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In an effort to boost money reserves and make itself more attractive to investors, India’s largest e-commerce firm, Flipkart, announced that it would slash monthly spending at its fashion arms Myntra and Jabong, according to India’s Economic Times.
Overall, the company estimates that it will trim its monthly spending to about $20 million from $45 million, as last recorded roughly six months ago. Spending on salaries and marketing expenses are the two biggest spends at Flipkart, according to the Economic Times article.
- Flipkart has reached out to a set of new investors after stalled talks with Walmart. This past September, Walmart was reportedly in talks to invest in Flipkart, but nothing came to fruition. Looking for fresh funding, Flipkart has reportedly been talking with eBay, as well as other larger companies, to raise between $500 million and $800 million.
- The news comes just days after Fidelity slashed Flipkart’s valuation by 36%. Fidelity, Morgan Stanley, and other banks recently valued the company around $5.5 billion, which is roughly $10 billion less than its peak of $15.5 billion in April 2015. After setting an aggressive valuation target of $10 billion for the year ended March 2016, Flipkart found it hard to meet objectives, as growth across the industry cooled in 2016 and funding continued to slow.
Raising capital quickly will be imperative for Flipkart as it deals with increasing competition from Amazon and the impending entry of Alibaba. Amazon has set its sights on India as its next big market and vowed to spend an extra $5 billion to build out its operations in the Asian nation. Back in December, the e-commerce giant launched its Prime Video membership service there to attract not only video subscribers, but also to siphon potential customers to its yearly Prime membership subscription.
Meanwhile, Alibaba is opening its first office in India with hopes to gain a slice of the growing e-commerce market. Cutting expenses could help Flipkart improve its margins in light of increasing competition, and may better position it for success moving forward.
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