How Jabong ran out of steam

In 2012, when Jabong was born, there were many fashion e-tailers – Zovi, Yebhi, Yepme and Myntra. By 2013, it had beaten all but Myntra.

Its gross merchandise value, industry jargon for value of goods sold excluding discounts, was nearly $150 million, just half of Flipkart’s. It raised $100 million in 2014, mostly from Germany’s Rocket Internet.

That was perhaps the last bit of good news. Jabong, founded by Praveen Sinha, Arun Chandra Mohan and Lakshmi Potluri, started faltering. One reason was Amazon and Flipkart.

The market had shifted to high burn and huge discounts, funded by venture capital funds. Flipkart raised $1 billion in 2014, and Amazon’s Jeff Bezos announced $2 billion funds for the Indian subsidiary. Snapdeal raised $1,127 million in under a year.

A former senior Jabong executive said, “Larg players starting putting in a lot of money, and started focusing on the fashion business… The market changed in that direction.” But Jabong could not grab a slice of the pie. The founders and investors fell out, and the former exited.

An ex-Jabong executive said the investors and founders had “divergent views on path to profitability.” Global Fashion Group (GFG), a Rocket Internet subsidiary that owns fashion e-tailers in emerging markets, refused to keep cash flowing.

Instead it focussed on adding international brands as a part of a global strategy. “But India is not like other emerging countries – its requirements are different,” said the first executive.

The market was consolidating. Zovi and Yebhi shut shop. Myntra was bought by Flipkart for $340 million, and Jabong searched for buyers.

But at valuation of $500 million, no one was ready to pay. By mid-2015, Jabong had become a millstone around GFG’s neck. In March it got $20 million that helped it stay afloat till a benevolent Myntra snapped it up, with Flipkart’s backing.

ROCKET GROUP FOCUSSED ON ADDING INTERNATIONAL BRANDS TO THE JABONG PORTFOLIO. THIS DID NOT WORK