E-market players Flipkart and Myntra grabbed the headlines by venturing into a long talked about acquisition that market estimates to be around USD300 billion. E-tailer Flipkart confirmed acquisition of leading Indian fashion e-retailer Myntra.com on Thursday.
While Flipkart has just two years of experience in fashion e-retailing, Myntra is a household name, offering clothes, accessories and cosmetics from mid-range to high end ones since 2007. Myntra has over time habituated the Indian online shoppers to brands such as Vero Moda, Hidesign, Puma, Nike and Beverly Hills Polo Club.
Flipkart endorses domestic brands such as W, And and Biba. Together the firms would be able to bring to customers nearly 100 Indian and international brands. Though it is equally large in terms of its fashion inventory, Flipkart primarily focuses on electronics, which yield a good share of its current revenue.
Flipkart co-founder Sachin Bansal was quick to identify that in terms of transaction volume, no other segment can rival fashion and Myntra had just the right thing to offer to Flipkart. Despite acquisition by Flipkart, Myntra would continue to operate as an independent portal. Myntra and Flipkart together account for about 50 percent of the online fashion market which on the whole is estimated to be worth over USD30 billion.
Why the acquisition?
One of the commonplace theories circulating about the reason for the acquisition is that Flipkart and Myntra wanted to consolidate the business to face the competition posed by foreign player Amazon. But Flipkart's closest rival is Snapdeal, a domestic e-retailer and Amazon which entered the market just a year ago poses very little immediate threat to the established e-tailer.
The acquisition however is justified by a lesser known reason. Myntra has invested significantly into offline and online marketing and search engine optimization. The online trading portal of the e-retailer features in first 15 of the top ranked sites by Alexa. But Myntra caters only to consumers in metros and leading cities and not to others and in the long run, the demand obviously would arise from second-tier cities with limited brand availability at physical market places. The acquisition would enable Myntra to gain from the wide reach of Flipkart.
The major reason behind Flipkart's acquisition is to benefit from the personalized marketing strategy adopted by Myntra. Mukesh Bansal, CEO of Myntra and an IIT alumnus imported the concept to India in 2007 after a 10 year stint in Silicon Valley. Myntra tracks customer preference and offers them a more cost-friendly deal by tracking their online shopping carts. Myntra is sure to get back to customers with a cheaper deal if they are found to abandon the shopping cart amidst purchase. It also promotes first time shoppers by providing exclusive personalized deals and discounts.
Besides this, the e-tailer is also roping in brands such as Nike to personalize their products. Myntra has over 4000 designers at shoppers’ service ready to supply the best of personalized fashion solutions. Despite its limited reach Myntra has managed to churn in the revenues by focusing on institutional buyers. Institutional buyers account for nearly 50 percent of Myntra’s sales, especially during festival seasons when they place orders for personal gifts to top tier employees.
Flipkart cannot find a better ‘better half’ than Myntra to boost its fashion segment. Another long shot for the two e-tailers would be target harnessing the potential of sportswear market that is estimated to be nearly 2500 crores.