After acquiring Myntra earlier, and now Jabong, Flipkart has
positioned itself as one of the largest players in the e-commerce
space. Industry experts feel the buyout is not only a step towards
consolidation of the industry but also a bid to acquire more customers
Flipkart has always been in the news for
good and bad reasons. This time it has hit the headlines for its arm
Myntra’s recent buy of Global Fashion Group’s (GFG) Jabong for $70
million. It is possibly the largest deal in Indian e-commerce, making
Flipkart one of the largest players in the space. According to reports,
with the acquisition, Flipkart is likely to have control over almost 70
per cent of the e-commerce industry.
Jabong commanded a share of 25 per cent of
the online fashion market, while Flipkart (including Myntra) had a total
market share of 45 per cent. After the deal, the combined share is
likely to touch 70 per cent.
Flipkart, which already is the market
leader followed by Snapdeal and Amazon, has now further strengthened its
position with the acquisition.
Earlier in April this year, Amazon was
eyeing Snapdeal to strengthen its position in India. For the record,
Snapdeal, Future Group, Aditya Birla Groups’ Abof and Amazon were in the
running to acquire Jabong.
The buyout is not only a step towards
consolidation of the industry but also an attempt to acquire more
customers. BestMediaInfo asked a few digital and brand experts what the
deal means for India’s e-commerce industry.
Strengthening portfolio
Strengthening portfolio
Harish Bijoor
Harish Bijoor, Brand Expert and Founder at
Harish Bijoor Consultants, thinks that it’s consolidation time for
e-commerce in India. He said, “This acquisition is just the beginning.
The Flipkart family grows bigger. To an extent the forces are rallying
into three formations. You have Amazon growing at a frenetic pace on a
lower base, you have Alibaba rallying forces and you have the Flipkart
family. This acquisition is significant for sure.”
Already having an existing fashion
platform, Flipkart seems to have strengthened its portfolio with brands
that were not available on Myntra. Brand expert and Founder, Brand-comm,
Ramanujan Sridhar, thinks when a company does an acquisition of an
existing competing platform it is to bring in a greater sense of
competition. He cites an example, “Some of the old acquisitions include
Wipro taking over Chandrika soap or Lever which had once taken over a
soap brand which means that there is a product in the portfolio and the
new product will give a greater sense of competition.”
He continued, “In case of all these
start-ups, there is one more critical factor: investment. The company
has to be a category leader. There might not be a significant difference
in merchandise but the idea being let me try and acquire customers.
Amazon is also trying to catch up with the trend and be an Indian
player.”
Some reports say Amazon India is one of the
largest players in e-commerce and is also a trusted one. The buyout has
taken place in a difficult time for Flipkart as the valuation of the
company has been fluctuating due to rejigs in its senior management
earlier this year.
Asked if the deal was a threat to Amazon,
Sridhar agreed, saying Flipkart must be worried about Amazon. It is to
be seen what Flipkart does with the Jabong brand name as it continued
with the Myntra name after acquiring it in May 2014.
Anil Nair
Anil Nair, CEO and Managing Partner, Digital L&K Saatchi & Saatchi, thinks that eventually this had to happen. “As e-commerce and fashion markets move to some majority, there is going to be a huge pressure on the bottom line. There is a lot of back-end consolidation.”
Will Flipkart retain ‘Jabong’ as a separate brand?
Nair said that after the acquisition, they
might also look at smaller cities where they don’t have a presence. The
challenge remains in whether Flipkart retains ‘Jabong’ as a separate
brand or the two will co-exist, he wondered. This is indeed not the end
of competition. Niche players in the fashion end are always popping up.
The buy is purely revenue and economic one.
Jabong, which matched larger rival Myntra
in sales until early 2014, had ceded market share since then as Myntra’s
parent Flipkart has been spending crores on advertisements and
discounts to lure customers.
Naresh Gupta
Naresh Gupta, Managing Partner and CSO, Bang in the Middle, it remains to be seen how everything will shape up. He said there are major announcements still awaited from the e-commerce major on whether the brand names will be the same, what categories of products both fashion portals will sell and so on. Gupta also thinks the deal won’t be a threat to Amazon “as they are in a different league”. Amazon recently entered India with its video content service Prime; hence there is no comparison with the global major, he averred.
Consolidation
Gopa Kumar
Gopa Kumar, Vice-President, Isobar, believes that Myntra buying out Jabong will help it preserve and maintain India’s top e-commerce player for the near future at least. “With the combined power of Flipkart, Myntra and now Jabong, this has become a potent combination and also now in the best position to take on Amazon, at least for the short term,” he said.
Kumar further said, “What it means for the
e-commerce industry at large is that this consolidation will continue,
as many experts have predicted. Consolidation and shakeout will continue
to happen as the market is cluttered and facing cut-throat competition.
This race for massive discounting, which is a hook to win customers,
means nobody is making money. There have been huge jobs cuts across and
valuations are down and at the lowest ever.”
It must also be noted that some government
policies are not clear on the marketplace model, which is creating a lot
of uncertainty in the industry. “It’s now over to Amazon and would be
interesting to see how it will react to this acquisition,” said Kumar.
Currently, Jabong offers more than 1,500
international high-street brands, sports labels, Indian ethnic and
designer labels and over 150,000 styles from more than 1,000 sellers. In
the past year, the company has been hit by an exodus of senior
management executives, a funding slowdown and strong competition from
Myntra and Amazon India.
GFG, which is jointly owned by Rocket
Internet and AB Kinnevik, houses the German e-commerce company’s fashion
businesses from emerging countries, including Jabong, Latin America’s
Dafiti, Russia’s Lamoda, Namshi in the Middle East and Zalora in
South-East Asia and Australia.
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