 "Mukesh Bansal")
Entrepreneurship is a long-term career. One has to be flexible as the failure rate is high, Mukesh Bansal tells Ankita Rai
The integration of two organisations after a merger or acquisition is never an easy task. The acquired company runs the risk of losing its brand identity. What steps are you taking to ensure that the Flipkart-Myntra deal doesn't dilute Myntra's brand identity? What do you say to detractors who think Myntra runs the risk of being cannibalised?
The most important step is to keep the company completely independent. As part of our agreement with Flipkart, it was decided that we will not really integrate any function at all. There will be lot of autonomy in decision-making, planning and budgeting.
There are two ways of building business in e-retail. One is the horizontal business model, which is more convenient and followed by many players. Two is a vertical business where you create a customer experience through quality content and highly curated catalogue. Flipkart is more of a multiple-category horizontal player. Its fashion catalogue is three times bigger than the Myntra's catalogue. Flipkart is about the width of selection while Myntra is highly curated.
Myntra is well capitalised. We could easily be an independent and profitable fashion e-retailer. When we started the talks with Flipkart, I realised together we can become the most powerful fashion retailer both online and offline. There was no investor pressure and it was driven by the management team.
Does the Flipkart buyout reinforce the supremacy of the marketplace model over the inventory-led one? Do you agree that a marketplace is more sustainable in the long run?
Both the models have their own pros and cons. The majority of Flipkart's business today is not marketplace-led. The inventory model works really well when you are working with big brands with which you have direct and exclusive relationships. The marketplace model works best with a long tail of suppliers where you have small boutiques and businesses as suppliers. We will continue to work with a hybrid marketplace model. We launched a marketplace to add more depth to our selections. We have tied up with boutique stores and regional fashion providers and small businesses such as suppliers of Kanjivaram or Banarsi sarees. It will be 80:20. Only 20 per cent is marketplace.
It is said that consolidation is the key to survival in the e-commerce space as it brings in the required financial and HR bandwidth. Do you agree?
It depends on why people want consolidation. In the case of the Flipkart-Myntra merger, two businesses have come together to form an even more powerful entity. So far, most of the mergers and acquisitions in the e-commerce space happened either because a company was in trouble or running out of cash. This is first time two strong companies have joined hands.
That said, Indian e-commerce is still evolving. There will be M&As and many new companies will get started and many will shut down. The whole ecosystem will continue to evolve in the foreseeable future.
In-house brands like Roadster and Dressberry contribute one-fourth of the sales at Myntra. And the margins there are in the range of 50-60 per cent. So how do you see this evolving going forward?
We currently have a portfolio of eight in-house brands, such as Roadster, Dressberry, Anouk, SherSingh and Hrithik Roshan's casual wear brand HRX. This year we plan to launch four to five new brands. For most of these brands the prices are 25 to 30 per cent less compared to a national brand in the category. We want to build a strong portfolio of in-house fashion brands, which are as good as or even better than national brands but are aggressively priced. We will be retailing theses brands not only at Myntra but also at Flipkart.
In your role as the head of the fashion business at Flipkart, what will be your primary focus?
Together, Flipkart and Myntra have a 50 per cent marketshare in the online fashion category. I look to grow it 60 to 70 per cent over the next 12 months. We want to dominate this category in a big way. It is also strategically important because fashion is a category that is not only the largest but also has the best margins.
All surveys show online retailers are eating into the revenues of big box retailers in a big way. Do you see online becoming mainstream in India?
The 24/7 nature of the online shopping is changing the way consumers used to shop earlier. Currently, online retailing is about 0.5 per cent of all retail in India but organised retail is only 8 per cent. In the next one year it will be 1 per cent. So it will be 1/8 th of all organised retail. It will be big in categories like electronics, mobiles and branded apparel. Currently, for many brands 20 to 30 per cent of their businesses are coming from online, which is likely to increase to 50 percent in two to three years .
What is your mantra for budding entrepreneurs in this space?
Entrepreneurship is a long-term career. One has to be flexible as the failure rate is high, so you need to be able to adapt and be prepared for the long haul.
One has to be clear in communicating what kind of leadership is required in each area. If the founding team is not able to provide the leadership, focus on getting talent from outside. These decisions are not driven by emotions. To encourage talent, we have a 100 per cent ESOP policy. This is some thing I learnt during my stint at various start-ups in the Bay area (the US). Most of the start-ups there had universal ESOP policy. It is an important tool to attract and retain top talent.
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