Flipkart owned Myntra, an online fashion retailer which bought Jabong for $70 Million (approx. Rs. 470 crore) aims to create India’s biggest online fashion retailing business with this acquisition. This is Flipkart’s second acquisition to strengthen its fashion retail arm after acquiring Myntra in 2014.
Here are 5 things you need to know about the acquisition:
1. Market Share
Everyone wants the largest chunk of the pie
Myntra and parent Flipkart together held 60 per cent share of the online fashion and lifestyle market in the country. With the acquisition of Jabong, the trio will together command a whopping 75 per cent. For Flipkart’s Myntra, this acquisition will help establish its dominance in the fashion space.
Don’t be surprised if you start to get heavy discounts on your next online shopping trip.
Ananth Narayanan, CEO Myntra
2. An All Cash Deal
It’s all about the money!
The decision to sell Jabong to Myntra was based on preference to receive cash. Flipkart beat other Jabong suitors such as Snapdeal and Aditya Birla Group because they paid cash for the acquisition, according to a statement by Global Fashion Group (GFG), which owns Jabong.
3. The Amazon Battle
Sometimes coincidences are planned
Flipkart-Myntra acquisition of Jabong comes at a time when Amazon is strengthening its ground in the Indian market.
We all saw how Myntra’s announcement also coincided with the launch of Amazon Prime in India. It will be interesting to see what Amazon has to offer, as Flipkart already has a Prime like service available in the form of Flipkart First which provides free shipping and other benefits.
4. The Benefits
Lesser e-commerce price wars maybe!
For Myntra, buying a direct competitor would mean lower customer acquisition costs. We can’t ignore India e-commerce giants and their price wars to acquire customers through sales and discounts.
5. The “Discount” Deal
I’m sold…. But can I get a discount?
Myntra is said to have got a “discounted” deal by industry analysts, paying just $70 mn for Jabong, which was valued at as much as $508 mn not too long ago (in December 2013). With large investments by Amazon, Flipkart and Snapdeal in the last few years, Jabong’s continuous loss of market share, severe funding issues and weak management have all brought down the company’s valuation.
When do you think this E-commerce bubble is going to burst?