What are Myntra’s plans for its “cheap acquisition” Jabong?

Great ambitions.
Great ambitions.
Image: Reuters/Abhishek N. Chinnappa
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India’s online fashion retail industry saw massive consolidation this July when Bengaluru-based Myntra acquired rival Jabong.

After the acquisition, Myntra—along with its owner Flipkart and Jabong—now holds around 70% of the over Rs1,400-crore market.

The deal put Flipkart in a position of strength, allowing it to pull away from rivals Amazon and Snapdeal in the high-margin fashion segment. But the e-commerce major has not yet spelled out what it plans to do with the latest acquisition.

Last week, Quartz spoke to Myntra’s CEO Ananth Narayanan, who now also heads Jabong, to understand why his company bought another online fashion retailer, and what is the way forward for the two companies.

Here’s what he said:

  • No merger: Jabong will continue as an independent brand, Narayanan said. “The customer overlap (between the two companies) is less than 30%,” he said. Jabong is more women-centric and is focussed on international brands, while Myntra is more focused on men. This is the same strategy that India’s largest online retailer Flipkart had adopted after it acquired Myntra in 2014.
  • Cheap deal: Jabong was a “very cheap” purchase for Myntra, Narayanan admitted. The deal cost $70 million (Rs470 crore) for a company that was valued at around $1.2 billion just two years ago. The low value came about after Jabong, once Myntra’s close rival, lost the race due to constant leadership churn and a cash crunch over the past two years. Flipkart had acquired Myntra for an estimated Rs2,000 crore in 2014.
  • Growth and profits: Myntra and Jabong together aspire to capture even more of the Indian online fashion retail market going forward. “It is not a static market. It will get to $40 billion by 2020,” Narayan said. “We have to figure out how to capture most of it.” Myntra is among the very few Indian startups to have publicly shared a road map towards profitability: The company hopes to start making profits by March 2017.