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Flipkart Buys Myntra

Dominating E-Commerce in India
Facts
L
a
u
n
c
h
2007
56% CAGR
2007-08 - 2012-13
1
s
t

In
India
3
rd
In Asia
(Post Myntra Acquisition)
19 Deals
$500 Mn
E-Commerce Deals in
2014-15
243 Mn
Projected Indian
internet users in
June 2014
Flipkart
Indian
E-Commerce
Statistics
›E-commerce market in India is valued at $3 billion
›Flipkart had a 4.9% share of the $2.9-billion worth of internet retailing transactions in 2013
›Since March 2013, Flipkart’s revenues jumped fivefold to Rs. 1,180 crore, but its loss
widened to Rs. 281.7 crore
›Flipkart acquired a majority stake in Myntra for $300 million
›Alibaba’s, China’s largest e-commerce company platforms was $248 billion in 2013
Issues
Consolidation of apparel e-commerce is likely to create a monopoly situation in the market
leading to price rise
Tendency to acquire and shut down firms inspite of repeated assurances to the contrary (Letsbuy,
Shersingh)
•Flipkart founders are taking in salaries of over $ 2 mn despite it being a consistently loss making
firm
•They’ve raised a lot of money from venture capitalist funds and have been expanding their sales
volumes, yet it is a loss making business and might continue to be so for a long time. The
founders might be hoping to sell it in a few years when it has gained a considerable value.
● Also these Foreign companies circumvent existing FDI norms by having
“front companies” who execute B 2 C flash sales therefore breaching
FEMA rules
● Since most of these companies are being funded by same VC’s and PE’s,
thus they may collude backdoor to the loss of customer interests
● A merger is likely to protect smaller Indian players from being acquired by
global giants
● Different cultures in India have evolved through mutual
dependance/sharing. Thus the Chinese model of Alibaba will impact this
mutual dependence, leading to inter cultural conflicts
● Unemployment in unorganized sector would increase due to changes in
consumer buying behavior
Information
›Flipkart acquires Myntra.com
›E-commerce market to be $22b by 2018
›To grow at 50-55% annually
›Flipkart and Myntra will operate independently after merger to avoid losing
individual value
›Myntra is focused on fashion wear which fetches high margin
›Largest chunk of Flipkart’s revenues comes from e-selling electronic products
›Private equity players Tiger Global management and Accel Partners involved in
the merger
›Indian government policy does not allow FDI in B2C e-commerce, while it allows
100% FDI in B2B e-commerce.
›Flipkart has not yet used the $360 million it raised in 2013
›
S.O.P.E
Key Subjects
Flipkart and Myntra.com
Key Objects
books, ticketing, electronics,
apparels, furniture, consumer
durables, food & groceries
Key Properties
Share of $2.9-billion worth of
internet retailing transactions in
2013
Flipkart 4.9% Myntra 4.1%
Amazon 1.6% e-Bay 1.2%
Key Events
Amazon.com and E-bay are
beefing up their presence in the
over $3-billion Indian market
Problem
›Identification : The angel investors had stake in both Flipkart and Myntra and just for their
personal gains, they are going on with the deal without giving a proper unjust view of the merger.
›Problem Formulation
›Controllable variables (X)– Investment money, acquisition strategy
›Uncontrollable variables (Y)– Industry and economic scenario, Amazon, e-bay expansion
›Problem Specification
›Flipkart is dependent upon the money from angel invertors to expand in the ever growing e-
commerce market. However, the economic scenario, competition from Amazon, e-bay etc. are a
challenge along with the probability of an ethical dilemma of merging.
Problem
Identification
Angel investors had
stake in both
Flipkart and Myntra
and just for their
personal gains, they
are going on with
the deal without
giving a proper
unjust view of the
merger
Formulation
Controllable Controllable
Problem Properties
Antecedants
Determinants
Concomitants
Competitors expanding in Indian Markets
Inspiration from Alibaba’s business model
Revenue not translating to appropriate profit margins in Flipkart
Investment giants having dual stake in Flipkart and Myntra
Shrinking market share of electronic segments
Targeted Strategy of Flipkart to increase the customer base in other domains