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‘Flipkart, Myntra together can tackle e-commerce competition in India’

LiveMint logoLiveMint 22-05-2014 Mihir Dalal

Bangalore: agreed to buy rival in India’s largest-ever deal in the fast-growing Internet business.

Flipkart’s chief executive officer Sachin Bansal and chief operating officer Binny Bansal, as well as Myntra’s chief executive Mukesh Bansal, none of whom are related, spoke on rationale behind the merger. Edited excerpts:

Why sell to Flipkart? Why not continue independently?

Mukesh Bansal: This merger significantly increases our odds of building what we want to build—India’s largest fashion destination. We want to build a `20,000 crore business by 2020. We want to build very powerful Myntra owned brands. And for this we’ll need at least $150-$200 million in fresh funds.

We could’ve have tried to do this alone. But we have key battles ahead. One is to fight Jabong for the vertical leadership, and all the three horizontal players realized that fashion is going to be the largest category and the highest margins, so everyone is trying to get ahead and take market share from us.

Although we’ve been able to maintain our market leadership, it has put a lot of pressure on cash burn, margins, discount levels, etc.

Between Flipkart and us, we share a large shareholder base. The choice was—we can fight all the four players or we can join hands with the strongest player and collectively fight the two key battles.

One is the dominance of the horizontal marketplace and the other is the dominance of the fashion vertical. As I saw it, it made more and more sense to use money to fight the other players together rather than burn money to fight each other.

I was really convinced that 1+1 can be four. It also secures Myntra’s future in many ways. We will be playing from a position of significant strength now.

What is the rationale for Flipkart?

Sachin Bansal: We want to create a large fashion business at Flipkart. The last two years we have been in the fashion space, we’ve got a lot of learning on how customers shop for fashion and what they are looking for.

Fashion space is going to be a space where multiple strategies will succeed and you can’t have all of them on one portal.

We want to have multiple destinations for customers to shop from.

Because of our old relationship with Mukesh, we found this was a good match in terms of what we want to do in a new portal with what Myntra has been doing.

There’s a large match there and that’s what led to this (merger).

What are goals for the fashion business for Flipkart as whole?

Binny Bansal: The fashion category in India from an e-commerce perspective started just two-and-a-half to three years back. So, it is not a very mature category.

Over the long-term, it will be 35-40% of the overall online retail market. For us, as a group, we think fashion will be over 50% of our transactions over the long-term.

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