Myntra’s app-only move slowed down FY16 sales growth

Bengaluru: Online fashion retailer Myntra, which is owned by Flipkart, reported a sharp slowdown in sales growth for the year ended March 2016, as its move to become an app-only platform alienated customers.

For the financial year 2015-16, Myntra Designs Pvt. Ltd, the holding company for Myntra’s marketplace platform, reported revenue of Rs1,069 crore, compared with Rs773 crore a year earlier. Losses widened to Rs816 crore, from Rs741 crore a year earlier, according to regulatory filings sourced from data platform Tofler.

The 38% increase in sales in the last financial year reflects a slowdown in growth for Myntra from the past two years, when its sales expanded by at least 75%.

The relatively weak sales report is primarily because Myntra became an app-only platform and shut its desktop website in May 2015 in an attempt to dominate mobile app commerce. The move drew a backlash from shoppers and led to the company losing market share to the likes of Amazon India and Snapdeal.

Myntra subsequently re-launched its desktop site on 1 June this year after re-opening its mobile site in February.

To be sure, Myntra Designs’ numbers are not an accurate representation of the platform’s overall finances. Because India bans foreign direct investment in direct online retail, Myntra has a complicated corporate structure: Myntra Designs sources products and sells them to a seller entity called Vector E-commerce Pvt. Ltd, which in turn sells them to consumers via Myntra’s website and app.

Sales at Vector E-commerce, which is yet to file its financial reports, will provide a more accurate representation of Myntra’s sales. In the year ended March 2015, for instance, revenue at Myntra Designs was Rs773 crore, while that at Vector E-commerce was Rs1,253 crore, according to filings.

Still, the latest numbers from Myntra cast some doubt as to how the company plans to hit some of its near-term sales and profit targets.

A Myntra spokesperson did not immediately respond to an email seeking comment.

Myntra expected gross sales, net of discounts, of roughly Rs5,000 crore this financial year, chief executive officer Ananth Narayanan had said in a May interview. That target may be out of reach after India’s demonetization initiative, which has hit sales at all online retailers.

Earlier in December, Myntra, which acquired smaller rival Jabong earlier this year, had said that it would aim to hit $2 billion in annual revenue run rate and also turn profitable by the end of the 2017-18 financial year, driven mainly by a rapidly growing user base. A $2 billion annual revenue run rate implies monthly revenues of roughly $165 million.

Narayanan had said that Myntra’s acquisition of Jabong had also boosted the company’s numbers, adding that it wanted to turn Ebitda-positive in the next financial year. Ebitda is short for earnings before interest, tax, depreciation and amortization, an indicator of operating profitability.

Myntra used to generate the majority of its sales through Vector E-commerce. After India announced new rules governing e-commerce in March, Myntra has been forced to restructure and get new seller entities.

In August, Mint reported that Myntra had started working with a new seller called Tech Connect Retail Pvt. Ltd, owned by former Bharti Airtel Ltd chief executive Sanjay Kapoor, as it sought to comply with new regulations for e-commerce firms. The company added two other entities, including Health & Happiness Pvt. Ltd, later.