Consolidating India’s Online Fashion Players, Myntra Buys Jabong


July 26, 2016

Mayu Saini, WWD

New Delhi, 26 July 2016

Changing 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.

“Fashion 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.

Myntra 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.

In September 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.

“Through 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 products.

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 Birla Group.

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.

(Published in WWD)