Everything you wanted to know about the Flipkart-Myntra deal

Indian e-commerce market is pegged at over $2.5 billion currently and is expected to grow to a whopping $20 billion market in the next five years. Fashion is going to dominate this market and there is enough space and scope for both Myntra and Flipkart to grow in this industry. So why not do that and stay independent? What’s next for Mukesh Bansal?

While the fact-file of the deal is very clear regarding the employees, the entities and the market share; it leaves room for many more questions.

What exactly triggered this deal and compelled Mukesh Bansal to say yes to this acquisition? Was it Amazon’s steep growth in Indian market or the common investors in both the companies (Tiger Global and Accel Partners)? What is the deal structure and how much is Myntra acquired for?

 Did you read between the lines of Flipkart and Myntra deal? Entrepreneurs don’t miss this

The trio of Sachin-Mukesh-Binny Bansal at the Flipkart-Myntra deal announcement

The trio of Sachin-Mukesh-Binny Bansal at the Flipkart-Myntra deal announcement

We at YourStory asked these fundamental questions so that you have the answers to all your questions about this acquisition. Here’s what Sachin Bansal, Binny Bansal and Mukesh Bansal had to say about the biggest acquisition in the Indian e-commerce industry:

 Why did Flipkart acquire Myntra, and why now? 

Sachin Bansal, Co-founder and CEO of Flipkart, said, “We should be growing in every category, and fashion is definitely the category of the future. Myntra is not only the leader in this category but it also has good rapport with lifestyle brands. We have known Mukesh since 2007 and we learnt our first supply-chain lessons from Myntra. We have a lot of respect for each other, and we eventually found a common ground. We have been exploring multiple ways to strengthen our presence in the fashion domain and this acquisition seemed the best way to do that.”

He further added, “Myntra has a strong team and excellent domain knowledge. There’s much to learn from them.”

Why did Myntra get acquired by Flipkart?

Mukesh Bansal, Founder of Myntra, said,

We started with personalization of merchandise and then pivoted to fashion. In the last seven years, we have taken the online fashion retail to a different level.  We are not only the leaders in this segment, but have built a very unique differentiation. We are among the top sites in terms of online traffic, and are focused a lot on building deep relations with the brand we work with. We have even made some brands household names. Overall, we have enjoyed this ride and wanted to take fashion to an altogether different level. In the last few months, we’ve had a number of meetings to see how we can do this together. We wanted to exploit our mutual synergies (like the technology at Flipkart and market leadership of Myntra) in order to accelerate our growth.

What is the structure of the deal?

Both Mukesh and Sachin declined to share the details of the deal structure. But Sachin clearly mentioned that it was 100% acquisition and Mukesh expressed his satisfaction over the fair valuation of Myntra. Given the fact that Myntra is already valued at over $300 million, the actual number probably is in that range.  Mukesh will be joining the Flipkart board and will head their fashion business.

Sachin said, “What happens to the backend will be collectively decided at the board meetings, but we do not intend to merge the two entities for consumers (and they continue to see it as separate websites). Mukesh added, “As we are betting big on fashion, almost $100 million is going to be invested in this domain (at Flipkart) to begin with.”

Since the investors of both the companies are the same (Tiger Global and Accel Partners), there is no exit taking place and they continue to hold their stake.

Okay, so are we going to see a single online fashion website instead of two different ones?

Mukesh Bansal said, “Fashion industry is so diversified that it cannot be constrained in one portal. There’s enough scope for multiple players to sustain and grow. Hence, both Flipkart fashion business and Myntra will keep on operating as separate entities (and different websites/portals).” He also accepted that it was inevitable that the market will shrink to only a few players eventually, but that there was always place for innovation from newer e-commerce startups.
He added,

Flipkart is known for offering the best price and best selection for all the products, including fashion, whereas Myntra has expertise in providing the best value proposition in the fashion segment. There is scope for selling both ways. It is still not a very mature category and from the long-term perspective, one has to understand that it can be sold in multiple ways. This deal enables fashion and technology to come closer and contribute to the growth of the former.

He also quoted the example of Walmart and Target for reference.

Future of Flipkart fashion buiness

Binny Bansal, Co-founder of Flipkart said, “We see fashion becoming our largest segment in the future and account for over 30% share in our revenues. Mukesh has built a team with a different DNA as compared to Flipkart. We both are customer focused and together we can build a huge business because of our complimentary nature. We want to preserve and grow the culture at Flipkart and this deal will enable that.”

Mukesh said, “I’m excited about my new role and want to make sure that we use our energies in right way.” To which Sachin added, “Together our market share in fashion retail is more than 50% and there is no threat from any international player.”

What will Mukesh Bansal and other Myntra employees do now?
Mukesh said that he is committed for many more years to the online fashion segment and will continue with his current role to fuel more growth here. He said, “We have got a fair valuation and as part of the deal, all the Myntra employees are eligible for universal stock options. They will continue to work towards our goals and we are targeting $3 billion in GMV alone in the coming years. Together as a team, we have had a great journey which will last for many decades and reshape our fashion and retail industries as well.”

Myntra is looking forward to seeing many more innovative fashion brands coming and establishing in the current market.

Flipkart wants to go the Alibaba way and not the Amazon way!

In 2008, Sachin Bansal had said that they wanted to become the Amazon of India, but six years down the line it’s not true anymore. He said, “In 2008, Amazon was a dominant player and a role model for most of the people starting in e-commerce. But over time, I’ve realized that India is different, and Alibaba group’s model is better suited for the Indian market. This is because the customers’ income level and behavior/exposure towards e-commerce is similar in both the countries. We can learn a lot from the Chinese e-commerce market.”
Sachin has visited China multiple times and knows many entrepreneurs there. Sharing his experiences, he said, “We do not have any understanding of the startup ecosystem in China. It’s bigger than what happened in the US in terms of innovation and scale.”

Flipkart for IPO?

Sachin Bansal couldn’t dodge the much awaited question about the IPO. He said,

We’ll find our own path in India (like Amazon in the US and Alibaba in China). We want to be a public company someday but it’s not on top of the mind. Right now, we want to build the right business and become market leaders across categories.

Similarly, he emphasized that profitability is also not the top priority as they are more focused on grabbing a larger market share first.

 

What do you think about this deal? Do comment below and let us know!

 


Alok Soni

Alok Soni

Alok Soni prefers to keep his bio short owing to a dearth of creativity. Feel free to reach out to him at alok[at]yourstory[dot]com