Mayu Saini, WWD
New Delhi, 26 July 2016
India’s playing field for fashion online, Myntra, a subsidiary of the
country’s biggest ecommerce player, Flipkart, on Tuesday acquired rival
fashion e-tailer Jabong for an estimated $70 million.
and lifestyle is one of the biggest drivers of e-commerce growth in
India,” said Binny Bansal, chief executive officer and cofounder of
Flipkart, adding that the acquisition would help the group continue to
transform commerce in India. “We will now be able to offer to millions
of customers a wide variety of styles, products and a broad assortment
of global as well as Indian brands.”
Jabong has been expanding
across various segments, from private label to global brand
partnerships, with more than 150,000 styles from more than a thousand
vendors. It has exclusive tie-ups with international brands including
Topshop, G-Star Raw, Bugatti Shoes and Dorothy Perkins.
has been paring back the number of brands it carries from the more than
2,000 at the peak to focus on those that generate the most revenues. In
addition to private label and local labels, Myntra sells more than 25
international brands including Nike, Adidas, Puma, Lee, Levi’s, Arrow,
Mango, Diesel, CAT, Harley-Davidson, Ferrari, U.S. Polo Association,
Forever 21 and Marks & Spencer.
Myntra expects to become
profitable in 2017, projecting sales of $1 billion. Industry estimates
pegged the deal with Flipkart at $70 million in cash, with additional
amounts for inventory and other things.
“The acquisition of
Jabong is a natural step in our journey to be India’s largest fashion
platform,” said Ananth Narayanan, ceo of Myntra. “Jabong has built a
strong brand that is synonymous with fashion, a loyal customer base and
a unique selection with exclusive global brands. We see significant
synergies between the two companies especially on brand relationships
and consumer experience.”
E-commerce in India has been growing
rapidly and is expected to increase by more than fourfold in the next
four years, from $30 billion this year to $120 billion in 2020. The
estimated 51 percent growth will be the highest in the world, according
to a recent research paper by industry body the Associated Chambers of
Commerce of India (Assocham). India has an estimated Internet user base
of 400 million. (In comparison, Brazil has 210 million Internet users
and Russia has 130 million.) The report noted that Internet penetration
in India is expected to increase from 32 percent in 2015 to 59 percent
in 2020, translating to a near-doubling of the Internet user base. Per
capita incomes are likely to double by 2025 as well, driving growth in
sales and consumption.
Fashion is the second-largest segment in
the Indian e-commerce market after electronics, and is estimated to
have the highest margins.
Flipkart had already made a
significant foray into fashion e-tailing with the purchase of Myntra in
May 2014 for $320 million. Since then it has invested heavily to grow
Myntra, including in advertising and marketing and price promotions,
pushing far ahead of its competitors, including Jabong, which has seen
a major decline in valuation over the last year.
2014, Jabong was bought by the U.K.-based Global Fashion Group, which
owns five other online fashion retailers in Latin America, Russia, the
Middle East, Southeast Asia and Australia, with the overall group
valued at 3.1 billion euros, or $3.4 billion, this month. Other other
sites that are part of GFG are Dafiti in South America, Namshi in the
Middle East, The Iconic in Australia and New Zealand, Zalora in
Southeast 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.
Jabong had net revenues of 126 million euros, or $131.8 million, in the financial year ending March 31.
this deal, Jabong potentially gets a lease of life, as it was
struggling to raise funding from its existing investors, and saw a
significant churn recently in its top management. As an upside, it has
reduced its emphasis on discounting last year, and if it continues its
focus on strengthening its product direction and merchandising
capabilities, it may not only do itself a favor, but also its acquirer
Myntra/Flipkart. Whether and how much it will retain its operational
independence remains to be seen,” said Devangshu Dutta, ceo and founder
of Third Eyesight, a consulting firm focused on the retail and consumer
The acquisition is
expected to heat up the fashion e-tail market in India, with Amazon
making a big push for growth over the last 12 months, especially in
apparel. Amazon plans to invest $5 billion in India over time, while
brick-and-mortar retailers have expanded their own web sites, including
Reliance Industries, which launched its own fashion e-commerce site
Ajio in April; Tata Cliq from the Tata Group, and Abof from the Aditya
But there have
been concerns the e-commerce bubble might burst, even as the number of
consumers shopping online continues to grow rapidly. Dutta observed the
growth is likely to continue, both in terms of customer numbers and
market share, driven not just by pure-play companies, but also by
mainstream retailers expanding their web sites.
“Among all categories, fashion and lifestyle goods can offer a buffer against commodification and margin erosion,” he said.