Snapdeal’s legal team is reported to have visited Jabong’s main office in Gurugram and the term sheet is nearly ready, say two sources close to the matter. The online fashion portal reported losses of Rs. 869.1 crore in 2015. Parent company Global Fashion Group has been scoping for a buyer to take Jabong off its hands for almost a year.
Snapdeal jumps onboard while Rocket Internet jumps ship!
Sources say Jabong’s German investor, Rocket Internet, is keen on exiting due to a financial crunch. Jabong has managed to increase its GMV from Rs. 1320.6 crore in 2014 to Rs. 1502.9 crore in 2015. The etailer has also cut down its losses from Rs. 159.5 crore to Rs. 46.7 crore after decreasing discounts. Discount rates have been decreased from 50% to about 20%. The ecommerce company’s CEO, Sanjeev Mohanty said they will be cutting costs even further by:
- Letting go of 400 low margin brads (inclusive of private labels)
- Slowing down on hiring
- Launching 30 – 40 new brands (by year end)
In spite of this Rocket Internet and AB Kinnevik refuse to offer fresh capital to Jabong.
On the other hand Snapdeal may be looking to recreate the success Flipkart has with Myntra. Many companies have shown interest in taking over Jabong like Aditya Birla Group, future group and even Flipkart. But it appears Snapdeal has beaten them all to the punch.
Will acquiring Jabong put Snapdeal back on the ecommerce Map?
It appears that Snapdeal’s profitability is slowly dying. Experts say with the competition at hand only one Indian etailer will survive – Flipkart or Snapdeal.
Flipkart has the attention of online consumers and despite struggles with sellers it appears to be doing pretty well. Snapdeal has take a new approach altogether with ecommerce services. It may be an attempt to increase traffic, given its low GMV and leadership sores as an ecommerce marketplace.
Snapdeal’s CEO says the marketplace is looking at profitability in the next 2 to 3 years. He also says, they are striving to be more customer centric, cut down discounts and reduce seller commissions. It’s not like Flipkart’s is in the winner’s circle. The Flipkart HQ is also facing trouble. Which only makes us wonder which marketplace will parish?