Bengaluru: Flush with capital, online fashion retailer Myntra has switched its focus to using its resources to expand sales faster from trying to turn profitable, chief executive Ananth Narayanan said in an interview.
Narayanan had earlier said that Myntra would break even at the operating level in the financial year that ended on March. That target was pushed back after parent Flipkart raised nearly $3 billion in fresh capital last year, Narayanan said, adding Myntra will now spend more money on growing sales.
Myntra, which also owns Jabong, generated gross merchandise value (GMV) of $1.2 billion in the last financial year. Its Ebitda (earnings before interest, tax, depreciation and amortization) margin narrowed to -5% in the month of March from -17% in the year earlier, Narayanan said.
Myntra sees sales rising over 50% this year, as it spends more on marketing and adds newer categories, he said. A faster expansion of sales at Jabong will also help boost Myntra’s overall numbers, he said. In the last financial year Myntra’s GMV rose by 45%.
Some analysts were sceptical of the idea of Myntra meeting its Ebitda target, given the competition and pressure to grow sales, but Narayanan said the firm chose to delay hitting its target to grow sales faster.
“We feel comfortable in maintaining an Ebitda margin in the negative single digits and growing sales at 50%. We’re very well capitalised and there’s no reason not to pursue the long-term target of $10 billion in GMV. But we don’t want to do anything stupid to get there that’s why we’ve put the constraint of keeping Ebitda at the same level,” Narayanan said.
Apart from expanding its core fashion business, Myntra is also trying to increase sales in personal care, jewellery and home accessories. These three generate 3% of sales, and the firm expects the number to rise to 10% by the year end. Myntra will open pop-up stores in personal care and add fine jewellery items to grow sales of these categories, Narayanan said.
The firm is also launching a digital TV channel called Myntra TV on YouTube.
“We’re investing a lot in content. On Myntra TV, we’ll have a series of digital content pieces, short video pieces on fashion. It’s a cheaper way to get top of mind among consumers. In the long-term there’ll be more digital consumption than TV,” Narayanan said.
Among the large e-commerce product categories, fashion sales offer the highest margins to retailers. However, sales of fashion products haven’t increased at the rate that analysts expected. Fashion was expected to become the largest e-commerce category by 2020. But it is still a distant second to the smartphones, an indicator that e-commerce firms will continue to struggle for years to generate profits as smartphones is a money-losing category with low margins.
“Does it really matter if it’s the largest or the second-largest category? The fact is it is a very large category. The overall fashion market is $100 billion and online is about $3 billion. Whether the market goes from $3 billion to $5 billion to $25 billion will be determined by how much offline to online conversion Myntra-Jabong, Flipkart and Amazon do. We’re doing the right things and I don’t see the market slowing down,” Narayanan said.livemint