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.
Let me end by saying that we have not heard the end of this.
These are interesting times and even challenging times for a whole lot of
people who are in the ecosystem. But only the paranoid will survive. Let’s see
who blinks first?
Keep watching, reading and waiting for the next big
announcement!
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