Craftsvilla’s path to profitability — version 2.0

At a time when e-commerce and profitability seem to be incongruous, this VC-turned-entrepreneur and his wife are changing the dynamics of the e-commerce world with Craftsvilla.

Of the many difficult phases in an entrepreneur’s journey, the task of downsizing your team and scaling down the company is perhaps the most painful. This was the exact problem that Manoj and Monica Gupta had found themselves facing in 2012. Craftsvilla, which was born out of the couple’s home and had grown to over 100 employees, had to be downsized to a team of 10.

Founded in 2011 after a holiday across Gujarat and Rajasthan, Craftsvilla was started with the idea of selling handicrafts online. The duo had realised that the ethnic space was an important segment, with high margins, and that there was limited access to handicrafts across different parts of the country and globally. The only way to ensure better access and higher visibility was to take the space online.

The zero to one phase

Starting with the buying and selling of handicrafts, the team later pivoted to a marketplace model and began to focus more on ethnic fashion. “We realised that, during that time, the demand for our first model was lower, and pivoting to a marketplace model made it easier to handle the logistics,” says Manoj.

In 2011, the team raised funding of $1.5 million, cash that, according to Manoj, they burned through within a year. The year 2012 hit, and the duo was faced with the dilemma that most entrepreneurs face during a cash crisis.

The one to zero and back to one phase

Talking about those days, Manoj says,

We worked drastically on scaling down the company; when we dropped the number of people to 10, our costs dropped from Rs 50 lakh to Rs 3-4 lakh. We stopped any form of paid traffic and moved from a swanky office to a small one.

Manoj adds that, at that time, they had multiple business models with multiple commission structures. Today, they have one simple business model with a single commission structure.

The team had come a full circle. While working from their home, the couple had decided to move to a small shop, and from there, they moved to a bigger office. Post the scaling down, the marketing spends dropped below 10 percent of sales and the revenue grew more than fourfold. Today, Craftsvilla claims that they will be profitable in the next six to eight months.

Working on the nuances of profitability

“When we began, everything, from cataloguing to marketing to technology to modelling and photoshoots, was handled by Monica and me. Only when the shipment boxes touched 20 did we realise that we needed to move to a shop,” recounts Manoj.

With all the cost cutting, the team began to focus on sales and making money. By October 2014, the team claimed to have had a GMV (Gross Merchandise Value) of close to Rs 7-8 crore.

Manoj claims that they achieved revenue positive growth in 2013, with a steady growth rate of 15-20 percent month-on-month. They managed this with zero discounts and COD, doubling the conversion on their traffic and average order values. Craftsvilla also saw much higher repeat usage.

Their customer acquisition cost dropped considerably to below Rs 250, and they began recovering their marketing dollars. By the end of 2014, the team was able to raise Series B funding of $18 million in a round led by Sequoia Capital, with participation by Lightspeed Ventures, Global Founders Capital and Nexus Venture Partners.

Growth and the balance

Manoj says,

The whole of 2015, we focused on growth and pushed the pedal, growing tenfold. But with the focus on growth, we realised that several things slipped. Things like customer experience and quality of products tend to fall through the gaps. With incremental focus on growth, you need to bring in an incremental focus on more intrinsic aspects of the business.

The Craftsvilla team believes that they are in a unique position to become profitable, as the margins of their business are higher and they also are in the sweet spot of providing value to the global consumer. “There isn’t any other platform that focuses on e-commerce and the ethnic Indian product line,” says Manoj.

The team claims to have over 3.5 million unique products from more than 25,000 artisans and designers across the country. The Mumbai-based venture, according to the team, reaches more than a million customers every day through its website and mobile app.

In late 2015, the team also raised a Series C funding of $34 million. In February this year, Craftsvilla acquired PlaceofOrigin, a marketplace for ethnic foods. The size and structure of the deal were not disclosed.

This year, the team is focused on building their engineering and product capabilities, enhancing customer care, and scaling in the ethnic category to reach $500 million in GMV. The team today consists of over 260 people.

As a company aim, the team is focused on making Craftsvilla an umbrella brand for everything that is ethnic. “The idea is to go beyond e-commerce, and look at food, content, cultural items and even spirituality,” says Manoj.

Website