Why Is India Fashion Electronics Jabong Going To Be Sold Off?

Recently, India was the first to do it.

Of

Flipkart was bought at a price of US $70 million.

Why is a company worth more than $1 billion worth 2 years ago? Why is it so cheap? Why is the German Rocket network group, the owner of Jabong, so eager to sell? What is the impact of the acquisition of Jabong on the fashion industry in India?

Why is Jabong sold cheap?

Jabong is a pioneer of India's fashion business, and many international fashion brands are cooperating with it.

The marketing means of network also make it popular among young people.

In addition, Jabong also offers large discounts to attract consumers.

Driven by multiple advantages such as first mover advantage + big brand entry + network marketing + discount, Jabong's development momentum was once unmatched.

However, the aggravation of competition, excessive reliance on discounts, the expansion of the deficit and the departure of entrepreneurial veterans caused Jabong into a crisis.

In addition, its co founder's involvement in the fraud of its logistics distribution company has exacerbated the already dangerous Jabong.

Eventually, the German Rocket network group, the real owner of Jabong, decided to sell it abroad.

In fact, since the beginning of this year, the data of Jabong have begun to improve.

By attracting financing and reducing low profit brands, Jabong's profits and sales have increased substantially.

But because Rocket network group is eager to withdraw from the India market, it has speeded up the sale process of Jabong several times.

Why is Rocket network group so eager to quit India?

This should start with the market positioning and operation mode of Rocket group.

The Rocket group was founded in Berlin in 2003 by Oliver Samwer and Alexander Samwer.

The company has invested in 36000 countries and has a market capitalization of $7 billion 200 million in 110 countries worldwide (Morgan STANLEY report).

The group's investment focuses on food, daily use, fashion, home, Internet, and innovation industries.

They operate through the venture-builders mode (unlike incubators, which use the company's resources and ideas to create start-ups, which are more like a subsidiary). The group will invite a professional manager as the co founder of the new company.

Rocket group has invested 9 projects in India, including online home platform Fabfurnish ($150 million), fashion Jabong ($70 million), online ordering website Foodpanda, and so on.

But none of these projects were successful.

According to Jabong's parent company Global Fashion Group (GFG), the reason for this is that the electricity market in India is too competitive and unprofitable. The group must spend a lot of money to lead in the competition, which the group does not want to see.

Some media have reported that Rocket group had launched an internal inquiry on PraveenSinha, co-founder of Japong.

Because anonymity has reported on twitter, PraveenSinha has tampered with its logistics distribution company's business data and privately withheld 10 billion rupees' book capital.

Praveen Sinha denied this and filed a lawsuit against the poster.

Some investors and former Japong executives summed up the 3 mistakes made by Rocket group in India fashion.

Rocket group just copied the successful mode of other places to India, but did not consider the actual situation of India at all.

In addition, the group lacks adequate supervision over the entire operation process.

Rocket group simply assigns individuals to manage the company. This person is not an entrepreneur. He / she has no feelings for the company.

The misappropriation of funds is entirely understandable.

The Rocket group is completely impatient with the India market and does not plan to operate for a long time.

Once competition intensifies, what they do is stop investing in packaging and selling.

What will be the impact of Jabong acquisition on the whole industry?

No matter why, Japong has been acquired as a fact. What will be the impact of this? The industry has carried out a multi-level interpretation.

Some people think that this will lay the leading position of Flipkart in the fashion business of India, and its market share will reach 70%.

Flipkart will be more than Amazon, Snapdeal, Voonik and other competitors, the entire India fashion business industry pattern will be rewritten.

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Another voice indicates that Google's report has predicted that the industry scale of India fashion business will reach US $35 billion in 2020, accounting for 35% of the total electricity supplier industry in India, and become the largest electricity commodity category in Cen.

Japong has a good brand image and user experience. Under this background, the offline giants like reliance group and Tata group have missed the opportunity to borrow Japong to develop online business.

More industry experts point out that the lesson of Japong tells us that the development of India start-ups is very dependent on external investment, and that investors are most interested in profits.

India's start-ups can't get caught in the trap of burning money and eating fat and valuing themselves.

Companies that do not have a good profit model will not last long.

Rocket group is relying heavily on the discount subsidy mode in India. When competitors provide subsidies, they are in trouble.