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Mayu Saini, WWD\n<\/i><\/p>\n
Mayu Saini, WWD
\n<\/i><\/p>\n
New Delhi, 26 July 2016<\/i><\/p>\n
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Changing\nIndia’s playing field for fashion online, Myntra, a subsidiary of the\ncountry’s biggest ecommerce player, Flipkart, on Tuesday acquired rival\nfashion e-tailer Jabong for an estimated $70 million.
“Fashion\nand lifestyle is one of the biggest drivers of e-commerce growth in\nIndia,” said Binny Bansal, chief executive officer and cofounder of\nFlipkart, adding that the acquisition would help the group continue to\ntransform commerce in India. “We will now be able to offer to millions\nof customers a wide variety of styles, products and a broad assortment\nof global as well as Indian brands.”
Jabong has been expanding\nacross various segments, from private label to global brand\npartnerships, with more than 150,000 styles from more than a thousand\nvendors. It has exclusive tie-ups with international brands including\nTopshop, G-Star Raw, Bugatti Shoes and Dorothy Perkins.
Myntra\nhas been paring back the number of brands it carries from the more than\n2,000 at the peak to focus on those that generate the most revenues. In\naddition to private label and local labels, Myntra sells more than 25\ninternational brands including Nike, Adidas, Puma, Lee, Levi’s, Arrow,\nMango, Diesel, CAT, Harley-Davidson, Ferrari, U.S. Polo Association,\nForever 21 and Marks & Spencer.
Myntra expects to become\nprofitable in 2017, projecting sales of $1 billion. Industry estimates\npegged the deal with Flipkart at $70 million in cash, with additional\namounts for inventory and other things.
“The acquisition of\nJabong is a natural step in our journey to be India’s largest fashion\nplatform,” said Ananth Narayanan, ceo of Myntra. “Jabong has built a\nstrong brand that is synonymous with fashion, a loyal customer base and\na unique selection with exclusive global brands. We see significant\nsynergies between the two companies especially on brand relationships\nand consumer experience.”
E-commerce in India has been growing\nrapidly and is expected to increase by more than fourfold in the next\nfour years, from $30 billion this year to $120 billion in 2020. The\nestimated 51 percent growth will be the highest in the world, according\nto a recent research paper by industry body the Associated Chambers of\nCommerce of India (Assocham). India has an estimated Internet user base\nof 400 million. (In comparison, Brazil has 210 million Internet users\nand Russia has 130 million.) The report noted that Internet penetration\nin India is expected to increase from 32 percent in 2015 to 59 percent\nin 2020, translating to a near-doubling of the Internet user base. Per\ncapita incomes are likely to double by 2025 as well, driving growth in\nsales and consumption.
Fashion is the second-largest segment in\nthe Indian e-commerce market after electronics, and is estimated to\nhave the highest margins.
Flipkart had already made a\nsignificant foray into fashion e-tailing with the purchase of Myntra in\nMay 2014 for $320 million. Since then it has invested heavily to grow\nMyntra, including in advertising and marketing and price promotions,\npushing far ahead of its competitors, including Jabong, which has seen\na major decline in valuation over the last year.
In September\n2014, Jabong was bought by the U.K.-based Global Fashion Group, which\nowns five other online fashion retailers in Latin America, Russia, the\nMiddle East, Southeast Asia and Australia, with the overall group\nvalued at 3.1 billion euros, or $3.4 billion, this month. Other other\nsites that are part of GFG are Dafiti in South America, Namshi in the\nMiddle East, The Iconic in Australia and New Zealand, Zalora in\nSoutheast Asia and LaModa in Russia.
In the past six months, Jabong founder and ceo Arun Chandra Mohan and cofounder Praveen Sinha have left the company and
former Benetton India ceo Sanjeev Mohanty was named ceo.<\/p>
Jabong had net revenues of 126 million euros, or $131.8 million, in the financial year ending March 31.
“Through\nthis deal, Jabong potentially gets a lease of life, as it was\nstruggling to raise funding from its existing investors, and saw a\nsignificant churn recently in its top management. As an upside, it has\nreduced its emphasis on discounting last year, and if it continues its\nfocus on strengthening its product direction and merchandising\ncapabilities, it may not only do itself a favor, but also its acquirer\nMyntra\/Flipkart. Whether and how much it will retain its operational\nindependence remains to be seen,” said Devangshu Dutta, ceo and founder\nof Third Eyesight, a consulting firm focused on the retail and consumer\nproducts.<\/span>
The acquisition is\nexpected to heat up the fashion e-tail market in India, with Amazon\nmaking a big push for growth over the last 12 months, especially in\napparel. Amazon plans to invest $5 billion in India over time, while\nbrick-and-mortar retailers have expanded their own web sites, including\nReliance Industries, which launched its own fashion e-commerce site\nAjio in April; Tata Cliq from the Tata Group, and Abof from the Aditya\nBirla Group.
But there have\nbeen concerns the e-commerce bubble might burst, even as the number of\nconsumers shopping online continues to grow rapidly. Dutta observed the\ngrowth is likely to continue, both in terms of customer numbers and\nmarket share, driven not just by pure-play companies, but also by\nmainstream retailers expanding their web sites.<\/span>
“Among all categories, fashion and lifestyle goods can offer a buffer against commodification and margin erosion,” he said.<\/span><\/p>