Myntra is slowly lowering the discounts it offers
In a bid to walk the path of profitability and also shed perceptions of being a value discount player, the fashion e-tailer is tweaking its business model
Fashion e-tailer Myntra, which is part of Flipkart, is fine-tuning its discount model in a bid to walk the path of profitability. In the peak sale season of October to December 2015, Myntra managed to lower its discounts on an average by six percentage points over the preceding quarter. In January, on a year-on-year basis, Myntra lowered its discounts by five percentage points. “We don’t want to be a value discount player. We want to be a mass premium player,” says Ananth Narayanan, CEO, Myntra. In an interview with Forbes India, Narayanan says the online fashion business will start to mirror the offline model, where discounting does not happen 365 days a year.
Q. Can you elaborate on your stated goal of wanting to be a mass premium player?
If I look at our customers there is a set of them who are fashion and brand focussed. These customers may seek deals (discounts), but they shop because they value a certain brand or they value a certain aesthetic. They are willing to pay a small premium. Then there is a set of customers who are only looking for the cheapest T-shirt or kurta. This segment, while large, is not brand and fashion conscious. We will play less in this segment because our whole value proposition is around fashion and brands. Nearly 65 percent of our customers are fashion and brand conscious and this base has grown dramatically over the years.
Q. You also said that you don’t think discounts will go away. Can you explain?
Fashion as an industry has two seasons: Autumn/Winter and Spring/Summer. At the end of each season every offline player—even a brand like Louis Vuitton— has a discount sale because at the end of each season you want to get rid of the old stock. This level of discounting will always exist and will never go away since it is inherent to fashion.
Q. But, while offline retail has two distinct sales seasons, in the online world it’s raining discounts 365 days a year. Will that change?
I think we would start to mirror the way offline retail operates more and more. But by when, I don’t know. It’s a journey. Also, all our customers have started associating online retail with discounts and I think customer perception takes a long time to change. And the way to reduce it is not to focus on discounts but to focus on full price sales.
Q. How have you managed to lower your discounts?
There are two aspects. The first is really about the products we choose and we have got better at selection. For example, we choose a sweater that sells more, so that we can discount less. The second is we use data to find out things like when are we giving discounts that have no use? There were discounts that were not giving us value and we have cut those discounts. For example, if a trouser sells equally at a 10 percent and 15 percent discount, then why would I give a 15 percent discount? So, we have used a lot of data to find out volume-price elasticity and the appropriate amount of discounting that we have to give.
Q. How has your app-only strategy worked?
After we went app-only, our repeat rate is now almost 85 percent. And that’s gone up by 15 to 20 percentage points. Besides, consumer experience on the app is better. Discoverability, navigation, speed, resolution of photos and all of that has improved.
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