Myntra's Acquisition Of Jabong Proves Fashion To Be The Hot Spot For E-tailers

Flipkart's acquisition of Jabong through its fashion arm Myntra at $70 million is clearly an attempt by the e-tailer to overpower its rival Amazon by further strengthening its fashion category. The deal reinforces that the high-margin fashion category will be the most promising and profitable segment for e-tailers going forward.

"Fashion and lifestyle is one of the biggest drivers of ecommerce growth in India. We have always believed in the fashion and lifestyle segment and Myntra's strong performance has reinforced this faith," Binny Bansal, CEO and co-founder, Flipkart said.

According to a recent Google-AT Kearney report, lifestyle/fashion category will overtake consumer electronics as the largest e-tail category by 2020. Lifestyle is said to contribute 35 per cent of the total e-tail spend whereas the traditionally-strong consumer electronics category is said to contribute just 20 per cent.

The emerging lifestyle category will be driven by the increasing number of women shoppers who will more than double their share of online spend to over 40 per cent by 2020, the report said. The industry will see a 5x plus growth in the number of women shoppers by 2020 as some of the barriers are overcome.

RedSeer Consulting which claims to be the McKinsey of the Indian consumer internet space said that Indian e-commerce companies are shifting their focus from pushing the gross merchandise value (GMV) numbers to generating higher revenues, delivering superior customer satisfaction and finally pushing the pedal on higher margin businesses (like fashion, services, etc.).

"Immediate effect of this is the slowing down of the GMV growth in market, but in long term, the growth will come back with return of discounts and customer centered strategies," said Anil Kumar, founder of RedSeer Consulting.

Fashion (especially women's fashion) is a top category on e-commerce platforms in terms of transaction volume and growth, and also one of the most competitive due to lots of brands and manufacturers, says Sandy Shen, Research Director at Gartner.

Flipkart's acquisition of fashion platform Jabong is a move to not only further penetrate into the "red-hot" fashion category but also maintain its leadership position in the market and keep Amazon at bay. "We expect major players to keep acquiring niche and smaller players to expand into more product categories, demographics and geographies, and add new functionalities to their offerings," adds Shen.

Myntra has partnered with over 2,000 leading fashion and lifestyle brands in the country such as Nike, Adidas, Puma, Levis, Wrangler, Diesel, Harley Davidson, Ferrari, US Polo, FabIndia, Biba and others to offer consumers with the latest in branded fashion and lifestyle wear.

The Myntra Jabong deal may not have been priced very highly in terms of monetary value but it gives Flipkart access to Jabong's functional infrastructure and large customer base which Flipkart can leverage, says Kumar of RedSeer.

The 'fashionable' acquisition undoubtedly gives Flipkart an opportunity to pose stiff competition to rival Amazon, at least in the piping-hot fashion category. If executed well, this could indeed be a game changing strategy.