It looks like any other printed T-shirt; the image is of a man sitting beside a campfire. Nothing out of the world, and definitely nothing that will make you shell out Rs 500-plus. Till you point a smartphone at it and see the picture come to life on the screen; the flames flicker, sparks shoot out into the night sky, and you can walk closer to the fire as you move your phone .

Online fashion retailer Myntra plans to launch these augmented reality T-shirts in the next month or so; its chief executive, Ananth Narayanan, says he’s excited about the “amount of technology and fashion in - novations that we are doing”. E-commerce watchers will tell you that Narayanan has little option but to innovate. He’s up against stiff competition not just from global heavyweight Amazon, but also from his own parent company, Flipkart, to say nothing of the dozens of small fashion startups scrambling for market share .

Globally, online fashion retail is one of the largest categories in e-commerce, and things are not much different in India. Gross margins in the online fashion business tend to be very high, sometimes as much as 40% for branded products and 50% to 60% for private labels. This is very important to the Indian e-commerce industry, which continues to grapple with losses. Flipkart, for instance, saw a 68% increase in losses in FY17. International e-commerce giant Amazon concluded the year 2017 with losses of $3 billion, mostly attributed to its spending in India. Amazon did not give separate financials for its India business .

The Indian online fashion market is projected to grow 3.5 times from its current $4 billion to touch $14 billion by 2020 and everyone wants to ride this wave.

The space has attracted a host of niche players such as Limeroad, FashionandYou. com, Koovs, Voonik, and Reliance’s online fashion store Ajio. However, competition from larger players who have uninterrupted access to funds has led to the death of several of these fashion platforms.

Fashion e-commerce site Zovi, backed by Tiger Global and SAIF Partners, closed in 2016. Unable to fight the discounts offered by the giants Amazon and Flipkart, Aditya Birla Group’s e-commerce venture Abof.com shut late last year. However, it recently re-launched as a private-label platform. Over the last two years, the space has seen many shutdowns including the likes of Freecultr, Luxury Couture, Fetise Man, and Ladyblush, all of which are backed by investors.

That leaves the big three—Amazon, Flipkart, and Myntra. Amazon, of course, is trying to be the undisputed leader in most categories, but when it comes to fashion retail, it seems to be on the losing side, in India at least. Not that its team here will agree. “We are doing all the fundamentally solid, right things to establish our position,” says Arun Sirdeshmukh, head, Amazon Fashion, India. Myntra, meanwhile, has been plugging away at expanding its customer base and its range of products.

Welcome to the next round of the great fight for the Indian customer’s wardrobe .

The number tell the story. The Myntra-Jabong combine (owned by e-commerce giant Flipkart) is looking to close FY18 with gross merchandise volume (GMV) of $1.2 billion, a growth of almost 55% compared with last year. For FY19, it expects GMV of $1.85 billion. (Online retailers in India typically don’t share their actual revenues Instead, they use GMV, which is the value of all goods sold on the platform, barring discounts and returns. Both Flipkart and Myntra-Jabong claim that GMV and revenue are almost the same for them.)

Flipkart Fashion is set to register revenue of $1 billion for FY18. That’s a 50% growth, which the company attributes to the increase in demand from tier 2 and 3 cities. Over the last few months, Flipkart Fashion has seen nearly 60% growth. It expects the momentum to continue, and looks for revenue of $1.6 billion in FY19.

With over two million fashion products and over 15,000 brands, Amazon Fashion is among the top three stores on Amazon.in and is one of the fastest growing stores. The company claims to have registered a growth (in fashion) of over 100% in 2016 versus 2015 and over 80% in 2017.

“Amazon Fashion is one of our top magnet stores and brings in second highest number of new customers to Amazon.in,” says Manish Tiwary, vice president, catego -ry management, Amazon.in, in an e-mail. “We will continue to invest in building this category for the benefit of both brands and customers as we do believe we have a significant opportunity to grow in this category.”

Amazon’s strategy is simple: Bludgeon the market with something for everyone. Flipkart chooses to focus on mass appeal, while Myntra is well entrenched in the mass premium and premium category. In this battlefield, then, Amazon is pitched against Flipkart in the affordable segment and against Myntra everywhere else. It’s now a war of tailored strategies across technology, customer engagement, and brand partnerships.

“If I were to describe Amazon in one word, it would be relentless. So if the fashion space is attractive from the point of view of transaction values and margins, Amazon will surely follow through aggressively,” says Devangshu Dutta, chief executive of retail consultancy Third Eyesight.

It’s not that Flipkart and Myntra are any less aggressive. In fact, with its smart acquisitions (notably of Jabong) over the past few years, Flipkart seems to have won, in fashion at least. But more on that later. Let’s first talk interactive T-shirts.

