Walmart, the US retailer which owns Flipkart, has asked Flipkart's online fashion retailer Myntra to streamline their processes in order to increase profits. This includes shutting down small warehouses across India, bringing down the level of stored inventory and reducing discounts offered by Myntra.
"There is a strong focus on the profitability and processes at Myntra and it may come at the expense of growth," a person familiar with the developments at Myntra told The Times of India. As per sources, there are clear instructions for Myntra to reduce discounts by 13 to 14 percent. The small warehouses that do not meet Walmart's standards have been asked to be shut down. According to sources, these measures are expected to impact sales of Myntra in the short run.
Reducing stored inventory will lead to Myntra unlocking working capital. "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. They would rather do that through Flipkart Fashion than Myntra," said a senior executive, who wished to remain anonymous.
Walmart had brought 77 percent stake in Flipkart back in 2018 for $16 billion. This deal included all the subsidiaries of Flipkart such as online fashion retailers Jabong and Myntra. Flipkart had shut down Jabong in February and has been directing all customers to Myntra ever since.
Myntra CEO Amar Nagaram had said the rapid growth for Myntra was possible because of a strong local leadership team that was able to comprehend the demands of the domestic market.
"Myntra is on a healthy growth path and will continue to move forward in our strategic direction, with focus on bringing the best brands to our customers," said Nagaram.
Flipkart owns 70 percent of the online fashion retail market in India, this accounts for 10 percent of the total apparel market in India. The Indian apparel market is estimated to be worth $59 billion by 2022, according to McKinsey's Fashion Scope.