“Flipkart proposes to Myntra”, “Flipkart is in talks with Myntra”, “Flipkart-Myntra merger still on tracks”… these are the headlines we have been reading from the past few months. A lot has been said till date and a lot more is coming (who knows!!), and we believe that it’s really the time, they both should get together.
To annihilate the competition
The deal will strengthen Flipkart’s position in both fashion and consumer electronics segment, which are currently the biggest online selling segments. Not only it will eliminate one major competitor for the company, but also can pose a threat for other players such as Jabong, Snapdeal and Amazon, especially in terms of consumer base.
To aggregate value in Flipkart
The merger would help Flipkart add the long-term revenue and margin boost in the company, and will help to go ahead with its private label apparel brand, Flippd. Also, Myntra has well established supply chain process and is still based on inventory model which further complements both Flipkart standards and the requirements.
To give Myntra an alternative to another fund raise
With common investors viz Tiger Global and Accel Partner pushing the merger plan, Myntra could possibly lose them in case of a denial. However, with Flipkart, it could always get a part of the large chunk without worrying for another.
To raise the hurdle for foreign players
With elections at the door, no one knows where the strings get attached to. But if FDI gets into eCommerce, then all existing retail players will have to directly combat with foreign players like Taobao. The acquisition will help Flipkart establish itself as a large Indian player, expand its expertise in Apparel business and keep scaling the business – despite the entry of foreign eCommerce giants.
But then, Mukesh ka kya hoga… !!
Mukesh Bansal currently holds the position of CEO at Myntra. If the acquisition takes place, where would he fit in? Will he take his share and quit the company? Or in case the deal allows Myntra to maintain its independent ownership, then what would be his role in the company?
In our opinion, it seems to be a win-win deal for Flipkart whereas Myntra will draw the long term benefits.
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