Things are getting messy at Jabong. If the top-level churn plaguing the online fashion retailer was not bad enough it may now be looking at a pink slip season.
Sources familiar with the development told The Economic Times that Jabong, which was acquired by Flipkart's fashion unit Myntra in July 2016, is expected to lay off a significant portion of its workforce in Gurgaon as part of the restructuring effort that is underway at Flipkart Group post the deal with Walmart. In all, Jabong could lay off 40-50% of its 400-strong workforce.
On Tuesday, in its statement announcing Flipkart co-founder Binny Bansal's resignation, Walmart had outlined a significant change in the group. "Going forward, Kalyan Krishnamurthy will continue to be the CEO of Flipkart, which will now include Myntra and Jabong, continuing to operate as separate platforms within the Flipkart business. Ananth Narayanan will continue providing great leadership as the CEO of Myntra and Jabong, and will report into Kalyan," read the statement.
With this move, Walmart is clearly looking to drive more synergies between Flipkart's fashion business and the twin fashion platforms. The daily added that while Flipkart Fashion and Myntra will continue to be run independently, it is not clear how much focus will remain on Jabong and whether it will continue operations.
According to sources, the move is expected to start with a restructuring of Jabong, where all operations including technology and corporate functions such as HR and finance will get combined with that of Myntra. Jabong is also likely to move base to Bengaluru from Gurgaon. The recent lay offs at Jabong could impact ten per cent of the full-time workforce at the Jabong-Myntra merged entity.
Significantly, in a statement yesterday, Krishnamurthy said he is committed to growing the Myntra business, with no mention of Jabong. "The Flipkart group is committed to the success of Myntra and growing the business, now more than ever. We want to empower the Myntra team to continue to operate independently to achieve even greater success," he had said.
However, Myntra's below-par performance this year does make a case for integration with Flipkart. Myntra is said to have missed its revenue target for 2018, with Jabong contributing significantly to the shortfall. An announcement on this is expected to be made soon, a source told the daily.
While speculation that Narayanan would put in his papers soon has been proved wrong with the man telling Reuters that he will continue to lead operations, the Flipkart Group has seen several high level exits recently. Myntra-Jabong's CFO Dipanjan Roy has also stepped down, sources claimed. Moreover, last month, Gunjan Soni, chief marketing officer of Myntra and head of Jabong, and Ananya Tripathi, Myntra's chief strategy officer and head of categories, reportedly announced their decision to leave the organisation in end-December.
Merging the businesses is likely to streamline operations at the Flipkart group. While its fashion business is run by close to 100 employees, the same functions at Myntra are handled by 1,000 people. "The entire purpose is directed towards cost saving in operations and marketing," Satish Meena, senior forecast Analyst at Forrester, told the daily. "That's what Walmart wants them to do in the fashion category through private labels owned by Flipkart and Myntra, while also looking to bring their own private labels to India."
But for the moment, opinion is divided on Myntra's fate. While insiders say that Flipkart Fashion, Myntra and Jabong will be integrated wherever there are synergies, while the front-end will continue to operate separately, other say that Myntra is likely to maintain its independence.
Edited by Sushmita Choudhury Agarwal