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Reasons why Flipkart and Myntra merged

By FashionUnited

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They are among top players in India’s e-commerce space. With investments pouring in, what led Flipkart and Myntra to merge

operations while deciding to stay independent? The reason is clear: to combat the threat being posed by foreign online retail competitors like Amazon and eBay and domestic rivals like Snapdeal and Jabong. While the government is contemplating allowing foreign investment in ecommerce, the need to race ahead was surely felt by the two.

Experts point out that Myntra’s strength in high-margin fashion and lifestyle category also made Flipkart make a merger offer to the former. Flipkart has had limited success with the apparel and fashion accessories segment compared to Myntra, which has been aggressively pursuing the fashion business by bringing international labels as well as tying up with designers and launching private brands. Flipkart and Myntra together generate more than 50 percent of the online fashion sales and the companies aim to increase that number to 60-70 percent over time.

Another strong similarity between the two is common investors. US hedge fund Tiger Global and venture capital firm Accel Partners hold significant shares in both the companies. And both also pushed Flipkart and Myntra to merge. Tiger and Accel together own 53 percent shares, while IDG Ventures and Kalaari have a combined stake of 28 percent in Myntra. In Flipkart, the two common investors (Tiger & Accel) together hold around 40 percent stake.

And last but not the least, another common factor between them is surname of their owners. While Sachin Bansal and Binny Bansal launched Bangalore-based Flipkart in 2007 that has seen around Rs 6,100 crores in sales, half the industry total and aims to record sales of 1 billion dollars (over Rs 6,000 crores) by 2015, Bangalore-based Myntra Designs, founded by IITian Mukesh Bansal has seen its profits range from 30 to 50 percent. He moved to India to start Myntra in 2007 and the company was targeting sales of Rs 1,500 crores next fiscal from apparel sales alone.

Flipkart
Myntra