Almost two years after acquiring India’s largest e-tailer Flipkart in a USD 16-billion mega deal, American retail giant Walmart is pushing hard to make its operations profitable in the country. The company has begun pruning costs across the processes in Myntra, a fashion e-commerce portal that Flipkart had acquired in 2014 for USD 280 million.
Local media Economic Times, citing sources, said the US retailer is in process of “shutting down small warehouses, bringing down the level of inventory and reducing discounts on the online fashion platform.”
For instance, Walmart has sent out “clear instructions” to “reduce discounts by around 13-14% and shutter small warehouses that do not meet Walmart standards,” which could impact the retailers’ sales in the short run.
Usually, in the fashion industry, the trends keep on changing faster than other industries, hence companies in the segment offer steep discounts to clear old stock.
“In the fashion business, you will have to offer heftier discounts to clear old stocks and that means burning cash. Walmart does not have the appetite for such losses in fashion,” the source quoted above said. “They would rather do that through Flipkart.”
By slashing offers and discounts and reducing inventory at Myntra, the US-based online retailer wants the fashion portal to cut down expenses and have more working capital. For the year ended March 2019, Myntra’s expenses stood at USD 221 million, up from USD 125 million a year earlier. Meanwhile, it’s losses for the financial year 2019 were about USD 73.2 million on the revenue of USD 141.3 million.
Walmart seems to be driving these changes to sharpen its focus on profitability, although it might hurt Myntra’s growth, and give fashion-focused e-tailers like Club Factory an opening to grab more market share. To optimize resources, Walmart in February already shut Jabong, its other fashion portal, and directed its customers to Myntra.
At present, Flipkart claims to control around 70% of the online fashion business, which accounts for 10% of the Indian organized apparel market, which is expected to reach USD 59. 3 billion in 2022.
The move comes as Flipkart begins to drive global sales for the Arkansas-headquartered company. Last month, Walmart said e-commerce contributed 12% of the total international sales for the quarter ended January 31, “led by Flipkart and online grocery sales in several markets.”