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Jabong raises $27.5 mn from European investor CDC; bullish on expansion

05-February-2014
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Jabong raises $27.5 mn from European investor CDC; bullish on expansion

Fashion and lifestyle e-tailer Jabong.com has raised $27.5 million from UK’s Development Finance Institution (DFI) CDC. This is part of the investment along with contributions from other international investors and the amount is rumoured to be in three digits. Well-known German VC fund Rocket Internet is one of the investors in Jabong and it is likely that it has also participated in the current round, however, it could not be confirmed.

This is the first time that any investment related information has surfaced from the very secretive Jabong. Though Praveen Sinha, Co-founder and MD, Jabong.com didn’t confirm or deny the development, it has been announced on the investor’s official portal. “CDC’s investment will help to drive the growth of the business and enable development of the supply chain infrastructure and the technology platform in India, creating the potential to connect millions of customers with thousands of small suppliers,” said the post.

Started in 2012, Jabong made a grand entry into the Indian e-commerce domain and captured a huge marketshare with its shock-and-awe strategy. It indulged in heavy discounting and huge marketing campaigns across media to grab the attention of the consumers. Speedy deliveries, instant customer care, fast return and huge variety of SKUs made Jabong a household name in a short span of time. However, while Flipkart and Snapdeal were declaring their numbers to the public, Jabong had remained silent on the kind of business generated as a result of their huge customer acquisition exercise. Sources close to the development shared that for the month of December 2013, the e-tailer did GMV of $23 million. It could be attributed to Google’s three-day Great Online Shopping Festival 2013, which increased sales for all e-tailers by a large number for those days.

Sinha chose to not comment on this as well. He maintained that customer delight is their top priority. He also stated they will be storming the market very soon with new campaigns. As of now, they are on the lookout for a new creative agency. “Though our marketing spends won’t change a lot, we will increase visibility and revisit our strategy,” Sinha stated. He added that they will redesign a new strategy in terms of the positioning they want to create for the brand.

Jabong’s GMV numbers look a bit far-fetched when compared to the industry standards. According to several media reports last year, Myntra claimed to have crossed Rs 60 crore in GMV. Another report suggests that Yebhi has just scaled Rs 30 crore in GMV.

Flipkart and Myntra have time and again claimed to break even in the next couple of years, but none of the players has yet been able to do so. While most e-tailers rely on heavy discounting to attract buyers, players such as Flipkart, Snapdeal, and Jabong have reached a point where they do have respectable brand recall in the customer’s mind. One will have to wait and watch to find out which of these e-tailers lasts the immensely competitive struggle to sustain high customer acquisition costs and low customer retention rates.

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