Tracing the Flipkart-Myntra merger
Flipkart India Pvt. Ltd. which has established itself as India’s largest e-commerce firm has acquired its rival Myntra.com, another growing online firm which specializes in fashion and lifestyle products, in one of the biggest deals in the history of online business.
[caption id=”” align=”aligncenter” width=”500"]
From left to right: Sachin Bansal (Flipkart), Mukesh Bansal (Myntra) and Binny Bansal (Flipkart)[/caption]
With globalization at its peak and technology igniting the lamp in the deepest corners of our lives, who doesn’t like to enjoy the comfort of shopping sitting on the couch in one’s living room? Easy transaction with a variety of goods to choose from makes e-retailing an always demanded venture in the world full of hustle and bustle. This inspired Sachin Bansal and Binny Bansal who formerly were colleagues at IIT Delhi as well as Amazon, to bring forth the genesis of Flipkart. An initial investment of $8000 has transformed into a $100 million e-retailing favourite. Its current user base is estimated to be more than a 100 million. Now coming to the other partner of the deal, Myntra.com is an Indian online shopping retailer founded by Mukesh Bansal, Ashutosh Lawania, and Vineet Saxena, all three being IIT alumni, in 2007. It offers about 50000 products from more than 600 Indian and international brands. It won IAMAI’s Best e-commerce website of the year award for 2012 at the 7th Indian Digital Summit, 2013.
Recently, the Bansal duo of the Flipkart scripted the biggest consolidation in the Indian e-commerce market by buying its rival and the 3rd largest Indian e-retailer, Myntra.com in a deal worth Rs 1800 crore. The two companies will continue with their separate entities and brands for now, with the same management structure and employee base as claimed by the founders. But on a critical note, what are the underlying reasons behind this merger?
What critics have to say?
As proposed by the founders, it is synergy and efficiency combined to create benchmarks in online shopping. But there’s a bit more to it. Another reason cited for the deal is to outweigh its biggest rival Amazon India and Snapdeal. According to KPMG in just a year, Amazon India has reaped about half the visitors of Flipkart. Also, bearing in mind that FDI retail is around the corner where the government may offer concessions, Amazon and Walmart may just diversify in such a manner that it would become impossible for the traditional retailers to transform the situation from bleak to bright. According to the Economic Times, Flipkart loses Rs 70 crore a month and Myntra is also losing in terms of market share to its growing competitors like Jabong. In such a case, sharing technology, logistics and customers with an aim to increase profit, cut down losses in revenue and increase funding can be a mind-game behind this.
Please note that the views mentioned above are those of a keen observer of Indian market, Mr. Mahesh Murthy, co-founder of the VC firm Seedfund.
Written by:
Priya Kumari
