jabong acquisition

Ahead of its potential sale, online fashion portal Jabong has shifted its business from an inventory-led model to a marketplace model. The shift in the business model is to comply with the new FDI guidelines from the government.

The development was first spotted by Mint. Xerion Retail, which has been selling most of the goods on Jabong, has now made space for three more vendors: Bren Trading Pvt. Ltd, Ravenna Fashion Pvt. Ltd and Wearhouse Products Pvt. Ltd. Until now, Xerion Retail sold most goods on Jabong. Over 90% of Jabong’s sales came from Xerion Retail until mid-2015.

The company has been working to change business to a marketplace model since beginning of this year. In January, Jabong hired Ranjan Kant as its chief marketplace officer, indicating the same. The company has been moving towards a marketplace model since October 2015 and started focusing on profitability.

We recently reported that Jabong is up for sale and companies like Snapdeal, Flipkart, and Aditya Birla Group are the in talks. However, some reports suggests that Snapdeal is the front runner for this deal.

And since Snapdeal and most other eCommerce websites in India are having marketplace model due to FDI guidelines, it would have invited trouble for the companies if they acquire an inventory-based company.

Jabong is run by Novarris Fashion Trading Pvt. Ltd, a wholly owned subsidiary of Jade e-services Pvt. Ltd. Jade is now owned by Global Fashion Group. Jade received FDI and sold goods to Xerion Retail, which in turn sold products to customers on Jabong’s site.

Jade had leased out the license to run Jabong.com to Xerion. After the new structure, Xerion as a company will cease to exist and the license of the brand Jabong.com has been transferred to Novarris.

Sanjeev Mohanty, chief executive and managing director at Jabong, said,

As India’s leading fashion marketplace, we are proud to connect over a thousand sellers who benefit from increased distribution with millions of customers who enjoy the best combination of choice, cost and convenience. We look forward to onboarding more sellers and customers, while enjoying good and equal working partnerships with all parties. We have no comment to offer in relation to speculation regarding a sale of the business.

Jabong’s marketplace model however, could raise questions. As per data from RoC, Bren Trading lists its directors as Sanjeev Dhull and Anuj Baijjal. Sanjeev was a director at Xerion Retail, the company that was running Jabong.com till last week. Also, Ravenna Fashion lists Rajeev Suresh Samant as its director. As per sources, the company is believed to be run by the management of Xerion.

The company is already in trouble. Rocket Internet is investigating former senior executives of Jabong for violation of several corporate governance rules. It also disclosed an apparent “conflict of interest” during the GoJavas deal with Snapdeal.

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