Technology, whether in what they sell or how they sell, has been the cornerstone of ecommerce fights. It’s no different in fashion. Augmented reality T-shirts and artificial intelligence driving the back-end are some of the more obvious ways in which we can see this fight playing out.

In the case of tech in clothes, Myntra is somewhat late to the party and Flipkart doesn’t seem to want to join. Amazon, riding on the surfeit of customer insight that it has globally, began selling interactive Tshirts in India almost a year ago; these Tshirts are from Bengaluru-based augmented reality startup FlippAR.

What is Myntra doing about this? “The thing that I am excited about is the amount of technology and fashion innovations that we are doing,” says Narayanan. “There are three big areas where we are innovating: selection, service, and customer engagement.” Narayanan adds that the company recently acquired Witworks, a Bengaluru-based startup that makes smart wearable devices and their underlying software. “Wearables is a Rs 300 crore industry in India and is growing rapidly, with online contributing 60% to the total business. This acquisition will help us develop wearable products like smart shoes, connected smart watches, and interactive clothing with biosensors,” says Jeyandran Venugopal, chief technology officer, Myntra.

These are fashion-specific moves that a focussed player such as Myntra can afford to make. Amazon and Flipkart, meanwhile, have to think across the range of categories they are present in; fashion is just one among many. “Fashion is a very high engagement category, so there is a certain level of variety that will actually help to play,” says K. Ganesh, Bengaluru-based serial entrepreneur and partner at GrowthStory.

Dutta of Third Eyesight adds that because it owns Myntra, Flipkart benefits from the smaller company’s fashion focus. “Myntra provides Flipkart with frequent, stickier customers who spend more .

Of course, technology is category agnostic. It’s just how it is used that makes a difference. Amazon and Flipkart’s investments in tech have impacted their fashion businesses as well as other segments. And no, we aren’t talking of the great mobile push that Flipkart experimented with, in its bid to shake Amazon. That’s been written about in detail earlier. (See “Flipkart vs. Amazon” on fortuneindia.com.)

Rather, what assumes importance in the fashion space is the kind of tech investment these companies are making to attract both buyers and sellers. Myntra has made its moves, buying out a wearables firm and focussing on tech-enabled products .

Amazon, which already has its share of such products, is looking beyond. In a move that’s bound to have an impact on its fashion business, Amazon is working on using technology to standardise sizes across categories. So, a size “L” will be the same whether you’re looking at formal shirts or casual shorts across brands. That’s a move that could see a number of shoppers begin to buy clothes and accessories online.

The company will also be introducing chatbots for answering queries. And in a big regional push, Amazon plans to translate content in key regional languages.

Amazon’s use of artificial intelligence to drive business is by now legendary. Machine learning, data analytics, deep learning, and robotics are not just words to the behemoth. With an enormous war-chest, Amazon is clear that it will spend what it takes to beat competition .

That’s Amazon’s global position, and things don’t seem particularly different in India. One of the biggest issues in India for timely and accurate delivery is locating an address correctly. The company is leveraging technology to track localities and buildings in a far more accurate way .

Elsewhere, the company is using machine learning to minimise product returns, which is a massive capital burner for e-retailers, offer more relevant search results, and even show products in response to a search with expected delivery timeline.

Flipkart isn’t sitting by when all this is going on in its neighbourhood. Apart from the acquisitions Myntra has made in wearables, Flipkart has announced plans to invest “millions of dollars” in its artificial intelligence initiative. Flipkart has created an internal unit called AI for India, to leverage machine learning and AI for its business.

The seemingly simple moves have paid off. For instance, there was a buzz around Katrina Kaif’s Kaala Chashma song when it was released in late 2016. The Flipkart algorithm picked up that people were searching for Kaala Chashma instead of sunglasses and began pushing that phrase.

Flipkart is also planning to use AI and machine learning to make sure that buyers are not resellers taking advantage of prices. For Flipkart, loyalty is not just about keeping customers hooked, it’s also about keeping sellers happy. Flipkart claims to have one of the lowest cost platforms. “We have worked a lot to ensure that the cost of supplying goods to the consumer is very low,” says Rishi Vasudev, head of fashion at Flipkart.

At the core of this battle is the customer, a fickle creature not bound by loyalty to a store. Equally, the customer is vocal when she perceives bad service, and with social media, this is a double-edged sword. Which is why e-retailers are going all out to ensure the best shopping experience.

For Myntra, curated products are the differentiator. “We don’t want to be an everything destination. We don’t give a wider selection, but curated items. The home furnishing category, in a horizontal site, will have 100,000 bed sheets; in Myntra, you will find about 2,000,” says Narayanan.

