Deal focus: India’s Fashinza in vogue with VC

The natural reaction for many investors facing a large, fragmented market is to consolidate. But in some cases, that fragmentation can be exploited and encouraged.

India’s Fashinza, a B2B marketplace and supply chain platform for the fashion industry, appears to be one such play. The company, which is facilitating fragmentation by offering ever-smaller order quantity minimums (currently only 50 units), received a USD 100m Series B round last week led by Prosus Ventures and WestBridge Capital.

Ashutosh Sharma, Prosus Ventures’ head of India, observes that the USD 750bn online fashion market is extremely fragmented in terms of upstream participants. In addition to untold numbers of factories across emerging markets, he reckons there are now hundreds of thousands of clothing brands trying to make their mark online.

“Launching a brand is becoming very easy. You have all these new channels where you can sell a brand, and anyone who want to launch brand is willing to launch a brand,” Sharma (pictured) said, mentioning the likes of Amazon, Flipkart, and Shopee. “Their problem is where to get the manufacturing. That’s what Fashinza is solving.”

Fashinza is effectively a middleman for mostly Western fashion brands and mostly Asian clothing manufacturers. The idea is to update the industry’s offline “buying agent” model, whereby various third-party vendors connect brands with factories and raw materials suppliers but provide no visibility on the latter’s operational practices.

A palpable current trend toward sustainability in the fashion industry means this lack of transparency is no longer tenable for many companies. And as online brands proliferate, often seeking to establish an audience through clean credentials, the concept of digital supply chain mediation has come into sharper focus.

Fashinza claims to have grown 10x in the past 12 months, crossing USD 150m in annualised gross merchandise value. The service is said to increase suppliers’ earnings by 200% and deliver brands a 25% reduction in inventory costs as well as a 20% increase in sales.

There are currently around 250 manufacturers and logistics providers on the platform as well as approximately 200 fashion brands. The user mix has evolved from primarily Indian to primarily non-India since inception in 2020. The US is the key expansion target for the Series B capital and expected to represent more than 50% of brands using the service in the years to come.

Many Indian software companies have successfully targeted global markets with similar tailwinds around counterparty digitalisation, industry fragmentation, and rising demand for sustainability and transparency. Fashion marketplaces playing this game could benefit a differentiating factor, however, in the fleeting nature of style.

Brands are not only under pressure to move product quickly due to increasing competition, they face an urgency around not being a copycat when it comes to seasonal designs – and the phenomenon is accelerating at the speed of e-commerce.

Theoretically, a B2B platform that provides supplier reviews and specifications could reduce time spent on procurement and the back-and-forth process of refining mock-ups. Fashinza claims to have reduced its average design-to-delivery turnaround time by 50% in a single year.

“Fast fashion and online sales trends are moving all the time, and one has to respond. If you’re thinking about what your spring or summer collection is going to be next year, you need this transparency for a quick turnaround,” Sharma said.

“A few years ago, there were 200 days from design to launch of a range, and so brands had that much time. These days, brands want to fix the design and retail it within 32 days in some cases. That kind of turnaround can only be possible through the use of technology and a platform like this.”

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• Topics
• South Asia
• Consumer
• Support services
• Early-stage
• India
• Prosus Ventures
• WestBridge Capital Partners
• Logistics
• manufacturing