Monday, August 1, 2016

Why Flipkart’s big bang Jabong take over is not good for shoppers

Last week as I was dithering over the online purchase of a brand of Hush Puppies, Flipkart bought the fashion and lifestyle etailer, Jabong for a small matter of 470 crores. Flipkart’s shopping bag is almost bursting at the seams and its stable is full with Myntra and Jabong already in making the combined entity corner 70 per cent of the online fashion and lifestyle market. I am sure the competitors are yearning for the good old days of MRTP control! But seriously it spells a dicey future for the 430 odd brands which are in the same space snapping at each other’s heels. How will the VCs who are such an important part of this ecosystem continue to fund small and marginal players who have been dealt a body blow by this acquisition? Though my heart goes out to these players, as a brand consultant I have little sympathy for those who keep going after the same market with undifferentiated, me too offerings. So let’s focus on the implications of the acquisition as people interested in marketing and branding.

More of the same?
The slightly worrying thing for me about this take over is the fact that the merchandise, brands and offerings are fairly similar to what Myntra is offering, give or take a few brands. So what is the long term future of Jabong even if protestations about its importance are being made in public? Where I will buy my Florsheim shoes from? What is the need for two similar brands in the same entity?
While there is certainly a lot to be said about the economies of scale and bargaining power that the combined entity will bring into play in negotiations with vendors and media I wonder what it means to me as a consumer and that’s what we need to worry about next.

Pampered me
As an online customer, I have been thoroughly spoiled by the unending series of discounts and options that these brands have been giving. I know that some of my friends have built a reputation for themselves in bargain hunting online and compared to some of those PhDs, I am in kindergarten! But having said that with such a whopping market share why should the company discount its products? And with many of the small and marginal players in the market whose source of funds will soon dry up, how will VC money make its way into my pockets by way of discounts?

Fashion the new mantra
The online ecommerce business historically has been driven by categories like mobile phones where we have created the now not so new shopping behaviour of checking out models and prices extensively in the Sangeethas and UniverCells of this world but buying it on Amazon. The prediction is that fashion and lifestyle will overtake it as a category in terms of importance and growth. This is an important consideration for the new acquisition. Yet given the fact that smartphones are growing 23 per cent as a category and given our mobile mad nation, I wonder if the Samsungs and Apples will take it lying down. Companies will have to come up with new offers like the Moto G exclusive offer of sometime ago.

What does it mean for advertising and advertising agencies?
This category has witnessed some of the most boring, inane full page monstrosities which were passed off as creative which though it had newspapers licking their lips made me grit my teeth. I suspect that advertising spending might actually come down as the offers too come down. I certainly expect the smaller players to go online and hope for the best rather than spend wasteful amounts on mass media. And as someone who loves advertising, I hope we see interesting campaigns rather than the disgusting “offer” advertising that is currently on display.

Dominance the key
What this acquisition shows more than anything else is the value VCs place on dominance as this is not only a management decision but something done by worried VCs. And yet I strongly believe that any category to survive needs two strong players like Coke and Pepsi who keep going at each other and also get new customers to the fold. As a customer, I am happy that Amazon who has been there done that in several countries is around and to make their presence felt they have also launched Amazon prime at the right time. So I am sure that though size matters it may not be everything given three different companies trying to merge with possible concerns of turf.