Indian Fashion E-Tailer Yepme Looking Shaky

According to a joint study by the global Boston Consulting Group (BCG) and Facebook, the online fashion market is currently worth about $4 billion or 5% of the Indian fashion retail industry. By 2020, about $30 billion of the Indian fashion industry is expected to be digitally influenced. Yepme is an online fashion player looking to make it big in this industry. However, there are several obstacles in its path.  

Yepme’s Journey

Gurgaon-based Yepme was founded by Vivek Gaur and Sandeep Sharma in 2011. It started out as an online fashion aggregator of a mix of private labels and branded apparel for accessories, ethnic Indian wear and western wear for men and women. Its main differentiation is that it is a private label brand with 30%-40% higher gross margins than other online marketplaces selling branded apparel.

In early 2016, Yepme opened its first physical store in Gurgaon to increase its presence. Today, it owns 8 stores and has another 20 franchise outlets across cities like Bengaluru, Delhi, Agra, Gwalior, Noida, Meerut, and Gurgaon. The stores also act as warehouses to facilitate deliveries in nearby areas.

Yepme has also expanded internationally. It has been selling in the US since 2014 through Yepmeworld.com. In 2016, it expanded to London through its subsidiary Yepme UK Ltd. In February 2017, Yepme joined Amazon’s global selling program through which it will sell its products in key European markets such as the UK, Germany, France, Italy, and Spain.

Yepme’s Financials

In FY 17, Yepme (by VAS Data Services) reported a revenue increase of 15% to Rs 120 crore ($18.5 million). Losses narrowed 74% to Rs 48 crore ($7.4 million). About 75% of its revenue came from its online operations and 25% from offline stores. Footwear accounts for the majority of its revenue, followed by accessories, and apparel.

Yepme claims to have an average of 300,000 online orders per month for an average cart size of Rs.700 ($11). On the other hand, in physical outlets, the average cart size is double. It has an average selling price (ASP) of $17 at its retail outlets located in the metros and an ASP of $11 at its stores in tier II and tier III cities. Offline operations have a gross margin of up to 55% in which 35% goes to the store franchise owners, and 20% is earned by Yepme as its net margin from the sales. The cost of starting a franchisee store is around $30K-$40K.

It has raised about $90 million from investors including Brand Capital, Capricorn Investment Group, Gokaldas Exports Ltd., Helion Venture Partners, Khazanah Nasional, Morpheus Media Fund, JS Capital, TCS Global, and TC Capital. Its largest round was a $75 million Series B round in September 2015 from Malaysia’s sovereign wealth fund Khazanah Nasional and existing investors including Helion Venture Partners, JS Capital, TCS Global, Capricorn Investment Group, and Morpheus Media Fund.

The company reportedly raised about $700K in a bridge round earlier this year and an undisclosed amount from Gokaldas Exports Ltd. It was reported to be looking to raise funds in the range of $10-$20 million.

Like most companies in the sector, Yepme is having a hard time. It reportedly laid off 30 of its employees and over 50 employees haven’t been paid for about six months. People were allegedly being forced to resign so that they could avoid paying them a proper severance package.

Its rival Craftsvilla, which had raised about $55 million, reported revenue of Rs 37 crore ($5.6 million) and a loss of Rs 119 crore ($18.3 million). It laid off 100 employees this year after losing market share to Flipkart and Amazon. Last month, Aditya Birla Online Fashion (ABOF), which has over 200 employees, announced its plans to shut down after two years of operations.

Flipkart and Amazon, plush with resources, have launched their own private labels. They have shaken up the e-commerce industry. Niche players like Yepme are getting sidelined in the brutal competition in the space. It is unlikely that they will survive. In fact, whether Flipkart can survive the aggressive competition from Amazon is also an open question at the moment.

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