At long last, Flipkart has performed the sacrificial rites of Jabong, with sights set on the much-awaited IPO.
The burial of Myntra’s strapped cousin comes three months on the back of Walmart announcing it had taken non-cash impairment charges of $293 million for the value of the Jabong trade name in the third quarter.
The shut-shop is in line with Walmart’s Executive Vice President and CFO Brett Biggs, who had claimed only last year that the firm had decided to consolidate back-office functions for Myntra and Jabong to up efficiencies.
As it turns out, in a video message featuring Flipkart CEO Kalyan Krishnamurthy and boss Doug Mcmillon, underlining their priorities, Walmart has decided to channelize its laser-like focus on areas like grocery and fashion as well as making investments in technology and infrastructure.
With a desire to “step on the gas” in India, the move could portend the e-commerce giant moving towards a possible $10 billion IPO. Jettisoning a nearly $300 million write-off in one of its units could help propel its valuation if plans of the IPO follow through.
For the Jabong brand, the writing has been pretty much on the wall ever since Walmart acquired Flipkart in November 2018. Soon after, Flipkart went on to merge Myntra and Jabong, which had no adverse effect on their market share.
Jabong.com was a fashion e-commerce entity that Flipkart had acquired through Myntra in 2016 for $70 million in cash, before the eventual absorption.
For some time now, Jabong continued to fade out as its compatriot Myntra gained in prominence.
Seeing an approximately 13% drop in app downloads for the brand in December 2019, it continued its downward spiral while Myntra’s app downloads rose sharply by 40%. Looking at the stark overlap in fashion demand trends, customer base, and marketing investments, funneling out energies in favour of a single premium fashion-focused platform looks like a logical move in hindsight.
Having been added to the arsenal to take on the muscle of Amazon and other rivals in India, Jabong, founded in 2012, had over 1,500 brands, sports labels, Indian ethnic and designer labels, and an excess of 1.5 lakh styles in its kitty, as per Myntra’s acquisition statement in 2016.
Presently, Myntra hosts over 3,000 brands on the platform, boasting close to 22 MAUs.
Looking at the events that have transpired, such restructurings are impending signs that a company is intent on going public, and the Arkansas-based giant aims to put the best foot forward to make the IPO more attractive.
The blockbuster US IPO could well occur this very year, with the listing expected to fetch Flipkart a valuation of $40 billion after the culling of Jabong. Walmart would possibly have to divest a 25% stake for it though, according to some analysts.
Now, as Walmart-owned Flipkart plans to make the fashion and clothing sector its cynosure, it sure has made the moves to justify it. Recent investments in the leading Aditya Birla Fashion and Retail Limited, Arvind Fashions, and USPL can all attest to that.
According to McKinsey’s FashionScope data, the Indian clothing market will be worth $59.3 billion by 2022, making it the sixth-largest marketplace worldwide. Seeing this vast untapped land, even in the presence of formidable foes, Flipkart’s pedal on the metal is sure to shake up things in the sector.
Stay tuned for more updates.