Profitability evades most of the Indian ecommerce companies. But Myntra got an opportunity to taste it, courtesy its private label business.
The Flipkart-owned company reported operating profits two months in a row and turned EBITDA (earnings before interest, taxes, depreciation, and amortization) positive in June 2017.
Success of Myntra’s private labels
The fashion etailer’s CEO Ananth Narayanan shared that his company is right on track in terms of year-on-year (YoY) growth, profitability and controlling costs. Their in-house labels like Roadster, Dressberry, Anouk, HRX and few others are doing well. And they would achieve the internal revenue targets set for this year and the next.
The CEO revealed:
- Myntra Fashion Brands registered 100% YoY growth
- Private labels would register a double-digit operating profit margin in the next two years
- Myntra would reach $300 million in revenues by the end of 2017 and profitability by March 2018
- 9 of the 20 top brands sold on Myntra are its private labels
Machine learning, artificial intelligence, wide range of high-quality fashion products, strengthening supply chain and forecasting demand helped the etailer to grow at this pace.
“It’s easy to get to profitability without growth. We’re trying to get to profitability and are continuing to grow and that’s important. We’ve been very rational about controlling costs… The biggest (area of cost optimization) has been supply chain and predicting where inventory needs to be placed, so that the actual package travels less… We’ve also been optimizing overall product selection, so figuring out what the right products are, so that we can get the sell-through rates optimized,” said Narayanan.
Myntra’s B2B seller entity secures Rs 199 crore loan
In July this year, Myntra rechristened its seller entity to become a B2B seller. For this unit, the fashion etailer has raised funds through loan. It secured Rs. 199 crore ($3.1 million) debt funding from Yes Bank by keeping its assets as collateral. Assets include Myntra’s consumable stores, raw material stocks, semi-finished & finished goods and receivables.
Debt financing is one of the expensive ways of raising funds and is time-bound. But it acts as a great source of money to meet working capital needs. With this debt loan, Myntra and its entities would have access to Rs 300 crore credit facility.
This money would help the fashion etailer to scale up its private labels business and develop supporting departments such as supply chain, marketing and customer acquisition.
“Even as we have hit this milestone, there is more happening in other brands as well. We continue to optimise supply chain costs resulting in overall scale benefits, which translates into a rise in revenues but not in fixed costs. We are also optimising our marketing, customer, and acquisition costs to reach this goal… The goal is to eventually make our private labels account for 35%-40% (not beyond that) of our total revenues, which we hope to achieve in 18 months. Being a multi-brand platform will continue to remain the crux of our business,” said Narayanan.
In August 2017, ROC filing revealed that Myntra’s parent company Flipkart borrowed Rs. 375 crore debt loan from Axis Bank to maintain steady cash-flow. The marketplace also borrowed money from HDFC Bank and Kotak Mahindra Bank.