India’s largest e-commerce company Flipkart, through its fashion unit Myntra, will acquire online fashion retailer Jabong from the Global Fashion Group (GFG) for $70 million in cash, a move that follows the trend of consolidation within the online commerce industry.
Apart from Flipkart, local rival Snapdeal and Kishore Biyani-led Future Group were also in the race to acquire Jabong.
GFG, which is an international fashion e-commerce and marketplace group formed through merger of six businesses, said that its board of directors concluded that Jabong’s position in India “would be best served through a business combination with a local player.” “Having reviewed multiple options over a period of several months, the GFG Board has resolved to sell Jabong to Flipkart Group,” GFG said in a statement.
Even as the development is expected to prove beneficial for Jabong considering that the loss-making e-tailer was looking for investment, experts believe the move could also strengthen Flipkart’s leadership position in the market in wake of the increasing competition it faces from Snapdeal as well as Amazon. “Fashion (especially 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,” said Sandy Shen, research director at Gartner. A recent report by RedSeer Consulting suggested that not only does the fashion segment command the highest share in revenues for online marketplaces at 37 per cent but it also earned the e-tailers the highest commission among other categories at 11-15 per cent.
“Fashion and lifestyle is one of the biggest drivers of e-commerce growth in India. We have always believed in fashion and lifestyle segment and Myntra’s strong performance has reinforced this faith,” said Flipkart’s CEO and co-founder Binny Bansal, according to a PTI report. RedSeer Consulting had said in its report that Flipkart controlled around 35-37 per cent market share in the Indian e-retail industry, followed by Snapdeal at 21-23 per cent and Amazon at 17-19 per cent. The report suggested that Snapdeal’s market share was on a down trend, while that of Amazon was increasing. In a dynamic scenario where Flipkart is already being nudged by its rivals, Amazon’s founder and CEO Jeff Bezos had, in June, said that the company would make an additional investment of $3 billion in its India operations to take its investment in the country to over $5 billion.
“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,” Shen said. Acquisition of Jabong is the eighth for the Flipkart Group since 2010, including that of Myntra in 2014 for $300 million.