Although
it's been talked about for a while now, online retailers Flipkart and
Myntra are now finally ready to close a deal and announce a merger -
according to reports. It is believed that the two companies will
announce the merger on Thursday, with only signatures left to be done.
According
to a report in the Business Standard, this merger is being done to remain
competitive against multinational companies like Amazon, which launched
in India in June last year.
(Also see: Flipkart, Myntra Deal Likely to Be Announced on Thursday)
Amazon in India has been growing
fast, and adding several new categories. Speaking to Business Standard,
Amit Agarwal, Vice President and Country Manager Amazon India said, "We
don't get distracted by the competition," citing about 20 years of
global experience.
In May, in another move which seemed to be a
response to Amazon, Flipkart had also announced Flipkart First,
an annual subscription service for shoppers which would offer free
one-day delivery, priority customer service, free shipping and 60 day
returns instead of the normal 30 day returns. This is very similar to
Amazon's Prime program, which the company has not launched in India yet.
These
moves show that Flipkart is working to stay competitive, and the
reported merger with Myntra would make sense for the same reason, as the
two companies have some complementary offerings despite a lot of
overlap. For instance, while Flipkart added the clothing category two
years ago, it's not known for that, which is why the company launched a
TV campaign to promote itself as the "Flipkart Fashion Store". This is
an area where Myntra has definite strengths. On the other hand, Myntra
does not sell electronics or books, two categories where Flipkart has
tremendous mindshare.
Amazon started in India with just a few
departments - books, movies and TV shows - but has been steadily
expanding its offerings, first adding mobile phones and electronics, and
more recently adding clothing and accessories, and shoes. Today, the
American company is competing directly with both Flipkart and Myntra.
Meanwhile,
another Indian company, Snapdeal.com announced on Wednesday that it has
raised $100 million in a new round of equity financing, and compete in
the same areas as Flipkart, also following the same "marketplace" model
of e-commerce. The investors included Premji Invest, which had in
February led a $50 million investment round in Myntra.
With these
developments, it makes sense for Flipkart and Myntra to shore each other
up, but the details of the merger are still unclear and it's not known
whether it is essentially going to be an acquisition with Flipkart
taking control, or whether Mytra will remain as a separate unit. When
Amazon acquired online shoe retailer Zappos in 2009 in a similar move,
it kept the smaller company active and continues to do so, and this
could well be the ideal model to follow here too.
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