Online fashion retailer Myntra is close to buying a majority stake in HRX, a clothing and shoes brand launched by actor Hrithik Roshan, from Exceed Entertainment, as it looks to boost its high-margin private brands business.
Myntra, which didn’t disclose the financial terms of the deal, said it will finish the transaction over the next few weeks.
HRX will bring in sales of ₹ 300 crore this financial year, up from ₹ 100 crore last year, said Rajesh Narkar, vice-president, Myntra Fashion Brands. Launched in late 2013, HRX is a sports and lifestyle brand that is sold on Myntra and Flipkart. Apart from clothing and shoes, its products include belts, backpacks and wallets.
“This deal will add an attractive sportswear and lifestyle brand in our private brands collection. Indians are looking to become healthier, more active and want more choice. Leaving aside a few international sports brands, there’s a lack of choice for consumers in sportswear and lifestyle and there’s massive scope to build a large brand in this segment. Buying an equity stake in HRX will align our vision with HRX’s over the long term," said Narkar.
HRX will become part of Myntra’s growing portfolio of private brands. The company, which is owned by Flipkart, now owns 12 private brands, including HRX. Its largest private brand is Roadster, a casualwear offering.
Among online retailers, Myntra has by far been the most successful in building a large private brands business ahead of its parent Flipkart and smaller rival Jabong. Increasing sales of private brands, which bring in higher margins than third-party brands, is one of the main drivers of the company’s plan of achieving profitability over the next two years or so.
Myntra expects private brands to contribute up to 30% of its sales by March 2017, from about 20% at the beginning of the financial year. The company is targeting gross sales (net of discounts but before product returns) of ₹ 5,000 crore this year.
For HRX, selling a large stake to Myntra will mean getting access to analytics, data on customer preferences and more marketing power.
“What we bring is a deep understanding of the sportswear and lifestyle market, an understanding of the consumer and scale. When a brand launches on Myntra and Flipkart, it gets a nationwide scale immediately. We have detailed data on what consumers want and which areas a brand is popular in. This can help brands with their offline strategy, too," said Narkar.
HRX plans to expand to offline stores in India this year, said Kamal Punwani, chief financial officer at Exceed Entertainment, which owns the rights to HRX along with Roshan. The company is in talks to open exclusive outlets, he said.
HRX will also expand to countries in West Asia sometime this year to boost its presence, said Punwani. “We’ve built a strong brand in sports and lifestyle in less than three years. With Myntra’s strength in analytics, data and the online channel and our product vision and strength in building brands, HRX will become a massive brand over the next 3-5 years. With this deal, our strategy and brand vision is completely aligned with Myntra’s," he said.
“Private brands help retailers in two ways. One, they have better margins than external brands," said Pinakiranjan Mishra, national leader for retail and consumer products at consulting firm EY. “Secondly, private brands also give more power to retailers. When you have your own brand, it helps keep competing, external brands on their toes. When a retailer owns a brand, they learn about merchandising and branding and it helps them in negotiating with external brands."