1. Jabong loss narrows, revenue slows on marketplace model

Jabong loss narrows, revenue slows on marketplace model

Fashion e-tailer Jabong, which is transforming itself from an inventory-based platform to a marketplace one in a bid to cut costs, reduced its losses to Rs 66 crore in the first nine months of 2015 from Rs 113 crore in the comparable period of 2014.

By: and | Bangalore | Updated: February 5, 2016 10:55 AM
jabong L

However, Jabong losses must be seen against the backdrop of a significantly slower growth in sales.

Fashion e-tailer Jabong, which is transforming itself from an inventory-based platform to a marketplace one in a bid to cut costs, reduced its losses to Rs 66 crore in the first nine months of 2015 from Rs 113 crore in the comparable period of 2014.

However, the losses must be seen against the backdrop of a significantly slower growth in sales. Revenue in the nine months to September rose to Rs 647.4 crore, up just 20% year-on-year and at a much slower pace than the 136% increase seen in 2014. Between January and June 2015, Jabong had reported Rs 227.4 crore in losses before interest, taxes, depreciation and amortisation, while revenues rose 26%.

As promoter Rocket Internet noted in a recent performance report, Jabong was able to lower its losses by moving to the marketplace model and holding less inventory, primarily private labels. Private labels for both Flikart-owned Myntra and Jabong account for 20% of revenues.

According to a person familiar with the matters at Rocket Internet, the Samwer brothers-backed incubator, which had clubbed all its fashion portals globally under Global Fashion Group (GFG) in 2015, wants to start its own private label. In a bid to expand its product range, the e-retailer will also introduce a dedicated section for ethnic wear in April with almost 2,000 brands.

Meanwhile, the e-tailer is hoping to be able to lower discounts. Sanjeev Mohanty, CEO and MD, Jabong, said discounts from the online retailer in the next two to three years would be comparable with those offered by brick and mortar retailers. “Some discounting is inevitable if you are catering for a trend and end up accumulating too much stock,” Mohanty explained.

Jabong is looking to transact a gross merchandise value of $800 million by December 2016. The company claimed it had achieved a GMV of $66 million in January this year. At a recent press conference, rival Myntra said it was targeting a GMV of $1 billion by 2017 from the current $800 million. “We will act as an aggregator of brands and curate them so that it is easier for the consumer to shop, “ Mohanty said. He added this would eventually result in controlled discount sales, making the model more profitable for the brand and the platform.

Myntra, which brought in a 12-member team last July to devise ways to cut costs, said recently it has reduced its discount offering by 6%. Jabong too claims it burns the least cash during sales and that it will be the first to break even without compromising on the top line. An ex-employee who was instrumental in helping cut costs at Jabong said the e-tailer had started trimming discounts, and bringing down operational and IT automation costs.

Rocket Internet entered India in early 2012 and quickly spread its portfolio to half a dozen companies within a year. However, three years down the line its portfolio companies are in trouble, with media reports saying they may be bought over by rivals; a couple of them have seen or are facing mass exodus from senior management. Last year Rocket Internet shuffled its CEOs from one portfolio to another, trying to manage its businesses here. Food Panda co-founder Rohit Chadda quit in August last year, while Fabfurnish’s founders Mehul Agrawal and Vikram Chopra have left the entity to launch their own venture, while Sanjeev Mohanty took over as CEO of Jabong in December.

  1. A
    Ashish
    Feb 5, 2016 at 4:41 am
    If you take last 10 years of annualized returns, even the worst equity mutual fund has outperformed fixed deposits by huge margin. So where is the risk? Visit prudentcap dot in to explore more .
    Reply

Go to Top