Why Ignoring online clothing shops could burn a big hole in your pocket

There was a time ten year ago where shopping for clothes simply meant walking down to the nearest retail store and purchasing the dress that you fancied the most. Whether you came back happy or sad directly depended on the money you paid, the choice(s) you made and the budget you had. But the rapid growth of internet in India has lead to mushrooming of e-commerce sites that offer prices far lower than the established players. With the rapid growth of infrastructure even the logistics scenario in the country has improved. This has lead to far lesser shipping times and a better connect between the e-retailer and the consumer. There is no hiding the fact that the mark up in organized retail for clothing are simply too high. Haven’t you felt that you have paid a Rs. 1000/- for a thing that at best didn’t take more than Rs. 400/- to make. There are many reasons for this behaviour an those are more apt for discussion in a MBA class room. Today we shall discuss the simple economics of buying from an online retailer.

Lets take the case of a Lehenga being sold by the manufacturer for Rs 1000/- and study the two case studies on the final pricing of the lehengas:- Case A ,Physical Store @ Mall

1. Cost Price : 1000/-

2. Overheads (A/C,Rent,Establishment Charges etc.) 100/-

3. Margin 40 % : 400/-

4. Drive to/from the Mall 150/-

5. Parking 50/-Food 200/-

Retail margins in clothing is usually more than 50%

Case B ,Online Store

1. Price : 1000/-

2. Overheads (A/C,Rent,Establishment Charges etc.) 50/-

3. Margin 10-15% % : 150/-

4. Drive to/from the Mall Nil

5. Parking Nil

6. Food Nil

Well the cynics could say that the discounts that the established online players give are never this high, true, and this is because as online players grow big, they too start attracting overheads (or share holders breathing down their neck??). That is why you have to get down and dirty and find liitle gems like us or like them.Smaller online stores can at times give your great discounts not because they like you, but because, they have to. They are the new kids on the block and they need to sell to survive. They are usually open to giving you discounts higher than what is listed on the website. So go ahead and take a plunge there are many small time retailers with surprisingly well organized delivery chain who can give you a great deal. You may also like to read the Great Retail Discount Hoax on the insane markups and the consumer management theatre being run by the big retailers in the market.