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Flipkart's war with Amazon to leave Myntra high and dry?

  • Flipkart reportedly plans to slash Myntra's budget by 10 percent.
  • The move is aimed at diverting resources to Flipkart for its war against Amazon. 
  • Meanwhile, money has been pouring into Amazon to take on arch rival Flipkart. 
Flipkart Amazon war could orphan Myntra

Flipkart is trying every trick in the box to bounce back from shaky grounds. It hasn't been a great 2016 for Flipkart, and the year 2017 kick-started with a top management rejig. Kalyan Krishnamurthy replaced Binny Bansal as the new CEO. The new changes come as Flipkart is seeking fresh funding.

 

The restructuring may also involve Flipkart cutting down on Myntra’s budget. An ET report claims that Flipkart plans to slash Myntra's budget, in the bid to divert resources in the big fight against Amazon. Needless to say, Amazon has been pouring in billions of dollars into its India unit.

 

The report, citing people familiar with the matter, claims that Myntra may not get the same amount of money that it previously did and could see 10 percent cut in the budget. Those not in the know, Flipkart had acquired fashion retailer Myntra for Rs 2000 crore back in 2014. And, last year we saw Myntra acquire another popular fashion retailer Jabong for reported $70 million.

 

However, Myntra turned into an app-only platform, and cut down access to desktop users. The plan backfired, followed by some high profile exits and eventually affecting Myntra sales. The LiveMint report reveals that its sales growth slowed down last year, blaming it on app-only platform. The company then reopened the mobile site and re-launched the desktop site. However, refuting the budget cut, Myntra spokesperson told ET that no such change is expected. Flipkart has also refuted the news as speculation.


Meanwhile, Flipkart has been asked to cut down on marketing and discounts to almost one-fourth, in the bid to meet targets.  This essentially means the burn rate has to be reduced. Two years ago, Flipkart had the highest burn rate, but it has been cutting down on it from 2016. Under the new CEO, who supposedly has been running the show for some time now, the burn rate will continue to reduce.  

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