How these two industry veterans are monetizing the $11 billion worth of textile surplus
It is an age-old business practice for textile mill owners to print some excess stock, lest they have wastage of the entire lot if a part of the design is not printed perfectly. They also print surpluses to be prepared for re-orders by their clients. The surplus stock thus generated after fulfilling the order, is, naturally, an equally high quality product, but is sold at lower prices through agents by word-of-mouth. In India, textile mills produce close to $11 billion worth of surplus textile and most of it is sold in an inefficient, cash-led method. The opportunity of bringing in an organised set-up where the mills and the buyers could transact in an open transparent manner, thus, is huge.
Who saw this opportunity?
Sanjiv Khandelwal did his undergraduate studies in Business Management at the Boston University. “I began with a venture in the textile industry and subsequently started a business in 2006.The company offered solutions for e-auctions, digital marketing, local services over Wi-Fi, mobile apps, and other such solutions for the B2B businesses,” says 52-year-old Sanjiv.
During that time, Sanjiv met Mihir Shah through a common friend. Mihir graduated with a BE from Mumbai’s Thadomal Shahani Engineering College and a Masters in Computer Engineering from University of Texas, and an MBA in Finance from Wharton. He has worked with Intel for four years and has had a long stint as a Director for TMT Investment Banking at Merrill Lynch, USA, and in filing patents. “In mid-2014, I decided to move back to India as I felt it was a different place since I had left 17 years back. The startup sector was just exploding and the entrepreneurial gene in me was starting to get vocal,” says 40-year-old Mihir.
Upon crossing paths, the two discussed their business ideas and realised they have complimentary skill sets, with a common vision to build a technology solution in the B2B space, which would change the old order fundamentally. “Mihir brings in the ability to analyse business and his experience in the technology, finance, and the TMT sector, and I bring in an understanding of the textile industry and the distribution network, and the experience in providing technology solutions to B2B business,” says Sanjiv.
They conceptualised a solution to digitise the process of trading in textile surpluses, and make it more transparent. The result was XSTOK‑ a mobile-first platform for buyers and sellers in the haphazard B2B space. By July 2015, they built an online B2B marketplace for surplus stock across fabrics, home textiles, apparels, and yarns. It enables the textile mills to upload details of their surplus stock on XSTOK, which can then be accessed by the registered buyers.
The company works with two parties ‑ mills and sellers, and wholesale buyers. The registered sellers upload the details of their available products. The registered buyers then get a notification, and the products are sold on the principle of dynamic pricing –either through an auction-based system or a wholesale price option.
“This way, the buyers also play an important role in determining the right price. XSTOK chargesthe suppliers a transaction and listing fees for every successful transaction. A buyer doesn't pay anything over and above the cost of the product he or she purchases,” explains Sanjiv.
As an end-to-end service provider, XSTOK lets the buyer search for products, review real-time inventory, buy the products, and make the final payment through their website.
Dealing with an age-old sector that is disorganised and informal, and has patrons who are loyalists of brick and mortar and make purchases relying on the touch with snap exchanges of hard-cash, XSTOK definitely had its share of skeptics in changing mindsets to convince the business owners to formalise their system and adopt modern means. For the same, XSTOK took on the responsibility of checking the quality of textiles sold on their site, ensuring timely delivery for buyers and also timely payment for sellers. “Initially, when buyers wanted to see samples of fabrics, we created 'SampleXpress', so that buyers could touch and feel the fabric before purchasing it. We also conducted textile weeks across cities and invited the potential B2B buyers, to see the samples and also clarify doubts about the process.”
In the next three to five years, XSTOK aims to manage at least 10 percent of the overall surplus textile products in India.
XSTOK.com finds the greatest opportunity to be in Tier 2,3, 4 cities and rural areas. “Most of the mills have been selling their surplus produce through local agents and hence the accessibility to the products was limited.But with digital, we are giving these buyers the opportunity to buy directly from mills and the largest manufacturing players, irrespective of their geographical location.”
As of now, some of the well-known mills that sell through XSTOK.com include Arvind, Bombay Dyeing, Nahar, Trident, D'Decor, Grasim, Garden Vareli, Welspun, Syntex etc. Their suppliers are located in the key manufacturing hubs across the country, like Delhi, Gujarat, Punjab, Rajasthan, TamilNadu, Andhra Pradesh and some in West Bengal for Fabrics, Home-Textiles and Apparels, on a large-scale.
Their strategy to develop the registered buyer's base is through a very strong digital presence, across all digital channels, including Google, Facebook, social media, direct mailing, and online advertising.
Is the business in surplus?
The startup has conducted over 500 auctions since July 2015, and has over 8000 registered buyers and over 300 registered sellers. “Very recently, a merchant downloaded our XSTOK mobile app while he was traveling from Vizag to Hyderabad by train. He participated in an auction; won it and also paid the product price, all of this while he was traveling. Such is the convenience that we aim to offer and it feels ecstatic to experience such stories.”
In September 2015, they raised Rs. 3 Crore in an angel round from an elite group of professionals that were heading consulting, stock broking, and logistics companies.The angel investors include Jeetu Panjabi (ex Capital Group), Manish Chokshi (Asian Paints), Anupam Mittal (People Group), VineetSuchanti (Keynote Capital) and Oliphans Capital, to name a few. “We were clear on only collaborating with investors who understood B2B business,” says Sanjiv
With the funds, they aim to expand to over 120 cities and break-even by the end of the current financial year, with over 1000 auctions, 25,000 registered buyers, and 500 registered sellers. In the long term, they aim to expand theirservices to several other commodities like paper, chemicals, etc.
The company is targeting a market pegged at $11 billion in India. Without any direct competitors, XSTOK is up against different flavours of transactional market places, such as liquidation.com and overstock.com.