So, finally Flipkart has bought Myntra, exposing an open secret and sending a not-so-subtle message—to rival Amazon. Despite loud protestations, it is quite clear that the investors, three of whom own shares in both companies, played a big role in seeing this deal through. Bringing together India’s largest online retailer and the country’s hippest fashion portal makes financial sense for the investors, and also strategic sense. The hard part is going to begin now. Instead of Flipkart and Myntra burning more cash to battle each other and the rest of the lot in the crowded online retail industry, investors now have the comfort of knowing their money will be used to fight the real challenger—Amazon—whose founder Jeff Bezos views India as a key market where he is willing to commit considerable sums of money from his considerably large war chest. Myntra, which informed observers estimate has been valued at around $370 million, is a strategic fit for Flipkart. As fashion becomes the premier battleground for online portals in India, Myntra with its higher margins from branded apparel, will help bolster Flipkart’s defences. With a product mix dominated by electronics, books and low-cost apparel, the seven year-old company founded by IIT-Delhi graduates Sachin Bansal and Binny Bansal has demonstrated that it is willing to think different and think big. Even as talks with Myntra’s Mukesh Bansal started and stalled in recent months, Flipkart has been busy. Inhouse logistics arm eKart now delivers products sold by rivals, while payment gateway PayZippy is being nurtured as a separate business, the first of several technology products the company says it will build. But these are just good beginnings. So far, Flipkart’s Bansals, who hope to sell eve- rything apart from cars and groceries, have wooed customers with steep discounts that have coloured their books red. To grow faster, they need higher margins that are delivered mostly by products designed in-house.
Myntra will help with its portfolio of private label apparel that enjoy margins of up to 60%, but Flipkart needs more such arrows in its quiver. Private label electronics—as Kindle has done for Amazon—can boost notoriously low margins in the segment. They can also do well by scouting for ideas and products in India’s technology startup space that is throwing up innovations ranging from wearable devices to technology that can automate warehouses and help customers get a feel of the clothes displayed on their portal.
More boldness has to be the calling card for the Bansals, who claim to draw inspiration from Jack Ma’s Alibaba, as they take on Bezos’s challenge on their home turf. Investors who have sunk money into this battle and are banking on Sachin Bansal’s famed “cool temperament” to see them through, will need to ensure he has enough motivation to invest skin in the game. Bezos owns nearly 18% of Amazon, while Ma’s 8.9% in Alibaba is set to deliver a fortune to the Chinese entrepreneur who has built an empire that spans the gamut from a wholesale portal to an investment platform for online shoppers.
Flipkart’s Bansals are estimated to together own about a fifth of their company that is now valued at about $ 2.5 billion. With Myntra in the fold, surely they have much to do battle for.