Myntra is banking on local brands being a key growth driver over the next 10 years. In China, for example, a lot of local brands are much ahead of global competitors in terms of scale. Myntra feels India is ripe for this revolution. Its private brand Roadster is a $100 million brand (in terms of sales), and fitness and active-wear brand HRX is seeing growth of over 100% year-on-year. To boost its presence in this space, for the first time, Myntra has invested in a retail brand that has a strong offline presence. It invested an undisclosed amount for a small stake in outdoor and adventure product company Wildcraft.

“We realised that if we get into a tighter partnership there is a lot of growth that we could unlock with the type of inputs we could give them on the assortments they should have, the kind of digital marketing we could help them with, the omni-channel partnership we could do with the brand, and for us the kind of assortment they could provide our customers,” says Ananya Tripathi, chief strategy officer, Myntra.

That’s a strategy Amazon understands. Myntra’s investment in Wildcraft comes a few months after Amazon Inc’s investment arm, Amazon NV Holdings, bought a 5% equity stake in departmental store chain Shoppers Stop for Rs 179.25 crore in September last year. Reports say Amazon plans to use Shoppers Stop outlets to set up centres where it can showcase its fashion and accessories brands. Other offline initiatives include Amazon Fashion Week and Project Udaan (to woo rural customers).

Myntra is also boosting its offline presence. It has the distribution and management rights for brands Mango and Esprit in India. It has six Mango stores now and plans to have a total of 20 by the year-end. It also aims to open 15 Esprit stores over the next 12 months, besides 20 Myntra Fashion Brands stores and 15 personal care stores.

Myntra is also planning a customer loyalty programme, but refuses to share details. It could learn a thing or two from Prime, Amazon’s hugely successful paid subscription service that offers a host of benefits. Currently, one of three products for fashion in India goes to a Prime customer. Amazon expects to touch the 50% mark, which means one out of two deliveries would go out to a Prime customer. “Prime is a 2.0 of e-commerce in India,” says Amazon India’s Sirdeshmukh. “We are doing work on Prime, fulfillment centres, partnering with brands, adding more collections,” he adds .

Flipkart, meanwhile, is quietly ramping up its fashion retail offerings. “We cater from the most premium to the most value customer and we want to be representative of what India is buying. We have shirts for Rs 500 and we have shirts for Rs 5,000,” claims Flipkart’s Vasudev. “We look at each category and say how do we give 10 times of what one would get in the offline world or another site.”

Vasudev says besides having over 100,000 sellers, the company is enabling the creation of new selections. It runs a scheme called Trend Stock, where its net - work of designers and stylists create the entire selection story for the next season.

If one looks at the investments and initiatives by each of the big three, Myntra is up against serious competition and needs to speed things up. It’s not that the smaller company hasn’t been displaying initiative; it has, in spades. When it comes to investment, however, the something-for-everyone portals have more to burn.

Industry watchers say Amazon is a late entrant in the fashion space in India. It got into private labels only last year (with Symbol and Myx). Flipkart (which has three private labels), along with Myntra (which has 13) and Jabong (which has one), on the other hand, command over 70% of the on - line fashion retail market in the country.

But substantiating position in a highly competitive market is nothing new for Amazon. In the U.S., all of Amazon’s inhouse fashion brands are fairly new, facing competition from retail majors such as Walmart and Target, which have made a strong push in private-label fashion brands in the last several months.

“Amazon is formidable,” says GrowthStory Ganesh. “They understand a market. They can easily bring into play their technology, analytics, and learnings into the fashion business in India.” Indeed, Amazon has begun to do this. But while it’s working across other segments, in fashion, Myntra still seems to have the edge. “One can say that verticals like Myntra are more likely to succeed due to clear positioning as a fashion brand while horizontals like Flipkart and Amazon will find it harder,” says Harminder Sahni, founder and managing director, Wazir Advisors, a retail consultancy.

He explains that “verticals will do far better in fashion in terms of understanding consumer needs of different segments”. Flipkart and Amazon, meanwhile, will serve those “who are more driven by price” .

Eventually, however, the customer is unlikely to be loyal to one retailer, and will move to specific brands. Online sellers will be chosen on the brands they offer as well as the shopping experience and deals. And based on those parameters, Novi Singon, an online shopper in Aizawl, Mizoram, says Myntra is definitely winning. “I shop the most from Myntra because they have an office in Aizawl nearby, so returning and exchanging is easy compared with others.” Besides, Myntra refunds happen within a day, while others take a day or two, she says.

Ganesh is more philosophical, saying that this three-horse race may not have one winner. “It will not be one winner takes all,” he says. “Fashion is a very high engagement category, so there is a certain level of variety that will actually help to play. From a consumer point of view it is good to have options.” And, after all, what is this battle for but for the consumer?

( The article was originally published in the April 2018 issue of the magazine. )