July 27, 2024

How the mighty fall! In the end, Jabong got sold for just $ 70 million. Two years back, it was valued at over $ 1 billion. But those were other times. Customer acquisition and retention were the buzzwords for valuation then and a mad spree of throwing good dollars behind bad ones was being witnessed. Everyone in the business thought that these companies would turn around one day. No one explained how, though. With a flawed deep discounting model that kept on subsidizing the sellers on the platform to lure customers, these companies failed to realize the psyche of the Indian (or those anywhere) customers. Once the discounts stop, there are no volumes to speak of. So, instead of ecommerce, these portals were peddling discount commerce. The valuation was bound to plummet, but it is shocking to see the depth to which it has really gone.

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Jabong was one of the first players in the fashion etail space and had carved out a niche for itself. But its main owner, Rocket Internet, is accused of applying two spoilers in the business. It used the cut and paste method of other countries to its internet properties in India. Then, it does not have the patience needed to sustain these acquisitions. Rocket is having trouble with all its properties like Foodpanda, PrintVenue and Cuponation. It has already sold Jabong and Fabfurnish. It claims it was shortchanged in its sale of GoJavas, the logistics startup that delivered for Jabong. It also feels that its employees cheated it. But experts have pointed out that the policies of creating startups by hiring employees at the top means that they have no emotional connect with the business. Hence, the required go-getting attitude is also missing. Rocket’s ecommerce ventures have flopped due to this.

With Flipkart acquiring Jabong through its earlier acquisition Myntra, it has emerged as the major player in the market. It remains to be seen whether this deal will be on the radar of Competition Commission of India (CCI) as it has all the trapping of creating a monopolistic behemoth in the ecommerce space. Myntra has said that since Jabong has an excellent brand recall and loyal customers, the brand will be kept operational without being merged. Although Flipkart will be benefitted by adding the large pool of customers at Jabong, it will need to look at the numbers closely. For, although Jabong has pruned its losses, it is still bleeding badly. That was one of the main reasons it got sold for peanuts.

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