23 May, Mumbai 2025

The digital landscape of fashion retail in India mirrors global trends, which is a dichotomy where high return rates for investor-backed e-commerce ventures and marketplaces are not always perceived as a significant impediment to growth and future prospects.

While traditionally viewed as a negative indicator, a closer look, especially from the point of view of investor priorities, gives a clear picture. The pursuit of rapid growth and market validation often leads these entities to view substantial return volumes as a byproduct – and sometimes even a signal – of aggressive scaling strategies.

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Revenue growth as the North Star

For investors in the Indian e-commerce space, particularly in the high-growth fashion and apparel sector, the primary focus often lies in demonstrating significant revenue growth and capturing market share. A growing top line, even if accompanied by substantial returns, creates the perception of strong consumer demand and a rapidly expanding business. This growth narrative is crucial for attracting subsequent funding rounds and achieving higher valuations.

As an early-stage investor in a prominent Indian fashion e-tailer once stated, one is looking for hockey-stick growth. Returns are a logistical challenge to be solved later; right now, it's about showing the market believes in the product and the platform.

This sentiment underscores the prioritization of scale over immediate profits in the initial stages of many investor-backed ventures in India.

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Returns as a source of valuable data

While the operational costs associated with high return rates are undeniable, they also generate a rich source of data for e-commerce players. Analyzing return patterns can offer invaluable insights into consumer preferences, sizing issues prevalent in the Indian market, product quality concerns specific to local manufacturing, and even the effectiveness of product descriptions and visuals.

Myntra, one of India's largest fashion e-commerce platforms, has heavily invested in data analytics to understand return reasons, which has informed improvements in their product sourcing and listing strategies.

By leveraging this data, companies can refine their offerings, improve customer satisfaction, and ultimately work towards reducing return rates in the long run.

As a senior data scientist at a leading Indian online marketplace for apparel noted, returns give a direct line to the customer's experience with the product. They treat each return as feedback, helping them iterate faster and smarter.

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The cost of customer acquisition and retention

The Indian e-commerce market is fiercely competitive, with numerous players vying for a share of the rapidly growing online fashion segment. In this environment, offering customer-friendly return policies, including easy returns and sometimes even free returns, can be a crucial tool for customer acquisition and building trust.

For example, Ajio, Reliance Retail's e-commerce platform, is known for its relatively hassle-free return process, which likely contributes to its growing customer base. While this might lead to higher initial return rates, the increased customer loyalty and repeat purchases can offset these costs in the long term.

A marketing head at a mid-sized Indian fashion brand selling online commented, In India, a smooth return experience can be a significant differentiator. Customers remember good service, and that includes how easy it is to return something if it doesn't fit or meet their expectations.

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Acquisition endgame

For some investor-backed fashion e-commerce startups and marketplaces in India, the ultimate goal might not be long-term independent profitability; rather, it’s to achieve a scale and user base that makes them an attractive acquisition target for larger players, both domestic and international.

In such scenarios, high revenue figures and strong user engagement metrics, even with higher return rates, can be compelling factors for potential acquirers.

The narrative of rapid growth and a substantial market presence can outweigh concerns about short-term profitability in acquisition negotiations.

While specific examples of acquisitions driven solely by high revenue despite high returns are less publicly documented in India, the general principle of scale attracting acquisition interest holds true across the e-commerce landscape.

The acquisition of smaller e-commerce players by larger conglomerates like the Tata Group or Aditya Birla Fashion and Retail (ABFRL) often factors in the acquired entity's reach and revenue potential.

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Return rates in India

While precise, publicly available data on return rates specifically for investor-backed fashion e-commerce companies in India is limited, industry reports offer some insights. A recent report showed the average return rate for apparel purchased online in India can range from 25 to 40 percent, significantly higher than in brick-and-mortar stores.

Some categories, like premium or fast fashion, might even experience higher rates.

Table: Estimated average return rate in India

Another report highlighted that return orders accounted for over 10 per cent of total e-commerce orders in a recent fiscal year in India, with clothing being the most returned category. This indicates the significant volume of returns that e-commerce players, including those with investor backing, have to manage.

A calculated trade-off?

Therefore, while high return rates present operational and financial challenges for investor-backed fashion e-commerce and marketplace startups in India, they are not always viewed as an insurmountable problem, especially in the early stages of growth. The focus on rapid revenue expansion, the valuable data gleaned from returns, the strategic use of liberal return policies for customer acquisition, and the potential for a lucrative acquisition often lead investors and founders to prioritize growth metrics.

However, it is crucial to acknowledge that this perspective is likely to evolve. As these ventures mature and the emphasis shifts towards sustainable profitability, effectively managing and reducing return rates will become increasingly important for long-term success in the dynamic Indian e-commerce landscape.

The ability to strike a balance between aggressive growth and operational efficiency will ultimately determine the enduring success of these businesses.

LATEST FASHION NEWS

22 May, Mumbai 2025

As India’s fashion market matures, consumer appetite for premium and luxury brands is evolving rapidly. Arvind Fashions, a trailblazer in the country’s apparel sector, has responded with a bold retail initiative — Club A, an exclusive multi-brand premium retail chain.

