Myntra looking to launch online marketplace

Over the long term, Myntra expects to generate 20-25% of its sales from the online marketplace 

 

Myntra is one of the few remaining purely online retailers in India as increasingly such companies are adopting the marketplace model to survive.

Myntra.com, one of India’s biggest online clothing and footwear retailers, may launch a marketplace platform within a year as it looks to offer products such as boutique fashion brands.

Over the long term, Myntra expects to generate 20-25% of its sales from the online marketplace, where independent merchants will sell products directly to shoppers, chief executive Mukesh Bansal said in an interview.

Myntra is one of the few remaining purely online retailers in India as increasingly such companies are adopting the marketplace model to survive after burning hundreds of millions of dollars of investors’ cash on chasing customers. The business model allows companies to save on inventory related costs and provides them access to foreign direct investment (FDI), which is banned in direct online retail. “Long term, it’ll be a hybrid model that will evolve for online firms. I definitely see us having some component of marketplace model,” Bansal said.

“Small boutiques with quality fashion look interesting for the marketplace. We’ll take one boutique at a time in a careful way so that the customer experience doesn’t suffer,” he said.

In the past 18 months, more than a dozen firms including Amazon.com Inc.’s India business Junglee.com, Infibeam.com, ShopClues.com and Tradus.com launched or converted to the marketplace model. Flipkart.com announced its marketplace entry earlier this month.

“If you were to look at Myntra and if you were to ask a retail consumer, ‘what do you associate it with?’, given the kind of advertising they do, it would be things like apparel, fashion, accessories, etc., rather than things like books or cellphones, which you would associate with someone like Flipkart,” said Ajeet Khurana, a venture capitalist at angel investor group Mumbai Angels.

“In light of this, allowing third parties to sell books on your site is different than allowing third parties to sell apparel on your site.”

Bansal said Myntra will take its time to ramp up its marketplace platform.

“We will be very patient about it and understand everything—it’ll be a five-year journey or longer. If you have a marketplace model where any distributor can get their products listed, they will control pricing, so price clash may happen. For us, there won’t be any overlap. The brand that we have in inventory model, we will not have in marketplace, and vice versa,” he said.

Myntra aims to double its revenue to Rs.800 crore this financial year partly as it gains market share from the exit of some online retailers. The company gets 80% of its sales from clothes and footwear and 20% from accessories such as belts and watches. “If you look at the past 12 months, a lot of companies such as 99labels.com have declined in size. We’re taking full advantage of that. Our repeat customers are also spending more so our revenue per customer will increase significantly,” Bansal said.

Myntra, which has raised more than $70 million from investors including Accel Partners and Tiger Global Management since it launched in 2007, will not need funds for two years, he said.

“Now the big question that investors have is: whether online retailers can become profitable? We strongly believe we will be the first e-commerce player in India on a reasonable scale to achieve profitability. Hopefully, next year, we will break even,” Bansal said.