Find out why ShopClues is not bothered about Amazon and Flipkart going to tier III towns
It was an interesting fireside chat between Radhika and Radhika at TechSparks 2017. YourStory’s special projects editor Radhika P Nair, who eats and breathes e-commerce, spoke with her namesake Radhika Aggarwal, co-founder and CBO of online marketplace ShopClues.
The duo explored how e-commerce is evolving for the Indian market, and what ShopClues is looking forward to. The timing for such a discussion was perfect – Indian e-commerce’s big daddy Flipkart raised more than $4 billion besides recently acquiring Ebay India; Paytm Mall backed by the Chinese behemoth Alibaba has a blank cheque just like Amazon. So how does ShopClues plan to compete with them?
For Radhika Aggarwal, this is not a new discussion. Since ShopClues was launched in 2011, the context was the same over the years; just the numbers were different. She believes that's what has worked for ShopClues is staying true to its DNA –targeting different customers – those in tier 2 and tier 3 towns and beyond, and targeting through completely different merchandise compared to its competitors.
“We have had our blinders on and we have focused on that. Today we have about 15 percent market share in lifestyle - we are the fourth largest player in the country. We have been able to do all this with a total raise of less than $200 million,” she says.
Profitability around the corner
Apart from enabling 6,50,000 merchants on the platform to reach out to a customer segment that is not accessible to them through the other platforms, ShopClues takes credit in enabling them to digitise their businesses.
“With demonetisation and GST kicking in, our connect with merchants has grown drastically. That contributed significantly to our revenue. So we will be fine, in spite of the billions of dollars in the Indian e-commerce industry,” says Radhika.
ShopClues had earlier claimed that they would be profitable this year. Radhika reiterates that they are looking forward to being the first e-commerce company to be profitable.
“You will hear about it in 2018. On a unit level in fashion, we are already making Rs40 per order - which is huge, considering that just seven-eight months ago, we were barely breaking even,” she says.
ShopClues crossed $1.1 billion valuation in January 2016 when they raised $100 million in Series E from Singapore-based GIC. But it was only a momentary celebration for the team. Radhika says, “It didn’t really change anything for us. What keeps me up at night -before and after becoming unicorn- is the same. The competitive landscape remains the same; the players remain the same. It’s a validation of what we are trying to do. But we have miles to go before I sleep,” she says.
More competition in smaller towns
Last year, e-commerce growth in metros was flat; but ShopClues claims to have seen major growth in tier III and tier IV towns. Over the last year, their orders have more than doubled and net revenue has tripled in the same period. They stated that the number of transacting customers doubled – with most of the new customers from tier IV cities – thanks to the ‘Jio effect’ and growing awareness among consumers. “It is a sign of ecommerce being a part of their life; that has further strengthened our belief that this is what we want to do going further,” says Radhika Aggarwal.
ShopClues has always focused on tier II and III audience with a wider selection at lower price points, setting itself apart from the likes of Amazon and Flipkart, was that a conscious choice or the only option for ShopClues?
Radhika says, “In developed economies, the market size for long tail is very small. But India is truly a long tail economy. When we founded ShopClues, we wanted to bring the real India online – e-commerce in any country has to reflect how commerce happens in offline space. In India, it is the markets and bazaars where most people are shopping; but e-commerce reflected little of it at that time. Since then, our focus on tier II, III, IV consumers and merchants from SMEs and MSMEs has further solidified.”
With both Flipkart and Amazon talking about expanding to smaller towns, what is ShopClues’ plan? Her answer is simple, “When you run a business, you compete against the behemoths. One thing that keeps you focused is the differentiation that you have,” says Radhika.
Radhika is looking forward to seeing the rural partake in the e-commerce pie. “We are also expecting an expansion of categories – C2C for used products being one. We are also doing well on unboxed/refurbished smartphones; we want to roll it out across devices,” she says. Today ShopClues claims it has about 45 percent of all refurbished phones sold online.
For ShopClues the focus is on the number of orders, net revenue, the contribution margin of each order, and EBIDTA.
“Earlier on we had decided that we are not going to play the GMV game at all. Even internally we don’t report GMV. We are making money on a contribution level,” says Radhika, adding that being able to target consumers in tier III and tier IV cities and selling them low ASP (average selling price) products, and making money out of those products is extremely challenging.
“We are very proud of what the team has managed to accomplish so far. We have to get EBIDTA positive next year,” she said.
In the race to profitability, ShopClues – just like Flipkart, Myntra, and Jabong - launched its first exclusive label in July. But having called itself a pure play marketplace, isn’t this step a move into a completely different business?
Radhika explains, “When you run an e-commerce company, you have information on your consumer – we know what products they are looking for, what price points they are looking for, what are the trends that are working for them, and how do you really leverage that to increase the sales for your merchants.
Over the past three or four years, we have launched some initiatives to enable our merchants to do better business with us – ShopClues Surety programme being one of them. It gives a seal of approval about the quality of a product. Our exclusive labels are one step above that. It is not manufactured by us; we partner with over ten merchants to be able to roll that out.”
The journey of entrepreneurship
Radhika Aggarwal has one advice for entrepreneurs. “Surround yourself with people whose advise matters to you. There are mentors all around us. We have to learn to be a good mentee. People often reach out to me too; I want to learn something from them as well.”
With ShopClues facing its own founder challenges, Radhika gave her opinion on how to handle founder disagreements
She says, “Every happy marriage or every happy founders-relationship is happy in the same way. But every time a breakup happens – whether in a relationship or between founders – it has its unique problems. Cut the cord sooner rather than later. Don’t let it fester.”
She says that entrepreneurship is a lonely journey. “But having the right team with you is very important – whether in executions or just bouncing off ideas.”
Her mantra is simple - “Make today better than yesterday.” Secondly, she says, just show up. “Just be there every day, and – especially for entrepreneurs – keep at it.”