American online retail giant Amazon Inc. wants to take the e-commerce war against its biggest rival on Indian shores – Flipkart head on. The company is in talks to acquire the fashion portal Jabong for a whopping $1.2 billion. If all goes well, this could be the biggest acquisition in the history of Indian e-commerce after Flipkart acquired Jabong rival Myntra for $340 mn in May this year.
Amazon has been very optimistic about the e-commerce scene in the country and had previously promised to pump in $2 billion for this year. According to VC Circle, Amazon plans to keep Jabong as a separate entity and the deal would be in lines of Amazon’s acquisition of Zappos in the US.
“It is not immediately clear how the deal would be structured as Jabong is an inventory-based e-tailer, where foreign investment is not allowed at present. But others point out that if Flipkart can buy Myntra, Amazon can seal this deal too with some careful structuring, especially if Rocket Internet, Kinnevik and others can pour in money into Jabong,” the report added.
Jabong had reported a gross merchandise value (GMV) of Rs 509 crore from three million orders in the January-June period of this year, which was a three-fold rise over the previous year.
E-commerce websites are currently giving the fashion portals more precedence as they have huge potential for catering to top of the line brands and also have huge margins to play with. Flipkart and Myntra dominate the fashion portal market with a combined share of 50 per cent with Jabong coming in second at around 25 per cent. With acquisition of Myntra, Flipkart has enjoyed unrivaled command over the fashion retail segment, which Amazon wants to break.
Amazon has already signed an exclusive tie-up with Aditya Birla owned fabric and ready-mades brand Grasim to retail Grasim’s readymade shirts and special suiting/shirting gift packs on its marketplace. It also partnered Label Corp that operates several celebrity endorsed private labels. It has also brokered a deal with Future groups to sell their products on the website exclusively, thus with this acquisition coming through it is only going to make deeper inroads into the e-commerce pie.