Fashion retail has very poor inventory (working capital) rotation
Increff, founded in August 2016 by former Myntra executives Rajul Jain, Anshuman Agarwal and Romil Jain, is a technology and analytics enterprise that helps fashion and lifestyle brands improve inventory turns through smart merchandising and efficient fulfilment via single view of inventory. Co-founder and CEO Rajul Jain discusses issues Indian apparel retailers face and Increff's plans to go global.
Increff recently received a funding of $3 million. What kind of expansion do you plan to head into?
We have so far raised total funding of $5 million in two tranches-one was the seed funding of $2 million in 2016 and the other was the Series A funding of $3 million in early 2019 from 021 Capital (Sailesh Tulshan) and Binny Bansal. The fresh funds will be used to fuel the next phase of our growth for entering international markets, expanding our customer pipeline in India and enhancing our current product offerings. We will also continue to attract the best talent from premiere institutes (NITs and IITs) who can stay invested for the long term to create cutting-edge and innovative technology solutions for our clientele.
How has the market responded to Assure and Iris?
As we position ourselves as premium tech-products provider, our products have impacted our client's businesses who have seen high jump in their revenues and margins. Our products bring lot of intelligence, accuracy and speed in decision making and operations. Earlier, brands and retailers were sceptical about adopting technology, but now most of them believe that it will play a very crucial role in standing ahead in a very competitive environment.
Our clients have reaped significant benefits from using our two technology platforms. To highlight a few cases:
- In general, our clients have seen a revenue improvement of 25-30 percent and margin improvement by 4-5 percentage points.
- One of our clients has seen 2-3-fold jump in revenue from same inventory holding.
- With another client who can support by agile manufacturing, we are targeting to achieve 6-8 inventory turns.
How are your solutions different from competitors offering similar type of supply chain solutions?
Increff Iris is an end-to-end merchandising planning and distribution product for fashion brands and retailers. What makes Increff Iris unique is that there is no such product in the Indian market with an ability to (a) consider nuances of complex category like fashion accounting for all operating business constraints (planogram, MOQ, lead time etc.); (b) consume most granular level data; (c) do humongous amount of calculations via 300+ algorithms in short period of time; (d) performs individual store-level analytics (no clustering of stores); and (e) provide intelligent decisions rather than simple reports.
Increff Assure is an end to end fulfilment platform, it is superior to even what some of the leading ecommerce companies have built in-house and beats global giants in this space. The unique aspect of Increff Assure is (a) unique piece barcoding approach; (b) API based deep integration; (c) pen-less, paper-less, keyboard-less processes; (d) no dependency on humans making decision ensures, 99.9+ per cent inventory accuracy and 99.9 per cent accurate order fulfilment which is unheard of. Case to prove: Increff customers' inventory lying in Increff Assure gets Amazon Prime status without dedicating inventory for Amazon.
Honestly, we don't see too much challenge for now, but we do expect domestic competition coming in. In global market, we ourselves will be competition to global tech giants. We are sure to win those markets via our cutting-edge products and lower costs. What we firmly believe is that instead of external challenge, challenge will be internal and therefore, we strive to (a) continuously innovate the product we have built; (b) focus on solving supply side of problems, and (c) killing your own products by launching new and better products.
What percentage of Indian apparel brands are victims of mismanaged inventory?
Almost every brand / retailer in India is struggling with inefficient inventory. Even large players or brand houses and retailers work on Excel models or plain vanilla ARS (auto replenishment systems). There is hardly any intelligent solution in the market.
What are the biggest reasons for brands to be either out-of-stock or over-stocked?
Fashion retail has very poor inventory management and rotation in India. It does about two turns in a year compared to global brands like Zara doing 10-12. This is primarily due to (a) legacy processes-long supply chain; (b) large and constantly changing variety; (c) low depth and size complexity; (d) multi-channel retail. Lower inventory turn leads to significant revenue and margin loss and high working capital needs which is very detrimental to growth.
How are you constantly innovating your solutions from the feedbacks you receive?
We believe that innovation is the only way to win and be always ahead. We constantly innovate not only our offerings to clients but also our internal operations.
When it comes to enhancing in-house operations and quality deliverables, we leverage latest technologies such as Java spring hibernate architecture for back-end operations and single page architecture like Angular/jQuery for front-end execution. We have processes and organisational structure in place which delivers B2C type of customer service to B2B customers.
We are already building next versions of our Iris and Assure platforms. We will soon be launching pure SaaS version of Iris platform, which will revolutionise the way merchandizers and planners work today. Automation is the key to us. In fact, the most important KRA for everyone in the company is: how good you are in automating your own work.
What are the major challenges that apparel retailers online and offline face? What would be your suggestions to overcome them?
