The suddenness of Jabong acquisition followed by gloating tweets and letters of Flipkart founders Sachin and Binny Bansal was enough to make everyone sit and exclaim, ‘What a masterstroke by Flipkart!’
But as we see the initial excitement settling down, the scrutinization has started to find out if it indeed was a major coup or the opposite.
Flipkart has gained a massive lead by buying fashion etailer Jabong. With 70% of online fashion market in its control, online marketplaces Amazon, Snapdeal and niche fashion players are set to lose a major portion of their market share.
Things would have been different if Jabong was acquired by Snapdeal. Flipkart-Myntra would have had to fight with Snapdeal-Jabong, Amazon Fashion, retail giants’ online portals and other small fashion etailers. But the Bansals have prevented that from happening.
If the etailer succeeds in integrating Jabong, Myntra and the fashion vertical on its marketplace platform, then it would be easy for Flipkart to dominate the online fashion industry.
Add to this, the ongoing legal battle about corporate governance violations by Jabong’s former top managers. In fact, Snapdeal’s CEO Kunal Bahl said that their negotiation with Jabong failed because it wasn’t a ‘clean target.’ Bahl said,
“We have a high bar when it comes to governance, regulations, and compliance. Unless a company can clear that bar, we have issue.”
While the love triangle with a jilted lover – Flipkart, Jabong and Snapdeal, caught everyone’s attention, Amazon launched its Prime service around the same time.
In the last few days, the US-based marketplace has announced a range of services, updates and initiatives such as 2-Hour hyper-local delivery service, expansion plans for Global Seller programme, Amazon Pantry and largest fulfilment centre in Haryana. Amazon has been slowly and steadily working towards building a loyal customer and seller base.
Industry experts feel that Jabong could be a distraction for Flipkart. If the driving force behind the decision to acquire the fashion portal was just to buy out a competitor and spoil another competitor’s game plan, then Flipkart succeeded in doing it. But in the bargain, are they at the risk of losing focus and inheriting liabilities?