The Story of Jabong's exit: From $500Mn to $70Mn

In a bid to seal its position as market leader, Flipkart has acquired online fashion portal Jabong through its unit Myntra. The e-commerce player has pipped rival Snapdeal and Aditya Birla Group to seal the deal at an estimated $70 million.

Jabong, which was at par with Flipkart's Myntra in sales until early 2014, has seen a steep decline in market share since then. This is mainly because of the crores Myntra’s parent Flipkart, Snapdeal and Amazon have been spending on advertisements and discounts.

By the end of May, Jabong was down. While it reported a 14% hike, it's loss only narrowed from €11.9 million from €16.3 million in the same quarter a year earlier.

Not to mention, the company has seen an exit of senior management, slowdown in funding and overbearing competition from Amazon India.

Earlier this month, Jabong fastened up its exit process as the firm’s owners, AB Kinnevik and Rocket Internet didn't want to pump more money into a losing race horse.

The valuation of GFG (owner of Jabong) slid almost a third to $1.13 billion in a mere 10 months. In May, the company last raised $339 million from Kinnevik and Rocket Internet, but that was a much lower valuation.

The current deal is estimated to be around $50-75 million, allowing existing investors Rocket Internet and Kinnevik AB to quit.

Jabong’s investors have managed to find a buyer for their struggling business, but does this mean any good for Flipkart? We'll have to wait and watch.

Image Source