The customer is king and Sameer knows to Crownit with a GMV of Rs 36 cr in two years

The early years of this decade saw a farrago of enterprises around product ecommerce in India when it was observed that the shopping behaviour of consumers was undergoing a sea-change. People, particularly young professionals in the metros, weren’t going to stores or restaurants or even local vegetable vendors anymore. Brick-and-mortar businesses found themselves up the slippery slope of profitability, some facing even closure.

According to another study by EY and Retail Association of India, India’s retail market was growing continuously. It was estimated at US $520 billion in 2013. And it is expected to grow at a CAGR (compound annual grown rate) of 13% to reach around US $950 billion by 2018.

This was when many businesses realised they could leverage the internet to introduce a new ecommerce model – O2O or online to offline model.

This model works on two levels: O2O aggregation platform and O2O marketing platform. The former enables an offline retailer via technology such as local delivery platforms and payment gateways. In the latter case, O2O marketing companies help the local merchants expand their business by marketing products.

When Sameer Grover decided to launch a startup, he chose the O2O marketing platform. In July 2014, he came up with Crownit, connecting consumers with local merchants. The app lets customers collect ‘crowns’ from local businesses in the form of cashback, which is redeemed for goodies like online shopping, movie tickets, talktime and even charity.

“Each time a customer makes a purchase at one of the local stores, s/he clicks a picture of the bill and sends it to the company to earn crowns. These crowns can be redeemed while shopping at ecommerce stores, booking movie tickets, ordering flowers online or even donating to a charity,” explains Sameer.

This Delhi College of Engineering graduate has had extensive experience creating and marketing software products for large enterprises as well as small and medium businesses both in India and the US. Ever since his return from the US in 2005, he has worked in leadership positions in startups like Apollo Health Street, MphRx and Knowlarity.

Current milestones

Starting out with a couple of round of angel investments, Crownit raised $5.5 million in a Series A round of funding from Accel Partners and Helion Venture Partners in May 2015. Since then, there has been enormous growth in business.

Launching its service from Gurgaon, the platform now has presence in seven cities -- New Delhi, Gurgaon, Faridabad, Noida, Greater Noida, Mumbai and Bangalore.

Over the past one and a half years, it boasts an increase in its customer base from 25,000 to 800,000 uses and the listed merchants from 1000 to 11,000. It has set a target of 20 million users and a 25-city reach by 2019.

Expansion plans

In the first six months, the app drove around Rs 7 crore of business in Gurgaon. This has burgeoned to a GMV (gross merchandise volume) of Rs 36 crore. It now aims to drive $1.2 billion of annual GMV in India by 2018.

Crownit is looking forward to raising additional funds for the expansion. According to a recent media report, it raised a Series B round of funding from a Silicon Valley investor and a Mumbai investor.

Asked about it, Sameer remained non-committal, saying, “We are a high-growth company which would continuously require more capital. We’ll continue to raise funds and our existing investors are supportive. We won’t require outside funds till next year.”

Talking money

Crownit makes revenue through the commission it charges for driving business to the outlets associated with it. An online-to-offline company, its core proposition is to drive customers to fragmented businesses.

“The average ticket size of each transaction is Rs 1,200. Our average users are working professionals in the age group of 22-35 years, with average spending of Rs 5,500 a month on the platform,” says Sameer.

About profitability, he says the venture is profitable at gross margin level and will hit full profitability by the end of 2017.

A competitive market

O2O, according to Sameer, is a $40 billion market and various platforms are competing in it. Nearbuy (formerly Groupon) and Little are the two nearest competitors that offer services in the same segment.

Last July, Zovi founders Manish Chopra and Satish Mani jumped on this bandwagon with the launch of Little, an app-only consumer lifestyle deals marketplace. They also raised $50 million funding, led by Paytm along with a big, unnamed investor with participation from existing investors, SAIF Partners and Tiger Global Management.

Similarly, last August, Groupon India, the daily deals and local commerce company, rebranded itself as Nearbuy, in which its US-based parent firm, Groupon, does not hold majority stake. Sequoia Capital, a venture capital firm specialising in startup investments, helped Groupon India split from its Chicago-headquartered parent firm.

Since its launch, Groupon India has scaled up presence across the country. In 2014, it said it sold over 7 million vouchers with redemption rate of 97 per cent among its customers.

Sameer is unfazed about competition, saying Crownit’s USP is that it gives cashback to customer on every transaction, unlike other startups that give discounts and coupons.

He adds that Crownit's app-only and cashback strategy has worked very well in the O2O market. He will continue to “make customers delighted with our gamification and personalisation”. “What sets us apart is that we don't do any marketing; rather we focus on engaging users without spending money and that helps us get to profitability faster.”

Besides startups, investors are also showing keen interest in such deals-centric platforms.

"O2O is a very large market with very fragmented merchant base on one side and value-based customers on the other side. Secondly, merchants need help in representing their services and attracting right loyal customers,” points out Shekhar Kirani of Accel Partners.

He adds that he is excited about Crownit as this platform has shown proven merchant benefits and sustainability over long time for thousands of local merchants. Secondly, the app is able to demonstrate a strongly loyal customer base that is happy with the overall O2O experience.

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