Flipkart’s acquisition of Jabong signals a major consolidation that might be brewing up in the online fashion retail space.
E-commerce industry experts are of the view that there are way too many players in the online fashion segment, and that the market will see at least 2-3 small acquisitions in the fashion space in the next 18 months.
There are over a dozen online players, such as Voonik, Roposo, American Swan, Craftsvilla, Hopscotch, in the fashion category.
The entry of offline retailers — such as Aditya Birla, Tata Group, Reliance Group, Landmark and Arvind Retail — with their respective online stores and omni-channel strategy has further intensified competition.
Sanjay Mehta, a serial investor, said: “It’s consolidation time for e-commerce players. Value creation of start-ups lies with founders, which is very clearly seen with Jabong’s downfall. Flipkart can access its user base and data trends and up sell the products.”
According to management consulting firm Technopak, the current size of the Indian e-commerce market is $14 billion, of which 40 per cent is electronics and 30 per cent is fashion. While electronics does not fetch good margins, fashion and apparel tend to have margins as high as 80 per cent.
Maintaining leadership Sandy Shen, Research Director at research and advisory firm Gartner said: “Fashion — especially women’s fashion — is a top category on e-commerce platforms in terms of transaction volume and growth. It is also one of the most competitive category due to the presence of numerous brands and manufacturers.
“Flipkart’s acquisition fashion platforms is a move to not only further penetrate the red-hot category, but also maintain its leadership position in the market and keep Amazon at bay.
“We expect major players to keep acquiring niche and smaller players to expand into more product categories, demographics and geographies, and add new functionalities to their offerings.”
Anil Kumar, founder, RedSeer Consulting firm said: “Mergers and acquisitions are a part and parcel of this money-spinning industry, and the signs are omnipotent for many more of these to follow. The call, at this point of time, is for the not-so-good doing businesses to join forces with bigger portals to leverage their synergy. Some of these M&As will also be investor-driven.”
He also added that going forward, Indian e-commerce companies will shift their focus from pushing GMV (gross merchandise volume) numbers to generating higher revenues; delivering better customer satisfaction; and pushing the pedal on higher margin businesses (such as fashion, services).
The immediate effect of this is the slowing down of the GMV growth in market, but in the long term, growth will return along with discounts and customer-centric strategies.