A year ago, Jabong’s founders turned down $700 million plus from Amazon; this week they sold for $70 million to Flipkart’s Myntra.
Indian eCommerce site Flipkart has sealed a shock deal to acquire Jabong, the nation’s third largest online fashion retailer.
The news came just a day after rival bidder Snapdeal presumed it had won the battle.
Flipkart’s success is expected to provide a crucial advantage in its battle to ‘own’ the clothing eCommerce space, giving it an advantage of scale and local knowledge in fighting off US-based Amazon.
Flipkart’s subsidiary Myntra will reportedly pay US$70 million for the troubled Jabong business. That’s a fraction of an offer from Amazon in early 2015 which valued Jabong at between $700 million and $1 billion.
“The acquisition…. holds an important lesson to all investors and entrepreneurs,” observed Harsimran Julka of Tech in Asia. “Exit when you don’t want to sell.”
Jabong is one a growing group of failing Southeast Asian eCommerce websites owned by Germany’s Rocket Internet which has witnessed the value of its businesses shrink dramatically over the last 12 to 18 months. It has sold off Foodpanda, Zalora and Lazada websites in several regional markets in a bid to stem growing losses.
“The acquisition of Jabong is a natural step in our journey to be India’s largest fashion platform,” said Ananth Narayanan, CEO of Myntra. “We see significant synergies between the two companies especially on brand relationships and consumer experience.”
Julka wrote that in buying Jabong, Myntra will acquire one of the best sourcing systems, catalogs, and loyal customer bases, especially amongst women buyers, within India.
“With Myntra’s app-only experiment going kaput last year, the company lost a lot of traction in India.
“The buyout will also give a boost to profitability of Flipkart, as the fashion category is the most profitable of all eCommerce segments, with gross margins as high as 80 per cent.”