Neha Tyagi & Sagar Malviya, The Economic Times 

Mumbai, 3 January 2017

Leading Indian womenswear brands bucked the slowdown trend on the back of mostly younger consumers shifting from tailor-made to ready-to-wear stylish designs at affordable rates and discounts. Makers of ethnic brands in the country — TCNS Clothing (maker of W and Aurelia brands), BIBA, House of Anita Dongre (AND and Global Desi brands), and Ritu Kumar — all posted 14 per cent-64 per cent year-on-year jump in their revenues last fiscal, even as the overall Indian apparel market slipped to single-digit growth at 8 per cent.

Sales of these four companies put together equals that of the apparel sections retail chains Shoppers StopBSE -0.51 % and Lifestyle International that sell around a hundred brands, and are more than Tata’s Westside. In fact, with combined sales of Rs 1,600 crore in the year to March 2016 as per their annual filings, these companies have nearly doubled their business in the past two years.

“Consumers no longer are stuck to the idea of compartmentalising ethnic wear and western wear as strictly as we think it is. There is a growing market for contemporary Indian wear, which cuts across all product segments,” said Anant Daga, CEO at TCNS Clothing.

The maker of W and Aurelia brands, which posted a 65 per cent growth in sales for FY16 at Rs 591 crore, is expecting a threefold jump in revenues in five years.

Experts say there’s good growth opportunity as branded women’s apparel is an extremely under-penetrated category and that is changing gradually.

“The number of women taking up ready to wear earlier was smaller, which is now picking up. Also, younger women are preferring to go out wearing something which addresses both traditional aesthetic and the work environment,” said Devangshu Dutta, chief executive at retail consultancy Third Eyesight.

This growth potential has helped TCNS Clothing, BIBA, House of Anita Dongre and Ritu Kumar — which are nearly two decades old or more — attract private equity investments in the past three years. While Everstone Capital picked a minority stake in Ritu Kumar for Rs 100 crore ($16.6 million), Warburg Pincus and Faering Capital invested about Rs 300 crore to buy a stake in BIBA Apparels. General Atlantic has picked up a significant minority stake in AND Designs for around Rs 150 crore. More recently, US-based private equity firm TA Associates invested about Rs 937 crore in TCNS Clothing.

Experts said companies can now easily support changing trends with investment in product innovation and reach. Indian wear, initially largely restricted to the older age segment, now finds acceptance among younger consumers.

That’s because most companies now sell fusion clothing — a mix of modern and traditional wear — instead of just ethnic, which are reserved for special occasions.

Another growth trigger is growing popularity of online shopping that has helped these brands reach out to customers in smaller cities. Online retailing now accounts for 10-15 per cent of their sales.

While online added to overall sales, companies aren’t necessarily enthused because of discounts. “We have been able to curtail ecommerce growth to a large extent as we believe in selling full price merchandise rather than going into the discount,” said Bijit Nair, president – retail at House of Anita Dongre. “But the new found availability due to geographical presence is helping too,” he said.

Siddharth Bindra, MD at BIBA, said, “We have got bigger stores and more locations. Our product ranges have evolved. We also brought larger heavier collections and collaborations with designers which did very well.” BIBA posted sales growth of 15 per cent at Rs 441crore in FY16.  

(Published in The Economic Times)

Shipra Srivastava, Retailer  
New Delhi, 30 December 2016

The Gurgaon-based  cashback  and  coupon website CashKaro.com  which has raised Rs 25 crore in its Series A funding round from Kalaari Capital in November 2015, and  a very small amount of investment  from Ratan Tata in January this year, is very close to achieve its break-even.  

In an exclusive conversation with indianretailer.com, Rohan Bhargava, Co-founder, Cashkaro.com, said, “We are very close to our break-even. In fact, we should be profitable in next 18 to 20 months.” The raised funds are being utilised to ramp up marketing, technology and expanding the human resource.  Currently, the company has the human resource of 75 people.  As of now, CashKaro  is earning minimum 10% commission of every transaction that happened via Cashkaro collaborated e-retailer.

The company is scouting for suitable investors to support its future campaigns.  “We would be keen for Series B and C funding from the investors who are sufficiently funded to support us in our future campaigns. We are also looking for expansion in to new countries,” informed Bhargava.

Presently, the company is registering ten to twenty thousand transactions per day, and has tied up close to 1200 online retailers including category leaders like Flipkart, Amazon, Yatra, makemytrip, and so on. The company is in talks with many offline retailers to initiate a programme that would offer an add-on value to customer on existing loyalty programme that is run by the retailer.

