Although it’s been talked about for a while now, online retailers Flipkart and Myntra are now finally ready to close a deal and announce a merger – according to reports. It is believed that the two companies will announce the merger on Thursday, with only signatures left to be done.
According to a report in the Business Standard, this merger is being done to remain competitive against multinational companies like Amazon, which launched in India in June last year.
Amazon in India has been growing fast, and adding several new categories. Speaking to Business Standard, Amit Agarwal, Vice President and Country Manager Amazon India said, “We don’t get distracted by the competition,” citing about 20 years of global experience.
In May, in another move which seemed to be a response to Amazon, Flipkart had also announced Flipkart First, an annual subscription service for shoppers which would offer free one-day delivery, priority customer service, free shipping and 60 day returns instead of the normal 30 day returns. This is very similar to Amazon’s Prime program, which the company has not launched in India yet.
These moves show that Flipkart is working to stay competitive, and the reported merger with Myntra would make sense for the same reason, as the two companies have some complementary offerings despite a lot of overlap. For instance, while Flipkart added the clothing category two years ago, it’s not known for that, which is why the company launched a TV campaign to promote itself as the “Flipkart Fashion Store”. This is an area where Myntra has definite strengths. On the other hand, Myntra does not sell electronics or books, two categories where Flipkart has tremendous mindshare.
Amazon started in India with just a few departments – books, movies and TV shows – but has been steadily expanding its offerings, first adding mobile phones and electronics, and more recently adding clothing and accessories, and shoes. Today, the American company is competing directly with both Flipkart and Myntra.
Meanwhile, another Indian company, Snapdeal.com announced on Wednesday that it has raised $100 million in a new round of equity financing, and compete in the same areas as Flipkart, also following the same “marketplace” model of e-commerce. The investors included Premji Invest, which had in February led a $50 million investment round in Myntra.
With these developments, it makes sense for Flipkart and Myntra to shore each other up, but the details of the merger are still unclear and it’s not known whether it is essentially going to be an acquisition with Flipkart taking control, or whether Mytra will remain as a separate unit. When Amazon acquired online shoe retailer Zappos in 2009 in a similar move, it kept the smaller company active and continues to do so, and this could well be the ideal model to follow here too.