Online fashion retailer Jabong.com is planning to shed around 400 low-margin brands, including some of its private labels, to cut losses as well as position itself as a platform for premium lifestyle products.
The e-tailer has already reduced discounts, is focusing on launching 20-30 new brands by the year end, and is going slow on hiring as it is targeting to become profitable by mid-2017, Sanjeev Mohanty, chief executive officer of Jabong.com told FE.
“Earlier the entry price of products sold on our website was around R400 to R450 which has now gone up to around R600 to R650. Average price point of our products is between R1,200 to R1,300. We are planning to shed around 400 lower-end brands,” Mohanty said.
The Rocket Internet-backed company has already brought discount down from around 50% to around 20% and is selling higher-end brands like Vero Moda, Mango, Mexx, Fabindia and has also tied-up with designers like Ritu Kumar, Rohit Bal, Manish Arora, Satya Paul among others.
“We have been constantly reducing discount levels and are focusing on selling products above R500. Our focus has changed and we want to offer more premium products rather than offering products at lower price points and at discounted rates. We don’t want to do it at the cost of sacrificing revenues so we have tied-up with strong brands and designers to attract customers. We will introduce 20 to 30 high-end brands in this financial year and our focus will be on premium offerings,” Mohanty said adding that the company’s Autumn-Winter collection will be more premium compared to existing price points.
Further the company is tying -up with 20 to 30 new brands by the end of this year for a fresh look and offering.
“It is a little premature to name the high-end brands we plan to tie-up with as we are still in talks with them,” Mohanty said.
The company has been trying to save costs in every possible way to turnaround the business and plans to go slow on new recruitments as well. “We have sufficient people and are not looking at fresh recruitments,” Mohanty said.
Jabong has around 600 employees working with the company at present.Jabong reported a 14% increase in revenue from a year ago to R243.78 crore in the first quarter of 2016. The company reported Gross Merchandise Value (GMV) of R410.54 crore for Q1 2016, up 8.4% from a year ago.
Adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) loss for the same quarter narrowed to R89 crore from R121.7 crore in the corresponding quarter last year.
Anurag Mathur, partner, Price WaterhouseCoppers, said, “Shedding off brands which are not performing well makes sense and focusing on high-end brands will help the company get better margins. Fashion has a larger chance of success compared to other categories as margins are usually around 15% to 20% while in case of private labels can go up to 40%. While in another large category like electronics, margins are around 7% to 10%.”