Speaking on same Bhargava said, “In next two weeks I will be able to give provide more information on same. We are in talks with many offline retailers.  Again, our offerings will be add-on to existing loyalty programme offered by the retailer.  We would be working with retailer on making customer experience seamless. Our motive is, for customers, the speed of getting the cashback should be great. Same time, the entire exercise should fetch value to retailer. On top of that, the specific needs of the retailer should be addressed.” 

The company is also very bullish on tier 2 expansion. Currently, 40 percent of its traffic comes from small towns. The company is also looking to tap unorganized players (in retail segment) from small towns.

No doubt, affiliate marketing sites like CashKaro can help to maintain a diversity of sources for customer traffic in a cost effective way. In fact, in some cases affiliate traffic may be better as affiliate sites usually already provide some context to the product (for instance, product comparison websites or lifestyle blogs), so the traffic is more of qualified leads.

“Currently, with footfalls and spending being affected by a muted consumer sentiment, cashback deals and coupons can help to create not only traffic, but conversions for brands,” shared Devangshu Dutta, Chief Executive, Third Eyesight.

“However, in the longer term, the business environment for affiliate websites is tougher – over time, with fewer online players to send their traffic to, commissions may be squeezed, margins slabs could be changed, and the period for expiry of a referral may be shortened. Therefore, expanding the offline footprint and deeper penetration into the market is vital for the sustained success of an affiliate marketing player,” he summed up. 

(Published in Retailer)

Alnoor Peermohamed, Business Standard

Bengaluru, 28 December 2016

The year 2016 will go down in history as a tumultuous one for India’s new economy companies that utilise the reach of the Internet to do business. The year started off on a low in terms of funding and valuations of start-ups, carrying over a sentiment of excessiveness from the previous six months.

It was a contrarian 12 months, with every expert under the sun saying that the fundamentals of the market — growing Internet penetration, increasing per capita income, a strong economy compared to a weak global market — remained extremely strong, yet companies riding on this wave were being punished.

This neglect from investors finally culminated when Sachin Bansal and Bhavish Aggarwal, two of the biggest poster boys for India’s start-up ecosystem, passed on the blame to foreign competition which came into the country with pockets full of cash. To their dismay, the red carpet treatment for foreign firms isn’t going anywhere, with Chinese big-daddy Alibaba planning to make an entry soon.

“My concern would be that 2017 may be a resurgence of aggressive pricing and discounting. It’s great for advertising and the media, but from the point of view of the sustainability of business, from the point of view of having a healthy consumer business ecosystem, you need a balanced approach,” said Devangshu Dutta, chief executive of Third Eyesight. “Just purely from a capital availability point of view and ability to spend point of view, Flipkart and Snapdeal would be at a bigger disadvantage.”

The year began with Prime Minister Narendra Modi’s big push for Start-up India with announcements of a fund of funds, incubation centres and promoting local start-ups across the country. But as the year came to a close, Modi’s move to scrap large value currency hit start-ups as business slowed across industries.

However, one bright spot was digital payment companies such as Paytm, Freecharge and Mobikwik which benefitted immensely from the move, with their user bases and the number of transactions on their platform going up in instantly.

Growth in digital payments, considered the backbone of e-commerce globally, could turbocharge the rest of India’s Internet ecosystem. Experts have dubbed 2017 the year of FinTech in India, with the government’s digital push helping grow and giving rise to secondary digital finance companies that deal in lending, helping consumers invest in capital markets and those that offer services to small businesses for handling the day-to-day running digitally.

Going into 2017, it is to be seen if the confidence in India’s start-up space returns. While angel investments have remained strong, the transition to Series A and further rounds needs to pick up steam. Consolidation in sectors such as e-retail, grocery delivery and food tech could give investors more confidence to return.

The focus on the scale will continue, however. “VC’s today are looking at how quickly can you add your first customer, your millionth customer and your 200 millionth customer. India is a volume game, if you do not get your 10 million customers in 6 months time they feel you have lost the game,” said K S Viswanathan, vice president, Industry Initiatives, Nasscom. 

(Published in Business Standard)

Richa Maheshwari, The Economic Times
Bengaluru, 27 December 2016

eBay India, one of the earliest online marketplaces in the country, posted a three-fold jump in sales in 2015-16. However, its losses widened to Rs 262 crore in FY16 from Rs 172 crore a year ago despite various costcutting initiatives.

The company posted revenue or income of Rs 392 crore for the fiscal 2015-16, according to its annual filing to the Registrar of Companies. It’s revenue stood at Rs 132 crore in the previous fiscal.

In comparison, Amazon Seller Services’ turnover for the previous fiscal rose 116% to Rs 2,217 crore, while Flipkart Internet’s sales increased 153% to Rs 1,952 crore during the same period.