With this endeavor, the company is looking to not just expand its portfolio but also shape the future of high-end retail in India.

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A destination, not just a store

Club A is more than just a collection of storefronts under a common name — it is a curated experience crafted to appeal to India’s discerning, upwardly mobile shoppers. Conceived as a lifestyle destination, Club A offers a blend of international sophistication and localized sensibility.

With an impressive line-up of globally recognized brands such as Tommy Hilfiger, Calvin Klein, U.S. Polo Assn., Arrow, Flying Machine, and Stride, Club A gives access to brands previously available only in standalone stores or online. The store also features a collection of premium accessories, including footwear, handbags, and watches from labels like Cole Haan and Guess. The goal is not merely transactional — it’s transformational, offering an immersive retail experience that resonates with the aspirations of new-age Indian consumers.

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Why premium fashion is booming in India

India’s fashion retail sector is changing and as per a McKinsey & Company report, India’s apparel market is expected to reach $115 billion by 2026, making it one of the fastest-growing fashion markets globally.

Within this, the premium and luxury segment is forecasted to grow at a CAGR of over 10 per cent, driven by rising incomes, increasing urbanization, and heightened brand consciousness.

Club A taps into this momentum by offering aspirational fashion in physical spaces that are meticulously designed. The focus is not just on products but on an enriched, holistic shopping experience that blends convenience, luxury, and personal attention.

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Building a national premium network

Initially launched in marquee urban locations such as Indiranagar (Bangalore), Connaught Place (Delhi), Piplod (Surat), and Lucknow Airport, Club A is steadily expanding into emerging metros and Tier-1 cities. Recent additions in Himayatnagar (Hyderabad) and HSR Layout (Bangalore) underscore Arvind Fashions' ambition to democratize access to luxury fashion while maintaining exclusivity.

The expansion strategy is underpinned by three major drivers.

Rising affluence: India is now home to over 140 million middle-class households, and this number is expected to double by 2030, creating a vast consumer base for premium products.

Urban sophistication: Consumers are not only spending more but are also seeking experiential retail environments, where ambiance and service are as important as the merchandise.

Brand equity: With over 25 international brands under its belt, Arvind Fashions is leveraging its extensive brand partnerships to create a differentiated, high-trust offering.

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Elevating the retail experience

Each Club A outlet is designed to mirror the aesthetic and identity of the brands it houses. Store layouts are sleek and contemporary, punctuated with high-end materials, strategic lighting, and curated product displays that appeal to modern sensibilities.

The introduction of dedicated concierge services marks a clear departure from traditional multi-brand retail formats. These services provide shoppers with personalized assistance, style consultations, and a seamless, white-glove shopping journey that aligns with global luxury standards.

The ambiance is equally critical. Soft jazz playing in the background, spacious fitting rooms, and visually immersive displays contribute to a boutique-like experience. This high-touch service model is Club A's key differentiator in an increasingly crowded market.

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Arvind Fashions’ from apparel major to luxury curator

With over 1,300 points of sale across India and a portfolio spanning everything from mass-market denim to luxury tailoring, Arvind Fashions is no stranger to scale. However, Club A represents a new strategic direction — one that focuses on controlling the retail narrative and offering customers a curated brand journey under one roof.

The company’s intent is threefold. To enhance brand visibility by giving premium labels their own environment; exercise tighter control over customer experience through exclusive formats; gain deeper insights into consumer preferences via direct engagement.

Therefore, this move is particularly timely, given the competitive pressures in the fashion sector. Arvind is proactively repositioning itself as a retail tastemaker rather than merely a distributor.

Standing out in a crowded market

India's premium retail scene is becoming increasingly competitive. Global giants like Zara, H&M, Uniqlo, and Marks & Spencer are expanding aggressively, while e-commerce platforms like Ajio Luxe, Myntra, and Tata CLiQ Luxury are capturing a sizable share of luxury sales. Department store chains like Shoppers Stop and Lifestyle are also evolving to serve the same demographic.

Yet, Club A distinguishes itself by merging the multi-brand convenience of department stores with the bespoke experience of mono-brand luxury boutiques. Its physical presence in high-footfall areas, paired with a merchandise mix, offers a compelling value proposition to aspirational consumers.

The road to premium retail dominance

Arvind Fashions' investment in Club A is a long-term play, built on deep insights into consumer behavior, urban lifestyle trends, and the growing appeal of luxury. As India’s GDP per capita continues to rise and consumer sophistication increases, demand for experiential, high-quality fashion retail will only intensify.

The company’s ability to scale Club A without compromising on service quality, brand curation, or store ambiance will be central to its success.

If executed effectively, Club A could emerge as India’s answer to Selfridges or Saks Fifth Avenue — not just a store, but a signature of urban Indian fashion identity. In a country where fashion is increasingly a statement of personal success and cultural capital, Club A is not just retail — it is aspiration made tangible.

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