Are Flipkart & Aditya Birla Fashion Exploring Synergy?

Gaining access to someone else's resources for mutual growth really helps sometimes. Here's an example - #NehuDaVyah or #NehuPreet, you would have surely come across these hashtags or something related while scrolling through the social media. Singer Neha Kakkar is tying the knot with Rohanpreet Singh, that's what the news is.

Although some people are also terming this as a publicity stunt. However, I am not concerned with whether it's a gimmick or the wedding is really happening. What I'm concerned with is the logic behind this wedding.

If you would say that they share a love bond and that's the only logic, well then, I have no interest in exploring that. Think about it professionally and a bit financially. Neha Kakkar gets most of her projects from Bollywood. She is seen rarely in the Punjabi music industry. However, Rohanpreet is now a familiar Punjabi singer who is yet to debut in Bollywood. So, can we say that this marriage would be beneficial for the careers of both? Looks like so.

Now, let's come to the topic. Flipkart has acquired a 7.8% stake in Aditya Birla Fashion, and Retail Limited (ABFRL) and the deal is said to be worth Rs. 1500 crores. Is this deal beneficial for both the parties involved? What does it actually mean for both of them? Read on to find out.

What's the Flipkart-ABFRL Deal About?

Flipkart, which is a Walmart owned e-tailer (online retailer) has picked up stakes in Aditya Birla Fashion and Retail Limited. ABFRL is the company whose brands such as Allen Solly, Louis Phillippe, Van Heusen, Forever 21 etc. have got a prominent presence. ABFRL also operates the Pantaloons stores. So, it could be said that ABFRL hosts some renowned fashion brands (mostly lifestyle brands) but mostly offline.

On the other hand, Flipkart is the owner of Myntra (& Jabong too), which is an online fashion destination and also Phone Pe (online payments platform). Myntra is the preferred online shopping venue in India when it comes to fashion. So, it can be said that Flipkart hosts a decent online fashion destination which is a market leader at the moment. So, the question is, why has Flipkart taken this step? Let's get into the details.

Reading Between the Lines

Indian retail market is in a sort of hyperactive mode as of now. First Reliance Retail acquired the assets of Future Group (although now it's being reported that the arbitration panel has impeded the deal and some complications are coming up).

Reliance Retail also received numerous investments, and Jio Mart is all set to flourish and disrupt the Indian retail market. Then, we heard Tata Group is interested in upping their e-commerce game by eying a stake in unicorn startup Big Basket. And now, this deal has come up out of the blue.

It looks as if all the big conglomerates and business groups are interested in converging their focus towards the Retail sector. Those already flourishing in the offline retail are trying to set their feet in the e-Commerce while those established in the e-Commerce are trying to target the offline channel. Coming back to the Flipkart-ABFRL deal, this looks to take the game to the next level as both of them look to make the most out of this deal.

A Win-Win Situation

A marriage of the complements is more likely to be successful than not. Flipkart is aggressively looking to expand its omnichannel presence and strategize its way to the top. In online fashion retailing, it already has the edge over the others, and by sealing this deal with ABFRL, the Walmart owned e-Tailer is looking to establish a monopoly in this space. Although the Competition Commission of India is likely to have a say in that case.

ABFRL, on the other hand, had already raised funds sometimes back through rights issues. Those funds, along with the investment made by Flipkart, could be utilized to strengthen its presence in the offline channel through aggressive marketing.

Also, the ABFRL owned brands (most of which are lifestyle brands) may find themselves in a better position with access to a prolific online channel in Myntra. And, this is not it. Even Phone Pe could be utilized to maximize the selling potential by promoting coupons, cash backs etc.

The Bottom Line

Coming back to where we started from, a marriage that gives access to one's useful resources to the other, where the other person needs it and is in a position to utilize it and make the most of it, is always rewarding.

Neha Kakkar and Rohanpreet's relationship may or may not last long, but this shall be professionally rewarding for both of them. In the same way, Flipkart and ABFRL both can make the most of the investment deal and reap the benefits in these tough times.

When the retail sector is looking to struggle, these kinds of deals come as a sigh of relief for the industry. However, it will be interesting to see who is finally able to capitalize and make its way to the top or at least be in a commanding position. The game is on, and the players (companies) are putting their best foot forward. We might see more such deals in the near future. But, who will win this ultimately or gain the most out of it, only time will tell.