Acquisition of Jabong by Flipkart

Acquisition of Jabong by Flipkart

Flipkart, one of the largest online retailers in India has acquired Jabong.com on 26th July 2016 for 70 million US$ (471.52 crore Indian rupees). Jabong.com is an online lifestyle retailer selling products from clothing to jewellery. Flipkart suffered a loss of 2000 crore Indian Rupees in the financial year 2015. Jabong.com acquired a gross loss of 46.7 crore Indian Rupees in 2015. A company already running under loss is buying another company which is also running under loss. Interesting bargain? Maybe, maybe not. Let’s delve a bit deeper and do a subtle analysis of how things may pan out for two of the largest online retailers in India.

Flipkart acquired Myntra, another top online fashion retailer back in 2014 to boost its sales in the fashion market. The traffic from Myntra was hence transferred to Flipkart and there were benefits rolling in with an initial upsurge in network traffic which also resulted into a higher number of sales. The strategic part comes into the foray as Flipkart has higher responsibilities now of coping up with competitions from the likes of Amazon.in as well as Snapdeal.com which are the other popular players in the domain. Flipkart expects higher number of sales with acquisition of Jabong and also a spike of growth and levitate it from the line of losses it is currently suffering. Going by the statistics, Jabong’s dwindling sales made it obvious that it will be sold out. How Flipkart handles the problem of diminishing network traffic which in turn will result into diminishing sales, remains to be seen. The question that arises now is what better way can Flipkart adopt to take them out of the financial crisis?

Shutting down Jabong.com entirely seems a very awful plan. But doing exactly this can help Flipkart. An illustration is being made from the author’s perspective to put the stones together. Shutting down Jabong.com and yet having access to the wholesalers and logistics under Jabong.com gives an advantage. The cost for maintenance of Jabong.com website goes down. Now where will the traffic from Jabong.com go? To solve this issue, a redirection to Flipkart with advertisements specifying how great the acquisition of Jabong with Flipkart is and how the customers will benefit from it, will not only boost customer base but also aid in improving image of Flipkart and spread the word of excellence which will result in an increase of network traffic. So cutting cost on maintenance and investing on advertising can prove to be beneficial for Flipkart in the long run. Every new beginning is some other beginning’s end and Flipkart will be looking for a profitable beginning this time around with the acquisition of Jabong.