Indian Online Retail (E-Tail) Industry

The online retail space formed about 0.55% of the overall Indian retail industry about Rs. 25.3 billion including organized and unorganized retail. The online retail industry constituted about 7.9% of the organized retail industry in India.

Indian e-tail industry followed an Inventory-based model or a Non-Inventory-based model also known as the MARKETPLACE MODEL.

In August 2014, industry which followed the inventory-based model were:

• Jabong.com
• Myntra.com 
•  Firstcry.com
• zovi.com

Industry that followed the non-inventory-based model were:

• Flipkart.com
• Snapdeal.com
• ebay.in
• Amazon.in

Industry experts felt the Flipkart and Myntra deal could start a phase of consolidation in the Indian online retail space which was about Rs. 139 billion (about US$2.32 billion) in 2012-13. In 2014 Flipkart made most awaited announcement of the Indian e-commerce industry – the acquisition of Myntra, leading e-tailer in the fashion and lifestyle segment where Flipkart was lagging. 

Flipkart: Leading E-tailer In India

Flipkart.com (Flipkart) referred as ‘Amazon of India’ was started by two ex-Amazon  employees Sachin Bansal and Binny Bansal in October 2007 with an investment  of Rs. 0.4 million. The company started as an online book seller with 50,000 book titles and got its first order  about four months after launch. Two years later in December 2009, it became the largest store for books in India. Once it picked up momentum, Flipkart started offering various products under different categories.  In 2010, it started selling DVDs,VCDs, mobile phones etc. In March 2011, the company was doing business with a Gross Merchandise Value (GMV) of  around US$10 million.    Then it added more categories as cameras, laptops, home appliances, e-learning,healthcare and  personal products, and clothing.

Myntra: Leader In Fashion E-Tail

Myntra.com (Myntra) was founded by Mukesh Bansal and Ashutosh Lawania in February 2007 in a three-bedroom flat in Bengaluru, Southern India. Vinneet Saxena (Saxena) and Raveen Sastry (Sastry) also joined the company as founders the same year. All four founders invested Rs. 5 million.

•  Initially, Myntra was as an on-demand online personalization platform for products and gifts where the customer could personalize products such as mugs, T-shirts, calendars, key-chains, diaries, etc.

• In October 2007, Myntra got an undisclosed amount of first funding from Accel Partners (Accel) and Sasha Mirchandani .

• By February 2014, funds generated by Myntra was U$115 million plus in six rounds of funding.

• In November 2012, Myntra acquired Exclusively.in Inc and its brand Sher Singh (www.shersingh.com) in exchange for cash and equity.

The Deal

•  Initially, the offer was to merge Myntra with Flipkart. 
• Later, Flipkart changed the offer and agreed to run both companies (Flipkart and Myntra) independently. 

Synergies

Myntra was in the high margin fashion segment and was the leader in this category. Flipkart wanted to establish itself in this segment ever since it had launched men’s clothing in October 2012.

• Vijay Kumar Ivaturi member of Indian Angel Network  said,

 “Flipkart wants to be a horizontal, multi-category, and scale player. It seems like a good strategy to acquire a category (fashion) player for scale and depth.”

• The deal helped Myntra gain access to Flipkart's logistics network and it was able to deliver its products to more than 9,000 PIN codes and cover more than 100.

• In July 2014, both websites (Flipkart and Myntra) had 26 million unique visitors followed by Jabong and Amazon with 23.5 million and 16.9 million unique visitors respectively.

Road Ahead

After the deal, Flipkart and Myntra had a total 50% share in the Indian online fashion segment.

October 6, 2014, Flipkart make Rs 600 crore as a result of its “Big Billion Sale”. The 24 hour
 sale was sold out in 10 hours even as the website gave out and orders got cancelled.