Malviya, The Economic Times
15 December 2015
online retailer Jabong crossed the Rs1,000 crore sales mark in
the year to March, doubling its revenue from a year ago but deep
discounting has led to a nearly threefold increase in the net
Xerion Retail, which runs Jabong, posted a loss of Rs 43.6 crore
on sales of Rs 1082.9 crore, as per a Registrar of Companies filing.
A year ago, it had sales of Rs527 crore with a net loss of Rs16.6
crore. Sales of the company, incorporated four years ago, amount
to a third that of Shoppers Stop, India's largest department store
chain started 25 years ago.
India's ecommerce market is set to rise to $103 billion by FY20
from $26 billion now, according to Goldman Sachs. At this stage
of evolution, online retailers have to go through years of operating
losses, given high initial investments as well as the incentives
they provide in the form of discounting to attract consumers online.
At the same time, several online retailers are said to be getting
more circumspect with discounts as they seek to shore up their
Jabong, which was started in a one-room office at Golf Course
Road, Gurgaon, in December 2011 is now part of Global Fashion
Group portfolio, a subsidiary of German online business developer
Rocket Internet. Both key cofounders Praveen Sinha and Arun Chandra
Mohan quit this year amid speculation that the company is on the
block. A week ago, Sanjeev Mohanty joined Jabong as CEO and managing
director from Italian fashion brand Benetton.
"Jabong is transitioning from a startup to a professionally
managed profitable ecommerce business. We are putting together
a strong leadership team," he told ET. "Our focus will
be on more and more curation, building unique assets and increasing
High growth and losses are par for the course at ecommerce
companies, an expert said.
"There is a management churn issue but it is more difficult
to bring losses down if you have to show high growth trajectory,"
said Devangshu Dutta, chief executive at retail consultancy Third
Eyesight. "For Jabong, loss is not a problem as long as they
have enough cash on the balance sheet and there is constant product
injection in its portfolio to excite consumers."
India's biggest homegrown ecommerce companies Flipkart and Snapdeal
are flush with cash as overseas investors in the two companies
look to get a piece of a market that's set to surge further. Amazon
India too has indicated that it may exceed the $2 billion that
CEO Jeff Bezos had pledged to spend last year, with sales growing
more rapidly than expected. In comparison, Jabong has raised about
$100 million from a consortium of investors including Swedish
investment giant AB Kinnevik and Rocket Internet.
Myntra, owned by Flipkart, and Jabong were considered the leaders
in the fashion category, but Amazon India is gradually getting
aggressive with the segment consistently among its top three.
During the festive season, Amazon saw its fashion segment grow
fivefold from a year ago.
Apart from this, most lifestyle product makers are either shying
away from offering heavy discounts for their wares or giving price-offs
for old merchandise, something that goes against Jabong's business
model of offering fast fashion or the latest collection.
Hence, the online retailer has launched over a dozen global brands
such as Dorothy Perkins, G Star Raw, Tom Tailor and Bugatti Shoes
exclusively for India that also helps them earn higher margins.
Just two months ago, Jabong helped British brands Topshop and
Topman enter Indian market through its platform.
"We are focusing on growing the 'just-in-time' marketplace
model where we don't hold inventory risk," said Mohanty.
"This is helping us create efficiencies and de-risk a lot
of our business, while allowing us to expand the number of vendors
and substantially increase the number of products listed on our
platform, which now stands at close to 400,000 SKUs (stock-keeping
units). We also continue to increase our assortment to offer more
choices to visitors on Jabong."
(Published in The