Jabong To Trim Its Loss By Shedding Brands With Low-Margins To Focus On Premium Lifestyle Products


May 23, 2016: Jabong, an online fashion portal in a bid to cut losses and position itself as a platform for premium lifestyle products, is shedding several low-margin brands, including three-fourth of its private labels.

The company, unit of German ecommerce incubator Rocket Internet, will instead focus on top 200-300 brands, said a top executive of the company.

Sanjeev Mohanty, who joined Jabong as Managing Director from Italian fashion brand Benetton six months ago said,”We had spread ourselves too thin and now we are shrinking our portfolio.” He further adds “We are sharpening our positioning and opting out of lower price point brands and labels.”

The names of the brands which are being delisted was refused to diclose by the Gurgaon-based company.

After a clampdown on discounts Jabong managed to reduce its losses to about a third in 2015 to Rs 46.7 crore, but the move slowed sales growth to 7% at Rs 869 crore.

Over the years, the company launched several global brands such as Dorothy Perkins, G Star Raw , Tom Tailor , Topman and Bugatti Shoes exclusively for India, helping it earn higher margins. The company is now also discontinuing a dozen of its own labels to focus on bestsellers, including Sangria and Incult.

Mohanty said, the lifestyle portal, which competes with players such as Myntra, Voonik and Koovs, will also expand its ethnic and sports portfolio.

India’s biggest domestic ecommerce companies Flipkart and Snapdeal are flush with cash as overseas investors in both companies seek a piece of the market that’s set to surge.

While the country’s overall online fashion market is expected to reach $20 billion by 2020, Jabong’s latest move is seen narrowing the market for itself.

“We are looking at 40% of the market, which is Rs 750 and above, with focus on the upper mid-priced market to premium and super premium,” Mohanty said.

Repositioning of the brand could mean initial loss of customers who aren’t strictly brand conscious, says experts. However, many also feel consolidation of brands could create a unique identity, something that several online players, which sell single-category products have started doing.

Sreedhar Prasad, partner-e-commerce at KPMG said, “It is good to consolidate the brand portfolio using analytics and understanding of customer preferences. This could even help in a clear value proposition to the customers. Brands need to provide either revenues or margins or variety to the platform.”

Jabong and Flipkart-owned Myntra were considered leaders in the fashion category, but Amazon India has been gradually getting aggressive. Most lifestyle product makers are either shying away from heavy discounts or giving price-offs for old merchandise, something that goes against Jabong’s business model of offering fast fashion or the latest collection.