Exclusive: Jabong achieves positive gross margin with every transaction, ships close to 38K orders everyday
Rocket Internet had followed the ‘spray and pray’ approach when they entered India. However, the incubator led by Samwer brothers, has been betting big on Jabong -- an online fashion and lifestyle retail venture. The Germany-based incubator forayed into India with multiple ventures like Jabong, Fabfurnish, 21Diamonds among others, but never shied away from shutting down a few. It pulled the plug from startups like Heavenandhome, 21Diamonds and Bamarang.
Launched in 2012, Jabong overtook Myntra a few months back, which dominated the fashion etail space for years. While Myntra cloaks close to 30,000 (according to our estimate) orders on a daily basis, Jabong ships around 38,000 orders every day.
“Undoubtedly, we have established leadership position in the fashion category and will continue to do so. We have done GMV business worth $25 million in a month during the last quarter of the previous calendar year,” says Praveen Sinha, founder and MD, Jabong.com.
The Gurgaon-based startup had started transitioning from pure inventory play towards managed marketplace model in May last year. “We have seen significant interest from merchants to sell on Jabong as well as on Jabongworld.com,” adds Praveen.
The recent $100 million round
Jabong raised $100 million from the set of unknown investors including UK-based CDC group. When asked whether it has access to the entire $100 million or the amount will come in tranches, Praveen reveals, “The round and quantum of investment is not a mere promise. We have complete access to the above figure.” Jabong is using the recent risk capital to spruce up its supply chain, technology and hiring talents.
On departure of co-founders
Lately, Jabong was also in the news when its core founding members left the company. Speaking about it, Praveen says, “It’s a sign of evolution. We started with two co-founders -- Arun and me -- but as we grew we required more people at functions like marketing, strategy etc. but now after two years, we’ve established the above functions. Besides this, the co-founders who left were also looking to start on their own. So, overall their departures were decided mutually.”
Customer service is a big challenge
“Most of the e-commerce startups offer superior customer experience initially (under 5K orders) but it fails to hold when they start cloaking above 15K - 20K orders. This is not the case with us, we have been able to wow every consumer,” adds Praveen.
Interesting trends and facts
- Shoes and apparels have been the most sought categories at Jabong
- Men tend to buy branded stuffs while women show appetite towards unbranded fashion clothing & accessories
- Cash on Delivery (COD) orders reduce by 6%. At present, it contributes 65% orders against earlier figure of 80%
- Average transaction size is Rs.1500
On acquisition and road towards profitability
“We believe in organic growth and not looking at any acquisition or merger. As far as getting acquired is concerned, I can’t predict the future,” points out Praveen. Jabong achieved operational break-even earlier this year. “However, profitability is still two-three years away from now,” he adds.
Recently, the poster boys of Indian e-commerce story, Flipkart and Myntra, have been served notices alleging violation of rules while attracting foreign fund. Speaking about it Praveen says, “Legally, we are a very intact structure which completely complies with the law of the land.”
For the uninitiated, FDI in B2C etailing is not allowed by India, and defalters will have to shell out as much as 4X of the raised amount. “You are free to operate in the B2B space but the consumer facing ventures can’t have the same set of investors and promoters. Going by that logic, we don’t see any issue as far as FDI is concerned,” points out Praveen.