Fashion e-tailer Myntra has been a coveted trophy for a while now.
Five years ago, it became a prize e-commerce giant Flipkart could show off to its rival Amazon. While Amazon was just starting to ramp up its India operations in 2014, Flipkart was acquiring Myntra, followed by the acquisition of Myntra’s rival Jabong two years later.
Flipkart Leads The Way
Before Amazon could finish saying fashion, Flipkart had consolidated its lead in the fast-growing segment. In a neck-and-neck race of 31.2% market share for Amazon and 31.9% market share for Flipkart, according to research firm Forrester’s data for last year, Myntra-Jabong took Flipkart’s share of the pie up to 38.4%. A bona fide jump.
In fact, Myntra-Jabong contributes nearly 20% of the group’s overall monthly revenues, a value that the world’s largest retailer Walmart did not miss after it bought Flipkart for $16 billion in August last year. Since then, much has changed.
At the time, Flipkart had three units apart from its core group operations, payments provider PhonePe, logistics arm Ekart and fashion e-tailer Myntra, which Jabong is a part of.
While Walmart has been openly enthused about the prospects for PhonePe—an unexpected $10 billion easter egg—it has been relatively quieter on Myntra. Significantly, at the time of the acquisition, Myntra was valued at $6 billion internally, dwarfing PhonePe’s $2 billion valuation.
And Walmart saw an opportunity. After all, it had faced its share of struggles in trying to sell fashion in its home base of North America. When Walmart CEO Doug McMillion visited India earlier this year, a media report said he was “mesmerised” by the way fashion was performing at Myntra and Flipkart.
That Flipkart is a crucial buy for Walmart is well known. In just over a year, the retailer has already left a definitive mark on Flipkart’s operations. For one, fast-growing PhonePe is becoming a veritable leader (The Ken wrote about PhonePe’s position here); Walmart has brought the focus to food retail—it has given Flipkart an equity capital of nearly Rs 2,000 crore just for food and has pushed for cost control at Flipkart’s grocery arm Supermart. (The Ken wrote about Flipkart’s hyperlocal plans here.)
But, in all of this, Myntra’s growth has been slowing. It has missed its internal gross merchandise value (GMV) targets two years in a row, two former executives at the fashion portal said, requesting anonymity. This has seen its GMV growth fall from 56% to 45% in the last two financial years, one of the executives added. Under Walmart, Myntra has seen a shift in goal from profitability to increasing revenue, three former employees at the company said. Myntra and Flipkart did not respond to a detailed questionnaire sent by The Ken.
But that’s far from the only change.
Myntra’s slowdown coincides with management changes at Flipkart and Myntra. In January this year, Myntra CEO Ananth Narayanan, who held the reins for four years, stepped down and was replaced by Amar Nagaram, who had been in-charge of Flipkart’s mobile segment. Over at Flipkart, group CEO Binny Bansal was replaced by Kalyan Krishnamurthy.
But, in perhaps one of the biggest changes to Myntra’s management after the deal, Nagaram now reports to Flipkart Fashion head Rishi Vasudev. He previously reported directly to Krishnamurthy, an industry source said, claiming that the move was one of the reasons Narayanan left the e-tailer. While Myntra has always operated independently from Flipkart, the move brings the two entities closer at the very top. It could signal a loss of autonomy for Myntra.
Walmart, in a bid to utilise Myntra for revenue growth, has the fashion retailer gunning for this new aim at a time when fashion buys have moved past India’s top metros like Chennai, Mumbai and Delhi to smaller towns. This is aided by increasing purchasing capacity and internet penetration. For Myntra, which is marketed as a fashion-conscious alternative to mass-market apparel sold by Amazon and Flipkart, this shift means that it needs to figure out a way to appeal to this tier-2 and -3 segment of customers.
The urban metro market contributes over 20% of sales to the apparel market, which has been Myntra’s forte, but increasing demand from small cities has got attention from big brands, a research note by ratings agency CARE says.