Daybreak - The Flipkart-effect is not doing Myntra any good

Episode Date: January 3, 2024

In 2023, more than 70 million new users downloaded the online shopping app Myntra. India’s leading fashion e-retailer owned by Flipkart has been on quite the discount giving spree lately. And we are not just talking about the year end and festive discounts. Since July, Myntra has 22 sales days every month. Its biggest rival, Reliance owned Ajio has no more than 14.So you might think, Myntra must be raking in some crazy numbers in sales right?Not quite.From onboarding hundreds of sellers a month to regular strategic changes, Myntra is trying it all. And its sales growth is still slumping. A former business executive told The Ken, “the past 15 months have been bad for Myntra.” In fact, Myntra’s net loss jumped over 30% in the financial year ended March 31, 2023. It posted a net loss of nearly 800 crore rupees.What is going on?Tune in.Listen to Anant Narayan talking about his stint as Myntra's CEO and more on First Principles hereDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Ramon, Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Happy New Year, dear listener. I hope you enjoyed your holidays.

I made the most of it. I went picnicking with my friends to this beautiful lake on the outskirts of Bangal. And I also did a bit of cooking and also some online shopping. I mean, isn't it so hard to not give in to the temptation of online sales season? So, yeah, that's what I did during the holidays. Now, talking about online shopping, do you know by the end of last year, I mean, 2023, which still feels so weird to say, more than 70 million new users downloaded the online shopping app, Mindra. The FlipCartown company is one of India's leading fashiony retailers,

and lately it's been on quite the discontaliener. discount giving spree. And I'm not talking about just the year-end and festive discounts or sales. Since July, Mintra has had 22 sales days every single month. For comparison, its biggest rival which is Reliance-owned Agio has no more than 14 every month. Now, put two and two together, as in the number of MENTRA users and the number of sales days, you would think, wow, Mintra must be making some crazy number in sales, right? Not quite. From onboarding hundreds of sellers a month to regular strategic changes,

Mintra is trying it all, and yet its sales growth is still slumping. A former business executive from Mintra told the Ken, and I'm quoting, the past 15 months have been bad for Mintra. In fact, Mintra's net loss jumped over 30% in the financial year that ended in March, 23. It posted a net loss of nearly 800 crore rupees. So what is happening to one of India's biggest online shopping companies? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I don't chase the news cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story

that is worth understanding and worth your time. Today is Wednesday, the third of January 24. To understand what is going on with Mintra, one has to look at the company's leadership. It's founder Mukesh Bansal left Mintra in September 2015. And ever since Mintra's chief executive officer or CEO has changed about every three to four years. After Bansal came Anandh Narayanan, who built and strengthened private label brands for Mintra. By the way, Anandh Narayanan is now the founder of MENSA and

we actually have a fantastic episode of our podcast's first principles, where Rohin and Anandt have a candid conversation about his stint as Mintra's CEO, and a lot more, of course. I'll link it to the show notes of this episode. Anyway, after Anand Narayanan left, Amar Nagaram took over in January 2019 and continued till December 2021. And then, in January 2022, came the current CEO, Nantita Sinha,

who was previously Flipkart's vice president for customer growth, media and engagement. And here is what changed under her. Mintra's house of brands, which included Mintra's own private labels and other licensed brands such as Kila and Nautica, which are exclusive to Mintra, no longer enjoyed a separate budget and a larger marketing team. The company kind of stopped experimenting as much as it used to. And before Sinha, the experiment period for any way, vertical, new vertical, was about one and a half years. Now it is just six months. A Minra

executive who spoke to my colleague, the Ken reporter Noha Burbhay, told her, and I'm quoting, from Bansal to Narayanan to Nagaram, the transition worked. This time, which is with Sinha, that did not happen. End quote. And not just that. Just a month after Sinha became the chief CFO Ramesh Bafna and chief marketing officer, or CMO, Harish Narayanan quit Mintra. The company's losses also grew in this period. The same executive also told us how they could never meet their event targets because their category and team leaders had left.

And then, to make matters worse, two former senior executives told us that around 200 employees across different functions were either fired or were forced to resign in 2023. According to a report, 50 jobs were caught. cut in the House of Brands team alone. The Ken spoke to many ex-employees of Mintra, and they described the town hall meetings as empty, uninspiring, and lacking any encouragement or long-term strategy. An executive from the House of Brands told us that the CEO saying that we can pull up numbers

if we push ourselves in a company-wide meeting was far from being practical. The new leadership including Sinha, the CFO, Abhishe Gubta, and the chiefs business officer Sharon Pice are all from Flipcard. So the FlipCard effect on Mintra became quite evident over the years. Most of the ex-employees that NUHA spoke to told her that the leaders who joined Mintra from Flipkart are turning the company into a mass marketplace onboarding as many brands as possible, which might not be the best thing for a company like Mintra. Stay tuned to find out why. One way of trying to understand what is happening to Mintra

is trying to understand how the company is going through a sort of a change in personality. A former House of Brands executive told the Ken that the company has moved on from being a fashion destination for the brand-conscious buyer to a mass market player that focuses on tier two and tier three cities since April 2022. In the span of a month, Mintra adds about 300 to 400 sellers and each of them handle about two to three brands. So the number of brands has gone up. But this focus on bringing more sellers collides with Mintra's de-emphasis on private labels.

But private labels are where online marketplaces make money. That is where they have control, they can launch products faster and they can get better margins. and Mintra played the private label game exceptionally well. To give you a picture, the share of private labels in Mintra's revenue used to be 25%, which is one-fourth two years ago. But now, this has fallen to 16%. According to two former senior executives, Mintra has been reducing its private label brands to focus on a select few.

So if it had over 50 such brands across different categories like home, furnishing, apparel and accessories in 2022, it now has only about half of that at 25. But in this process, Mintra has also ended up killing brands that were doing well. One of the two executives explained this to us by saying that smaller brands actually have far better unit economics than HRX or Roadster. But Mintra was cash crunched and the House of Brands was sideline. The House of Brands executive that we spoke to told us, and I'm quoting, the House of Brands business is heavily dependent on just two to three private label brands and it has reached its saturation. End quote.

Roadster contributes about 10% to Mindra's gross sales, followed by HRX, which is 8%, and Marston Harbor, which is about 4 to 5%. Now, out of the 15 licensed brands, 10 have been showing negative contributions. So, to drive growth, Mintra tried to get into the beauty and personal care segment about two and a half years ago. But the segment is not profitable yet. It did not see the kind of growth that Mintra's leadership was hoping for. I mean, it is hard to beat Nica in this category. So what is Mintra doing now? Mintra is betting big on Genzi.

It is trying to lure them with its Genzi-focused segment called Mintra Forward and Rising Star. which is a set of direct-to-consumer fashion and lifestyle brands such as Neiman's, Souta and Rare Rabbit. Mintra Forward was launched in May last year and its aim is to acquire 10 million Genzi users in the next two years so that they can become the next drivers of growth for Mintra. But even here, it will have to fight against Reliance-backed Agio, which obviously has more money and also around 20 million monthly active users already. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings.

A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.