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. The deal is crucial for Flipkart because the fashion and lifestyle category is set to overtake electronics by 2020, according to a Google and AT Kearney forecast.
In a statement, Romain Voog, CEO of GFG, which owns Jabong, said, “Through the sale of Jabong, we are achieving a milestone in our strategy to refocus and invest in our core markets that show not only both significant growth and revenue potential but also a clear and predictable path to profitability.”
GFG had over the past 12-18 months reviewed multiple bidders including Snapdeal, Amazon, Future Group and Aditya Birla group. The transaction is expected to close during the third quarter.
Ananth Narayanan, CEO of Myntra, told BusinessLine that the acquisition’s aim was to achieve scale and growth. “Jabong’s loyal customer base of four million monthly active users combined with our 11 million customers and a combination of some of the most iconic brands that will be exclusive to both platforms — including Dorothy Perkins, Topshop, Tom Tailor, G Star Raw, Bugatti Shoes, etc — will set us on the path to becoming India’s largest fashion platform.”
He said the deal would allow the trio to lead the online fashion and lifestyle segment, which is set to contribute $40 billion of the $110 billion e-commerce industry by 2020. Jabong will continue to function independently and its CEO will report to Narayanan.
The acquisition is significant for Flipkart, said Rajeev Banduni, CEO of GrowthEnabler, a London-based online advisory services firm. “From taking Amazon head-on, Flipkart has wisely decided to adopt a flanking strategy by roping in smaller players and building up its base. With Amazon on one side and Alibaba-backed Snapdeal and Paytm on the other, this is just the beginning of a long battle for Flipkart,” he said.
This is a typical example of a company acquiring another for synergies in areas like access to a large customer base, increased territorial reach, new set of products/brands, new logistics networks and a great team, said Sandeep Ladda, E-commerce Sector Practice Head at PwC India.