These numbers are not earnings from actual goods sold on their portals, but transaction and listing fees from sellers and advertising revenue, which form an e-commerce site’s actual income. E-commerce firms charge sellers anything between 5% and 20% of the value of goods as commission.

“eBay is now playing defensive rather than strategic for some time as India is not a priority market for them. They have reconciled themselves as a small player and are now narrowing down their losses,” said Devangshu Dutta, CEO of consultancy firm Third Eyesight. 

“Investments by ecommerce giants Amazon and Flipkart have helped in expanding the footprint of the sector, especially of players with a small base like eBay,” he added.

The company declined to comment. “eBay India is a 100% subsidiary of eBay Inc and as a policy we don’t comment on country-specific financials,” said the official spokesperson of eBay India.

The company is now reducing its workforce in India by laying off engineers and data analytics professionals. Last Month, the company sent across an email to its employees in Bengaluru, saying, “We are also eliminating full time employee (FTE) and additional workforce (AW) roles supporting other domains in Bengaluru.

This is not a cost-cutting decision, rather, it is a decision to focus resources in locations with critical mass.” A copy of the mail seen by ETalso said that eBay will be hiring replacement roles at other locations particularly Shanghai and some in the United States. “A limited number of Bangalore based individuals will be asked to stay on for a transition period or offered relocation to the US.”

San Jose-based eBay bought local auction platform baazee.com for $55 million (about Rs 344 crore) to enter India in 2004, at a time when online retail was unheard of.

The company, however, lost its earlymover advantage in India to rivals Flipkart, Snapdeal and Amazon as these players took to investing heavily in customer acquisition by offering deep discounts. Last month alone, Amazon invested Rs 2,010 crore in its Indian unit, taking the company’s total investment in Amazon Seller Services to Rs 11,638 crore.

According to a Morgan Stanley Research released early this year, India’s ecommerce market will be pegged at $119 billion by 2020 against the earlier estimate of $102 billion, and the total Indian internet market size (including the online food-aggregation business) will grow to $159 billion from $137 billion.

(Published in The Economic Times)

Alnoor Peermohamed, Business Standard
Bengaluru, 26 December 2016

The contribution of private labels in India’s online shopping segment is expected to triple to around $5 billion in 2017 as e-tailers try to boost earnings and fill gaps in the market in high-margin categories such as fashion, furniture and home decor.

Private labels make up less than 10% of online sales today, or around $1.5 billion in value, largely driven by fashion retailers such as Myntra, Jabong and Koovs. Going forward, it is expected that this contribution could grow closer to 20% and will also be driven by high-value items such as furniture, according to RedSeer Consulting.

“What horizontal players are doing is they are consolidating buyers of unbranded products in electronic accessories and some few other categories and introducing products in those gaps,” said Anil Kumar, chief executive officer of RedSeer consulting. “This helps them earn additional margins where people really don’t care what brand they’re buying as long as the price is right.”

The largest of the horizontal players, Flipkart and Amazon, are launching new private labels to improve margins in commodity products such as electronic accessories. Flipkart recently launched Smartbuy, an umbrella brand for selling electronic accessories and home decor products, and plans a second brand next year.

Amazon, too, has its own private label Amazon Basics to sell electronic accessories and Symbol and Myx in the fashion space.

Rival Flipkart relies on subsidiaries Myntra and Jabong to drive private label fashion sales, with estimates suggesting around a third of the sales of the two brands being driven by fashion labels.

Amazon did not respond for comments and Flipkart said it was too early to comment as the private labels were launched this month.

With India’s e-commerce expected to grow by 60-70% in 2017, making it a $30-34-billion industry, a sizeable part of that will be driven by sales of private label products. The push for private labels largely comes from investor pressure on e-commerce companies to improve earnings and get on their way to profitability.

“Given how the market is at the moment, where there is pressure from investors who have been asking about profitability or a route to profitability, products that earn additional margins are going to be a focus,” said Devangshu Dutta, chief executive at Third Eyesight.

Globally, Amazon has adopted the private label route, selling everything from groceries under its own brand to electronics such as Kindle tablets. While private labels will grow to contribute under 10% of sales on large platforms such as Flipkart and Amazon, smaller niche players will look at them more deeply.

As of today, online furniture retailers see over 50% of their sales being driven by private labels. Pepperfry and Urban Ladder, the two leading players in this space, almost exclusively sell furniture under their own brand names. In online fashion this contribution is 25-30% while for online groceries it is close to 20%, says RedSeer.

“One reason is that when you’re stepping into a gap in the market, there’s no competition so you are not forced to discount. Secondly, if you’re sourcing it directly and cutting out a brand, the cost of product development and marketing can be made by the retailer,” added Dutta.

(Published in Business Standard)