Flipkart’s Myntra acquires Jabong for $70 million; the ecommerce fight in India continues
After a lot of speculation over Future Group acquiring Jabong, it is none other than Flipkart’s Myntra unit that has acquired the online fashion retailer. With this acquisition, Flipkart further strengthens its fashion and lifestyle segment in India. Snapdeal and Future Group were earlier said to be the forerunners at acquiring Jabong for obvious reasons.
Global Fusion Group (GFG) that owns Jabong, has revealed that Flipkart Group has acquired the online fashion site for $70 million. This is in line with previous reports that have been hinting at a price far less than what Jabong expected. Instead of the asking price of $200 million, reports suggested that the online site could be sold out for as low as $50 million.
Romain Voog, CEO of GFG, commented: “Over the last 12 months, all of GFG’s operations have significantly improved their customer experience and economics. Through the sale of Jabong, we are achieving a milestone in our strategy to refocus and invest in our core markets that show both, significant growth and revenue potential but also a clear and predictable path to profitability. With a strengthened balance sheet, we are now uniquely positioned to continue investing to deliver unparalleled shopping experience and best in class service to our customers and partner brand-owners across all of our countries”.
According to Ananth Narayanan, CEO, Myntra, “Jabong has built a strong brand that is synonymous with fashion, a loyal customer base and a unique selection with exclusive global brands. The acquisition of Jabong is a natural step in our journey to be India’s largest fashion platform. We see significant synergies between the two companies especially on brand relationships and consumer experience. We look forward to working with the talented Jabong team to shape the future of fashion and lifestyle e-commerce in India.”
Jabong is owned by Global Fasion Group (GFG), which is jointly owned by Rocket Internet and Kinnevik. In fact, back in 2014 it was merged with other online fashion retailers to form GFG. “With net revenues of €126m and Adjusted EBITDA of €(56)m for the 12 months ended March 31, 2016, Jabong represented 13 percent of GFG’s Net Revenue and ca. 22 percent of Adjusted EBITDA loss,” GFG writes.
Jabong has been looking for buyers for sometime now, owing to its sliding valuation, reluctance of investors in pushing in money, and competition from biggies like Myntra and Amazon. Now, Jabong will add over 1500 on-trend international high-street brands with more than 1500 on-trend international high-street brands, sports labels, Indian ethnic and designer labels and over 150,000 styles from over a thousand sellers to Myntra.
Flipkart, one of the unicorns from India, was seen under stress recently as its valuation was pushed below $10 billion. All along, there have been signals of a tough road ahead. Commenting on this acquisition, Binny Bansal, CEO and Co-Founder said, “Fashion and lifestyle is one of the biggest drivers of ecommerce growth in India. We have always believed in the fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith. 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.”
Sandy Shen, Research Director at Gartner said, “Fashion (esp. women’s fashion) is a top category on e-commerce platforms in terms of transaction volume and growth, and also one of the most competitive due to lots of brands and manufacturers. The acquisition of fashion platforms is a move for Flipkart to not only further penetrate into the red-hot category but also maintain its leadership position in the market and keep Amazon at bay. We expect major players to keep acquiring niche and smaller players to expand into more product categories, demographics and geographies, and add new functionalities to their offerings.”
This marks the third acquisition in the past couplf of months, following the high-profile buyouts by Microsoft and Verizon. We saw Microsoft acquire LinkedIn for $26.2 billion and most recent Verizon buy Yahoo for $4.83 billion.