Fashion retail has very poor inventory (working capital) rotation in India. As mentioned, it does about two turns compared to global brands like Zara doing 10-12. This is primarily due to (a) legacy processes -long supply chain; (b) large and constantly changing variety; (c) low depth and size complexity; (d) multi-channel retail. Lower inventory turn leads to significant revenue and margin loss and high working capital needs is very detrimental to growth. We are solving this problem through our two technology platforms (Increff Iris and Increff Assure) and one service (Increff WaaS) to bring in incredible efficiency on the supply side and in turn maximise inventory rotation.
Who are your major clients in the apparel and textile industry?
We have 17 clients for whom we manage about 30 brands. Clients include likes of Puma, Wrogn, Reliance Ajio, Myntra, Mango, Esprit, Cultfit, Roadster, Arvind Group (Ruf n Tuf and Newport), D:FY, Brooks, Turms, etc.
How do the solutions you provide help in forecasting trends and make stocking decisions?
Our end-to-end merchandising product Increff Iris helps brands take intelligent decisions in terms of (a) what, how much and when to make or source, and (b) what inventory to showcase and when at each store with the help of its four modules namely:
1. Smart assortment plan,
2. Ideal buy plan,
3. Optimal store allocation, and
4. Business intelligence.
We do it by performing individual store level analytics (no clustering of stores), considering business as well as product attributes at a most granular level and by doing humongous amount of calculations with 300+ algorithms. With this level of information, brands can easily capture market trends and plan accordingly. The ideal buy plan module helps brands decide on stock by considering nuances of complex category like fashion accounting for all operating business constraints (planogram, minimum order quantity (MOQ), lead time, etc.).
What is the trend in terms of having number of collections per year and styles in each collection among Indian apparel brands / retailers?
It depends on the brand's philosophy. However, in general brands are moving away from season concept and trying to launch collections faster to catch consumer trends. The number of collections per year is on rise and the styles in each collection is also going up.
What supply chain market trends can be expected in future?
Given the proliferation of sales channels (traditional, ecommerce, social commerce, etc), brands are gearing up to predict demand more accurately across sales channels to tap varying customer needs. They are moving towards distributed warehousing to be closer to customer and fulfil their orders faster. We will see brands trying to move to flexi manufacturing to tap upcoming trends faster.
What kinds of insights do your solutions provide? How is the data collected offline?
Increff delivers incredible efficiency in sales and inventory via its two Enterprise SaaS solutions (Iris and Assure) and warehousing as a service (WaaS).
Increff Iris is an end-to-end merchandise planning and distribution software. It has four modules-Smart Assortment Plan, Ideal Buy Plan, Optimal Store Allocation, and Business Intelligence. These modules help brands take critical decisions on what and how much to buy, when to buy, how to distribute the right inventory to the right store and what decision to take based on business insights. Given that fashion is an extremely complex category, Increff Iris adds huge value by enabling granular data driven decisionmaking. Till now this is being done via excel sheets which is highly inefficient.
Increff Assure is a unique order fulfilment and warehousing platform which allows brands to expose single view of inventory, in warehouse, to all sales channels (online and offline) channels, thereby dramatically increasing sales velocity. It takes away the need of physical automation and instils digital automation. Here, technology takes all the decisions eliminating chances of human errors and showcases single view of inventory to all sales channels. Instead of fragmented inventory, the platform allows room for consolidated inventory and improves inventory efficiency drastically.
Increff WaaS is warehousing as a service. It allows brands to set up a warehouse anywhere, anytime without incurring Capex. It's like a controlled marketplace of warehousing. So, we move the capex heavy model of warehousing to a completely Opex model for them.
We pull data through ETL (extract, transform, load) from clients' ERP system, POS system, warehouse system, customer panel of large format retailers & e-commerce marketplaces.
As on date, is Increff only limited to the Indian market or has it expanded to the foreign markets as well? What are your future growth plans?
Increff aims to become the most impactful technology solutions company in world. After successfully proving the model in India, we are now focusing on global expansion.
In India, we get good inbound enquiries and most of our existing customers have come via word-of-mouth. We believe nationally, the growth ball has started rolling and have built a very premium positioning in the market.
We now are focusing on international market and are at commercial discussion stage with a very large client in the Middle East and PoC (Proof of Concept) stage with one of the largest supply chain companies of Europe. We are now appointing partners who will help us sell our products in international markets.
Our focus going forward will be to a) grow revenue by 10x, b) expand internationally in Europe, Middle East and South-East Asia and c) become a global leading technology platform solving supply side of problems for brands and retailers.
What new solutions are you working towards especially for the apparel and textile industries?
We help brands predict their demand pattern at very granular level (store and SKU level). Our merchandising platform, Iris helps brands take key decisions like what to buy, when to buy and where to showcase inventory more intelligently. This helps them plan their merchandise more accurately, respond faster to upcoming trends and ensure that their supplies are closely mirroring the true demand.
Assure helps brands showcase single view of inventory to all sales channels and delivers higher sell throughs. We also provide Warehouse as a Service. We Uberise warehousing and move it from Capex to Opex model. Brands can now fulfil orders from multiple warehouses, thereby being closer to customers. They can also move to practically daily replenishment of their offline stores. (HO)
