The company is making a bet on fashion e-commerce as it looks to build out its mostly offline empire.
By guest author Varsha Bansal from Vogue Business
Key takeaways:
- Reliance, the Indian conglomerate owned by Mukesh Ambani, is launching a luxury e-commerce play through its online fashion site Ajio, sources say.
- The company, confirming the upcoming launch, says planning is early but data insights indicate that there is a luxury appetite from its online consumer base.
- In India, the online luxury market is nascent, with a scattering of players reaching customers with different models.
As online luxury retail in India gains traction, Reliance is placing a new bet on the market. The conglomerate that owns businesses and operates international brands across industries in India is set to launch a new luxury e-commerce portal.
Through its fashion e-commerce play Ajio, Reliance’s luxury vertical will serve as the online home in India to the list of brands that Reliance either owns or operates in the country, according to two people familiar with the company’s plans. Owned by Asia’s richest man, Mukesh Ambani, Reliance has partnerships with 46 international brands, including Burberry, Kate Spade and Tiffany & Co., among others, and operates 682 physical stores. The idea is to transfer the company’s market share of owning and selling luxury brands from offline-only to online.
A spokesperson for Ajio confirmed the development, but added that the luxury vertical has yet to sign any official brand partnerships, and declined to share further information around timing or online experience. The vertical will build upon Ajio Gold, Ajio’s premium retail site that carries brands like Superdry and Steve Madden, which the company considers the entrypoint to more high-end online sales.
“Data-driven insights from the ‘bridge to luxury’ brands that retail on Ajio have indicated strongly the possibility for Ajio to craft a luxury vertical, and we are exploring [that],” the Ajio spokesperson says.
There is money on the table. India is home to 8.6 million luxury consumers; less than a third of these buyers bought luxury products online, translating into sales worth USD 450 million, according to Forrester Research. The overall luxury spending in India in 2019 was USD 6.2 billion.
With a growing millennial population that is increasingly brand-aware and has a higher disposable income, the online luxury market in India is set to grow. Forrester expects the market to reach USD 1.3 billion by 2023, growing at an annual compounded rate of 29 per cent.
This is what Reliance wants to tap into. As a credible name in the offline space for international brands, experts believe that the same trust will be extended online. This also opens up doors for more brands to break into the Indian landscape, which can be logistically and demographically complex for international brands to navigate on their own.
“Trust is of utmost importance in the online luxury segment, which is why online shoppers are usually hesitant to buy luxury brands online,” says Satish Meena, senior forecast analyst at Forrester Research. “But due to Reliance’s relationship with these brands, customers are bound to have more trust in purchasing these products online.”
Limited players, different models
By entering the luxury market, Reliance is tapping into a segment that e-commerce players such as Walmart-owned Flipkart, Myntra and Amazon India — all known for affordable fashion — have steered clear of Industry experts, however, say that as global brands, there is always a possibility of Walmart and Amazon entering the space despite Reliance’s exclusive contracts.
Global marketplaces are not the only competition. Different players in this category are trying out various business models. Tata Cliq Luxury — owned by India’s multinational conglomerate Tata Group — is an e-commerce marketplace for premium and luxury products carrying 50 brands; Luxepolis, launched in 2015 by Vijay KG, sells both new and pre-owned, certified luxury products. Darveys connects Indian luxury customers with around 650 stores across North America and Europe, facilitating the purchases of desired products by finding the best prices available.
These companies are targeted at both luxury and aspirational luxury buyers. For instance, Darveys, founded in 2013, was a paid membership-only platform until two months ago when it moved away from catering to only high net worth individuals to more casual buyers as well.
Customers from tier II cities in India, which go beyond the metros of Mumbai, Delhi and Bengaluru, have shown immense interest in purchasing luxury, say industry players. Since brands typically open stores in top-tier cities, like Mumbai and Delhi, customers outside of these cities are left with fewer available options to shop, and could do so more conveniently online.
“We realised that we had a database of 1.2 million people, but only 150000 were paid members,” says Darveys founder Nakul Bajaj. Getting rid of the membership layer “immediately shot up the number of visits on our website”.
Darveys data shows that customers’ lifetime value increases over time, as they build up trust and means to spend more.
The resale model is also gaining traction in India. Platforms, including Confidential Couture and Labelcentric, have come up in the pre-owned segment in a bid to target Indians who are not willing to spend as much for a luxury product. Luxepolis sells both new and pre-owned and has a proprietary database of more than 50,000 products with detailed images of hardware, logo font, heat stamps, leather details, date code or serial number conventions and more to ensure accuracy.
Industry experts believe there is enough demand from luxury customers for the market in India for multiple players, but that Reliance’s standing relationships with brands could increase competition on the supply side. Having an existing partnership with luxury brands’ offline businesses in India is an added advantage for Reliance. Not only does the relationship already exist, but Reliance can steer brands to support their online businesses by fulfilling orders from stores. But to compete as an e-commerce company, it will need to tackle user experience and logistics to meet expectations.
Hurdles in the market
The online luxury fashion market in India won’t be an easy one to crack. The online luxury market in India is fairly nascent, and the target audience of these players are primarily the people who travel and make purchases abroad.
Apart from that, luxury needs a strong offline presence in India, according to experts. For Reliance, building an online strategy for its brands in alignment with their physical stores could help bridge those two needs.
“Indian consumers who have just recently developed trust in online players to be able to purchase a casual dress or a handbag still find it difficult to spend over USD 600-700 for a premium purchase without the touch and feel of the product,” says Abheek Singhi, a retail expert at The Boston Consulting Group.