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The Economic Times - - Power Of Ideas - AR­CHANA RAI

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.

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