 "Mukesh Bansal")
The look and feel of the UK's leading fashion portal, ASUS, and that of home-grown Myntra are rather similar. That includes the bold discount announcements on the sites. That's perhaps because Myntra closely studied international e-commerce companies such as ASUS and US-based Zappos, explains Mukesh Bansal, founder and CEO of the largest online fashion player in the country.
While ASUS and Zappos have been around for about a decade and a half, catering to the fashion whims of twenty-somethings, Myntra has been in the industry since 2007, about half that time. But that has not prevented Mukesh, also an IIT graduate like namesake but unrelated Flipkart CEO Sachin Bansal, from challenging the might of established brick-and-mortar players in the apparel and lifestyle retail industry.
The self-effacing Mukesh, 38, benchmarks his company not just against online players at home and abroad, but also established retailers such as Shoppers' Stop, one of the first apparel-focused department chains to start in India in 1991, as well as Lifestyle, which set up its first store in the country in 1999. Currently logging half the sales figure of Shoppers' Stop and Lifestyle, Myntra estimates that in another 15 months, it will equal their numbers. Then comes a bold prediction. By 2016, Myntra's sales, Mukesh claims, will exceed those of the two physical chains by approximately 30 per cent. (Shoppers' Stop declined to comment and Lifestyle did not reply to an email.)
Myntra is logging around Rs 100 crore a month in sales now. It aims to touch Rs 250 crore a month in 15 months and anything between Rs 400 crore and Rs 450 crore per month by 2016. Between now and 2016, the company's estimates of its own growth is at least 300 per cent, while that of its physical competition is a more modest 50 per cent.
Online clicks
Can this be for real? Sachin Bansal, the 32-year-old CEO of Flipkart, does not discuss the claims made by Myntra, but agrees that growth in online fashion is exploding. In what could make things tougher for Myntra, Sachin told Business Standard that Flipkart is poised to become a leader in the apparel segment by the middle or end of this year.
Flipkart did not share its sales figures for apparel, but Sachin pointed out that while electronics is the largest component for the company, apparel is the fastest growing segment. In online retail, Jabong is another serious player in fashion, but it is still some distance away from Myntra in terms of sales.
Experts say that since fashion is a seriously promising business even online, Myntra and Flipkart, following very different business models, are vying for a big piece of the country's fashion retail pie estimated at $60 billion, including online and offline apparel trade, most of which lies in the unorganised sector. Projections suggest that fashion, seen as the most attractive in retail, will grow to at least $100 billion in the next four years. Currently, total retail in India is worth around $500 billion. Of this, the e-commerce market (excluding online travel) is pegged at $3.1 billion and is expected to grow to $22 billion in five years, according to a report by research firm CLSA.
Myntra links online retail growth, especially in the apparel industry, to a rapid scaling of technology. As e-commerce has made 24X7 ordering possible, virtually every nook and corner of the country now has access to modern retail. The company receives 15,000 orders a day, which translates into an average of 30,000 products sold in a day. Myntra is aiming at 100,000 daily orders in two and a half years' time. Also, quite tellingly, Tier II and III cities are major contributors to the company's sales. And here is another pointer to why online commerce is flourishing: 20 per cent of Myntra's revenue comes from transactions over the mobile phone. In two years, the online seller expects at least 50 per cent of the orders to be made over mobile phones.
Even as Myntra is set to debunk some assumptions in the retail business, it does not want to deviate from the inventory-based format, which is seen as a revenue guzzler because of the significant warehouse and backend costs involved. Flipkart, which had begun as an inventory-based player and raised $540 million in many rounds of funding through six years, shifted to the marketplace model last year. The marketplace model, with lowered costs for the company, hosts retailers on a platform while retaining a hold on the delivery of products. American online biggie Amazon too entered India last year through the marketplace format. Of course, the Indian rulebook does not permit foreign investment in online retail (read inventory-based model).
Against this backdrop, Myntra's need to grow faster than usual is evident. Though even as recently as October 2013, the company had said that it was not looking to raise funds and that it was comfortably funded, it has now done the opposite. Myntra announced a few days ago that it had received funding worth $50 million ( Rs 310 crore) from a group of investors led by Premji Invest, the family investment arm of Wipro chairman Azim Premji. Since its launch in 2007, Myntra has raised close to $125 million from investors. It is only a fraction of what Flipkart has raised, and Myntra is believed to be seeking more funds. "We are in talks with investors," Mukesh says, without divulging the time or quantum of fund that Myntra plans to raise. "It's a conscious choice between profitability and growth," he adds. While Myntra, until recently, may have been more inclined towards profitability, it is now going all out on growth. The shift in the company's stand regarding profitability versus growth is striking. The new funds will go into brand-building, technology and backend operations-areas that any serious e-commerce player will focus on.
Funding matters
It also matters that Myntra has Accel Partners and Tiger Global as its investors. These companies have also funded Flipkart and there was a strong buzz that Flipkart had made a merger offer to Myntra. It has since been dismissed as a rumour. "Absolutely not, the speculation may have started because we have a common investor base," is how Mukesh reacts when asked about this. Sachin's response is similar.
But does Myntra, which is targeting $1 billion gross merchandise value (GMV) by 2016, have any sellout plans? "Our default option is not to sell," affirms Mukesh. However, he adds, if the offer is exceptionally good and matches the vision of the company, the possibility of a sale cannot be ruled out. "We have not considered anything like that so far," the Myntra CEO adds cautiously. The company, however, is serious about going public in two to three years.
As for diversifying beyond apparel and shoes, Myntra is determined to stay the course. "We want to stay just in fashion," says Mukesh. The affinity for the segment goes back to his college days when he was a fashion freak. Just as Zappos, bought by Amazon a few years ago, came into being because Nick Swinmurn, the portal's founder, could not find the right pair of shoes in the malls, Mukesh's love for style and fashion made him envision Myntra.
"I connect with fashion emotionally. Also, I realised the potential of fashion early," says Mukesh. That early start may stand his company in good stead, for as his rival in the business, Sachin, points out, e-commerce will soon be bigger than brick-and-mortar businesses.
MYNTRA'S GROWTH IN NUMBERS
* Rs 100 cr Sales/month
* Rs 250 cr Sales/month expected in 15 months
* Rs 400-450 cr Sales/ month forecast by 2016
* $50 mn (Rs 310 cr) Money raised in January
* 15,000 Number of transactions a day
* 30,000 Products sold/day
* 100,000 Orders/day likely by 2016
* $125 mn (Rs 775 cr) Funds raised since launch in 2007
* 20-29 years Age group of Myntra's customers
* 20 per cent Share of transactions on mobile
* 50 per cent Transactions on mobile by 2016
