Online Retail For Designer Brands Gets An Investment Boost In India

Finally, here is an easier way for Indians to access their favorite international luxury brands without having to plan an international shopping trip every few months. The emergence of private sales portals in India is giving local residents access to international designer brands, often at heavily discounted prices. And such portals are on the ascent, with investors more than willing to pour money into these start-ups.

A case in point is 11-month-old Bangalore-based startup TPS Shopping Outlet Pvt. Ltd. The firm is not even a year old, but last week, it managed to gather $5 million worth of investments from five companies. TPS has not revealed the names of the investors but said that the money would be used to add new categories in its members-only site theprivatesales.com and to create a website dedicated to discounted luxury fashion. The TPS website currently offers rate slashes of up to 80 percent on international brands.

The main attraction of these private sales sites is that they greatly extend the reach of luxury brands. Such sites make the brands available to a wider customer base. Normally, luxury brand stores are located in tier-one cities. But online retailers like these bring these brands within the reach of potential customers who live outside the big cities as well. It really does not matter that the items being offered on sale are a few seasons old, because they are available at hugely discounted rates. And then there are flash sales as well.

Reaching out to customers who live outside the metros is a huge part of the online retail story. This is one reason why private equity fund SAIF Partners will be investing $4-5 million in yet another Bangalore-based online retail startup that deals in clothes and accessories. Earlier on, SAIF Partners had invested $4 million in Pune-based BrainBees Solutions Pvt. Ltd., whose online baby products store FristCry.com sells brands like Mattel, Pigeon and Mee Meet.

This is just the tip of the Indian online retail iceberg. Last week, members-only shopping site 99labels.com raised $3.5 million from Info Edge (India) Ltd., while FashionandYou.com managed $8 million from Sequoia Capital in December 2010.

E-commerce is certainly a fast growing sector. And as Helion Venture Partners managing director Kanwaljit Singh put it, online retailers will be looking at selling high volumes in order to sustain over the long term. Singh added that in the short term these startups would have lower margins, simply because the firms would be focusing on drawing in customers, sorting out the delivery system and seeing to the back-end of the site. He further added that once the initial work is done, ecommerce ventures could boast of higher margins than physical stores.

The absence of real estate costs is a boon for private-sales sites. The promotions come through word-of-mouth, member referrals and online ads. Plus, companies like TPS go out of the box by planning to host fashion shows – the first of these begins next week. TPS is already growing at the rate of between 50 and 70 percent. The firm currently has 400,000 registered members, nearly half of whom have made purchases. The world is truly the oyster for such portals.

Via: The Wall Street Journal

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