Is Rocket Internet’s Jabong running out of funds?

Photo credit: Perspecsys Photos.

Online fashion player Jabong, a Rocket Internet venture in India, has narrowed its losses by almost 23 times in the fourth quarter, the Berlin-based incubator said on Thursday.

For the three months ending December 31, Jabong, which competes with Myntra and other ecommerce companies that sell clothes and accessories, posted a loss of about US$297,000, Rocket Internet said.

That compares to a loss of about US$6.9 million in the fourth quarter of 2014.

Holiday cheer

The fourth quarter, however, is traditionally a strong three months for retailers, because it coincides with the Christmas shopping season. In India, it also coincides with the festive season that culminates in Diwali.

Gross profit margins for Q4 improved by 14 percentage points, driven by a lower level of discounts.

On a year-on-year basis, Jabong posted a loss of US$7 million, compared to US$24 million in 2014.

There’s definitely no strategy to exit India, said Rocket’s APAC JV head

So far, so good. Rocket even explained a 19 percent drop in revenues in Q4, saying it was the result of fewer discounts. In retail, sales and revenue typically get a boost when companies run promotions and discounts, but those discounts eat into their margins and bottom line.

Gross merchandise value (GMV) too fell about 19 percent to US$56.8 million.

Online retailers often use GMV, or the value of all goods sold before discounts and such, as a measure of performance. That is because they typically make revenues from the commissions they get from sellers.

Jabong CEO Sanjeev Mohanty has said it is trying to break even sooner than rivals, as the company tries to match bigger rival Myntra in performance. Sanjeev was named chief of the company in November, after its founders quit.

Burn

Photo credit: Purple Slog