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Myntra and retailer's quest for profitability

How does a retailer scale and turn itself to profitability??

There have been several cases of online retailers that have struggled to balance scaling at the cost of profitability.

The founders / promoters are at the cross roads on the need for more capital - that cedes control - to expand aggressively. They struggle with the need to attain profitability quickly. Their mentors are also not effective at advising them since there is no proper precedent for one approach over other.

Looking at Myntra’s case - a leading online retailer - It proves that it is never too late to get on the path of profitability irrespective of whether you want to grow aggressively (Reference here). All promoters would appreciate that. This case is strengthened by Zappos - an US online shoes retailers - as well that has been profitable right from day one.

Myntra’s steps to attain profitability is well renowned and the slew of online retailers can gain a lot of insights from Myntra’s case.


Private brands

Private brands have always given the retailer a better handle on the gross margin. Having a control on the supply side and the demand side is very powerful. With the ability to control every part of the product journey, retailers can be nimble and react to changes more easily and effectively with private labels.

Improving back-end supply chain efficiency

Nothing helps a retailer than improving the back-end supply chain efficiency. Getting the back-end right is the toughest part for a retailer. Any amount of investment here is worth the cost. The other aspect that retailers need to concentrate on is the impact of the changes on the consumers. 

It does not make sense to invest in supply chain improvements that have no visible posit impact on the consumer. Having an open eye on the consumer and making relevant changes help a lot.

Better product mix

More is not always better. Having a proper assortment management and healthy turnover are very important for retailers since shelf space is costly. Supply side dynamics is equally important as demand side. 

It makes a lot of sense for retailers to always keep a close look at the assortment mix and carry products that have a better inventory turns along with better gross margin.

Myntra has started the journey and well on its way. Other retailers should also recognize the value in turning to profitability.

Note: The author is a lead consultant in the Retail practice at Thoughtworks. He has predominantly worked with apparel retailers and grocery retailing. This article is biased around apparel and grocery retailers.

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