Even as losses pile up at home, Myntra plans entry into US

Sets up Myntra Inc, USA to enter the $60 billion market; reports Rs 740 crore losses on revenue of Rs 758 crore in FY15

Myntra, the fashion arm of Flipkart, is looking to enter the $60-billion online apparel and accessories market in the US and has set up a subsidiary — Myntra Inc, US.

The move underlines parent Flipkart’s global ambitions. Since its takeover in May 2014, India’s largest e-commerce company has used Myntra as a test bed for new technology and business models.

For Myntra, the plan to expand its business overseas comes at a time when losses at home continue to pile up and retail giant Reliance plans an entry into the space. Myntra’s US plans were revealed in its annual report for FY15 filed with the Registrar of Companies (RoC). The unit is yet to start commercial operations.

In FY15, Myntra had reported a loss of Rs 740 crore on a revenue of Rs 758 crore, compared with a Rs 173 crore loss from Rs 427 crore in the previous year.  The four-fold jump in losses is due to increased spending on advertising and undercutting costs of products, Myntra said in a filing with RoC. Myntra is trying to scale up its operations, getting more users to download its app on their smartphones in the light of Reliance’s entry into the online fashion space with ‘LYF’, which it plans to launch alongside the 4G LTE services of Reliance Jio.

Aditya Birla group, which owns brands such as Louis Philippe and People in the offline space, has also launched its fashion e-commerce portal Abof.

While Myntra was not an exception to the trend of e-commerce players reporting surging losses as competition in the space increased, it expects to be profitable by the end of 2016, according to Myntra’s Chief Executive Officer Anant Narayanan.

“The nuance is that I will push for Ebitda (earnings before interest, taxes, depreciation and amortisation) profitability because that is important for a sustainable business model. I also want to make sure we are investing for the next 10 years, as the business will be 10-fold,” Narayanan had said in an interview last month. “Currently, we are at $550 million gross merchandise value (GMV). Next year, we will become $1 billion but we have to ensure we’re building the organisation for a $2-3 billion GMV.”

Myntra expects to achieve a GMV of Rs 6,436 crore (approximately $1 billion) by 2016 according to the company’s RoC filing.  The shift to better margins would come from promoting more in-house brands, which “yield better margins in the wholesale segment when compared to external brands”. Private brands contribute around 20 per cent of Myntra’s revenue, which will be increased to 30 per cent.

Flipkart, which has infused Rs 1,150 crore in Myntra since its acquisition in May 2014, has kept it as a separate platform. Instead, Myntra has become a test bed for Flipkart, with the company experimenting with an app-only strategy which it was eager to adopt for itself, but is now distancing itself from.

While the true impact of Myntra going app-only isn’t known, its operational costs shot up nearly three times to Rs 1,465 crore for FY15.