Ecommerce has been one of the most competitive industries on the online space ever since its inception. Indian Ecommerce giant Flipkart just acquired Jabong for $70 million which is on the low side considering it was worth around $508 million in December 2013. Flipkart’s recent acquisition of Jabong further hints at the increasing competition in the Indian Ecommerce market.
Flipkart owned Myntra had been doing pretty well until Amazon tightened their hold on the online fashion segment this year. This can be touted as the main reason behind this sudden move by Flipkart despite having their own fashion specific portal. With the new member in their family, Flipkart gains a huge loyal customer base from Jabong along with user data that can go a long way. The deal was done through their fashion portal Myntra, but Jabong will continue to operate as a separate brand after the deal.
The tightening competition
This recent merger is a sure sign of the increasing competition in the Ecommerce industry. With Amazon planning to invest 5 billion dollars in their operations in India soon, Flipkart was expecting serious competition. Unlike Amazon, Flipkart cannot pour billions of dollars into the market to capture more customers. They still have to depend on investors for the money which is a big disadvantage in a market like Ecommerce. Flipkart has been having a hard time raising funds since last year, as investors slashed their values with profitability in focus. Flipkart saw its value go down by 30% during the last 6 months which again calls for a bold move to recover the lost dominance. With a mighty competitor like Amazon to take on, it was wise of Flipkart to gulp a smaller fish like Jabong to increase their market share. This will also help them stand united against Amazon rather than compete with all of them together and burn out.
Flipkart and Myntra together hold 60 % of market share in the Indian fashion segment. With the addition of Jabong, they get a huge boost to their market share, access to a large customer base, bigger team, and better territorial reach. We might hear about more acquisitions very soon as this seems just like the beginning of a big industry war to come.
How data fuels the competition in Ecommerce
Targeting the customers with the right deal at right time has always been the secret recipe of Ecommerce successes. With their years of operation, the Ecommerce giants like Flipkart, Amazon, Snapdeal, Myntra and Jabong have access to massive amounts of shoppers’ data. This data is effectively being used for the right targeting that creates higher profits. Most of this data is internal and derived from the customers’ order history which could reveal a lot about them like gender, age, location, preferred brands and much more. Customers actually benefit from right targeting as they get deals relevant to them right into their inbox from time to time without having to take any extra efforts of finding them.
Apart from this, the major players in the Ecommerce industry are using web scraping to aggregate data for market intelligence and competitor analysis. Big data, is in a way shaping the Ecommerce industry and helping it stay competitive.
What the merger means for the Ecommerce market
We believe the Flipkart-Jabong merger will only help in increasing the competition between the big players. Fashion being the most profitable of all segments in Ecommerce, we can also expect more companies entering this niche soon with the hopes of grabbing a share of this market.
This deal can also be considered as a beginning of growth in online fashion space which is expecting more companies competing for the customer’s wallet. Some of the new vertical players in the industry are Voonik, Limeroad, Abof by Aditya Birla group and Cliq by Tata group. With the tightening competition among these Ecommerce portals, customers can definitely expect great discounts and a wider variety of products to choose from online, since price war seems to be the only competitive strategy so far.
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