Myntra’s Jabong acquisition will boost Flipkart in more ways than one

Flipkart has acquired Jabong through Myntra at around $70 million. It has trumped potential competition from several firms, including Snapdeal, Future Group, Aditya Birla Group and Amazon. This move might preserve the Indian e-commerce player’s ‘No.1 e-commerce marketplace’ tag, but there are lingering questions about whether it will do it any good.

There is no denying that this sale marks one of the sharpest drops in Indian e-commerce history. Jabong was valued at over $50 million by the end of 2013, and was registering sales of over Rs. 450 crores. Even as its sales saw a 2X hike last year, the funding crunch, market share loss and management issues became too over-bearing.

That doesn’t seem to bother the folks at Flipkart.

“Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India. We have always believed in the fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith,” Binny Bansal, co-founder of Flipkart said.

“This acquisition is a continuation of the group’s journey to transform commerce in India. I am happy that 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,” he added.

After this deal, Myntra and Jabong will have a combined base of 15 million monthly active users, and an assortment of global brands exclusive to both the platforms. That seems to work in the deal’s favor.

“Good move by Flipkart. They have taken down a potentially strong competitor. A major part of why Jabong wasn’t doing well was because Rocket Internet had issues with governance”, Arvind Singhal, Chairman and Managing Director of Technopak said.

The move is a part of Rocket Internet's strategy to exit its India portfolio companies. The German Internet firm had earlier sold iff its online home furniture store FabFurnish to Future Group, which also owns HomeTown.

“When you buy off a loss-making company, you don’t have to deal with inflated valuations. You are paying a lower price. People usually do it to expand their consumer base.” Sandeep Ladda, Partner and National Leader of Technology and eCommerce at PwC India said.

India’s startups have seen a slew of acquisitions in the last few months. CaratLane was acquired by Titan and BlueStone is now being funded by other investors. What more, Jabong was valued at over $500 million just 3 years back, and was looking to raise money at $250 million last year. In comparison, $70 million seems like a deal.

Singhal couldn’t agree more. “Flipkart will have to rise beyond mobile and consumer electronics if it has to be profitable. Fashion is a promising category. We might see more such acquisitions. This isn’t the first one, and it sure won’t be the last.”

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