Myntra to expand private label business to reduce dependence on discounts
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Bengaluru: Flipkart-owned online fashion retailer Myntra plans to increase spending on technology, buy more brands and hold more full-price sale events to reduce dependence on discounts for attracting customers.
Myntra is also on track to grow sales by about 40-50% in this financial year, chief executive Ananth Narayanan said in an interview.
After Flipkart received as much as $1.4 billion in fresh capital in April, it increased its fund allocation toward Myntra.
“Instead of increasing spending only on marketing and discounts, we have decided to invest more in technology and brands. These will help us build moats and improve the bottom line,” Narayanan said.
Myntra had launched its Brand Accelerator programme last December. It bought a majority stake in HRX, a clothing and shoes brand launched by actor Hrithik Roshan, from Exceed Entertainment last August.
The company will do “many such deals” this year, Narayanan said. Its private brands, which include Roadster, Dressberry and Anouk, will contribute about 30% of overall revenues by the end of the year from 23-24%, he said.
“We want to cap the contribution of private labels to a third of our overall business. We want to keep our identity as a multi-brand retailer and not turn into a private label business”, says Narayanan.
Myntra’s efforts to expand its private labels business come at a time when the retailer is pushing towards becoming profitable. The company is looking to cut back on discounts, while shifting more towards selling full-price products. Private labels typically help retailers such as Myntra gain higher margins.
The company had held a full-price sales event in April, a first-time experiment to test the shopping appetite of its customers when discounts aren’t on offer. Myntra failed to meet its own target of generating up to Rs100 crore in gross sales for the three-day full-price sale event.
However, it will again host a similar event later this year after tweaking the product assortment and the duration of the sale.
“One of the things we learnt from the full-price sale was that you need to have a lot more high fashion and exclusive merchandise. That’s what customers are looking for when you ask them to pay full-price. Another thing is, the sale should be longer. Because a full-price purchase won’t be an impulse purchase, customers like to browse and delay the decision. They want to come back later and see if they feel like buying it,” Narayanan said.
In December, Myntra, which acquired smaller rival Jabong in 2016, had said that it aims to hit $2 billion in annual revenue run rate and also turn profitable by the end of the 2017-18 fiscal year, driven mainly by a rapidly growing user base. A $2 billion annual revenue run rate implies monthly revenues of roughly $165 million.
Myntra expects Jabong to grow sales by at least 40% this fiscal year, driven mainly by advertising, sales from newer brands and the introduction of Myntra-owned private labels.