Flipkart and Jabong will move to fashion site for profitability

Posted on: Jul-2016 | Others

Giant flipkart in E-commerce is facing some challenges from Amazon in the middle of market from last 6-12 months. The company is moving fast to long term profitability after; its online fashion brand Myntra announced its takeover with its competitor Jonong in $70 million deal on Tuesday.

With this takeover Myntra will be earn giant profit at the end of year. Joint fashion portal would together offer customers portfolio of fashion and lifestyle products during the festive season starting this September, according to a Business Standard report.
Flipkart does not affect by the major competition in the fashion and apparel segment. It possesses a market share of over 50 percent in this segment and it will put benefit of acquisition of Myntra and now Jabong.

Vinay Joy, associate partner at legal firm Khaitan & Co said deal is all about teamwork when Amezon is trying to grow strong in fashion vertical and entering new categories, ABS reported

Merger is an important deal when Amazon already announced fresh investment of $3 billion for its India operations.

BS reported, Flipkart manage to beat several competitor like Future Group and close rival Snapdeal, Aditya Birla Group-run fashion portal Abof Group, which was not set to pay over $50 million for Jabong.

Jobong has looses of euro 56 million i.e Rs 415 crore on the reenue of euro 126 million i.e Rs 933 crore for the year ending 31 March, bringing down its profit form peak of around $1.2 billion to a trivial $70 million, when it was sold on Tuesday.
According to analyst said deal may support to Flipkart’s overall valuation if it gives similar value to Jabong like Myntra, Mint report said.

The fashion and apparel segment enjoys the highest gross margin globally e-commerce business segments, however Jabong being valued at only around 0.5 times revenue for the year till March 2016.

Jobong is focuses on profitability by facing loss at gross margin level from 19.7 percent of net revenue to falling 5.4 percent in 2015.

According to report said quoting analysts with Kotak Institutional Equities, “we believe that this acquisition is due to lack of capital, leading companies to focus on cash generation. Other companies also evaluating other option of capital generation like advertising and online content to influence their platform.”