Three years on, Myntra’s gamble on ‘outside leadership’ pays off

CEO Ananth Narayanan has grown the fashion retailer’s GMV eight times in three years

When talks began to let Mukesh Bansal take up a bigger role in Flipkart, the company that had acquired his online fashion firm Myntra for around $300 million in 2014, a call was made to look outside the two firms for a new CEO.

It was a bold move because very few of India’s successful Internet companies back then had leaders who were not founders as it was believed few outsiders really understood the business.

The outsider that landed the job in July 2015 and who assumed office in October that year was Ananth Narayanan, a veteran analyst from McKinsey, who had no experience in fashion or selling products online. Narayanan was the first so-called ‘professional CEO’ to take over one of the top e-commerce players in India back then. To make things more interesting, Mukesh Bansal, in his true style, stepped down from running Myntra, on a daily basis almost immediately after Narayanan’s appointment.

Three years on, and the gamble seems to have paid off.

After a few frantic early days when Narayanan grappled with the steep learning curve of figuring out the e-commerce business, he has largely steered Myntra forward. In fact, today Myntra stands out as an oddity of sorts in India’s e-commerce landscape with its focus on driving sustainable growth, something that ensured its survival when parent Flipkart was going through a rough phase in 2016. “When I joined Myntra, I was much more comfortable with long-term strategy, given my background. But I quickly realised that without day-to-day execution and knowing the details, it was very hard to move any business metric,” said Narayanan, in an interaction with Business Standard. “The nature of e-commerce is itself very execution-oriented, so I swung the pendulum and made sure I spent time on it.”

Under Narayanan’s leadership, the annual gross merchandise value (GMV) of products sold by Myntra has grown nearly eight times, from around $275 million in 2015 to an estimate of $2.2 billion. While massive growth is common among India’s fast-growing Internet companies, Narayanan is one among the few who managed to do this while continually cutting losses as a percentage of the company’s growing revenues.

Narayanan says he’s got Myntra to this stage not just by figuring out how to execute on a day-to-day basis, but also by investing in big bets early on. Today, the company continues to grow at a CAGR of 50 per cent because of bets taken on growing private labels, building a differentiated offering and a specialised supply chain for fashion three years ago. Narayanan likens himself to having one eye on a microscope while his other eye peering through a telescope.

From just a handful of private labels, Myntra over the last three years, has developed 14 brands, which drive 25 per cent of the company’s revenues. That number is expected to grow to 30 per cent of the revenue soon and is important because the company’s in-house business is already operating at a 5 per cent EBITDA level. Narayanan knew he couldn’t do everything inhouse. So, he pushed for the next best thing of signing up 140 brands to exclusively sell their products only on Myntra.

“If we hadn’t taken this approach of making long-term strategic bets early, we would have missed opportunities such as acquiring Jabong, or building the AI-powered private labels, or our Rapid platform. Even now, I check my calendar at the end of every month and if I haven’t spent 25 per cent of my time looking at new business opportunities, I correct that in the next month,” adds Narayanan.

But Narayanan is a lucky man. The year 2018 brought with it a surprise that can amplify some of the work he’s been doing. With US retail giant Walmart buying into Flipkart, he’s now looking at the world as a stage for Myntra, even if parent Flipkart says it will solely continue to focus on the Indian market. The investments Narayanan has made in private labels and the struggles he’s had with onboarding international fashion brands are now strengths he can play on.

He wants to take on some of Myntra’s private brands overseas, starting with places that have a large concentration of Indian expats, who recognise the brands. “Maybe, we can place our products within Walmart’s stores,” Narayanan says, adding “it’s a conversation that we’ve already started having.”

The other big advantage of having a parent like Walmart, he says, is in sourcing, where he can take advantage of the US company’s scale to cut better deals with international brands.

“Even if we don’t take Myntra as a business to other places, we can take some of our labels globally. This will happen over three years, and it’s not just our private brands but also things like Rapid (a platform that uses AI to design apparel), which are universally applicable,” Narayanan says. But one of the things Narayanan has missed out on is making Myntra profitable. He says the company is still quite close, but with capital now flowing in from large investors (first Softbank and now Walmart), plans of faster growth are being given more importance. Narayanan’s plan to make Myntra self sustainable came when parent Flipkart wasn’t doing too well itself. But now, that scenario just doesn’t exist anymore.

WHEN I JOINED MYNTRA I WAS MUCH MORE COMFORTABLE WITH LONG-TERM STRATEGY GIVEN MY BACKGROUND, BUT I QUICKLY REALISED THAT WITHOUT DAY-TO-DAY EXECUTION AND KNOWING THE DETAILS IT WAS VERY HARD TO MOVE ANY BUSINESS METRIC

ANANTH NARAYANAN Chief Executive Officer, Myntra