‘Most of our business is from local, regional brands’

Online marketplace ShopClues.com is targeting $1 billion annualised gross merchandise value (GMV) by end of this year, according to Sanjay Sethi, co-founder and Chief Executive Officer (CEO) of the company. Presently, only Flipkart, Amazon India and Snapdeal are said to have an annualised GMV of over $1 billion. 

The four-year-old company has 70 per cent of its traffic from Tier-II and Tier-III cities. In a telephonic interview to BusinessLine , Sethi spoke about the company’s strategy, profitability and getting listed on Nasdaq. Excerpts:

Now that e-commerce has gained traction, how do you see your business prospects?

We currently have 2,50,000 merchants on board, perhaps one of the largest in the world. ShopClues has seen around 300-350 per cent y-o-y growth; against the market growth of 60-70 per cent. This means we are gaining market share. We get around 2 million orders a month.

Last year, we had a market share of 6 per cent (in terms of GMV). While in terms of orders placed we have a market share of 10-11 per cent; that is for every 100 orders placed we get to ship 10 to 11 of them.

What sort of gross merchandising value are you targeting?

By the year-end, our GMV will be $1.2 billion to $1.3 billion.

The e-commerce market has players like Flipkart, Myntra, Amazon and Snapdeal. How do you see them compete with you?

We are gaining market share. But in terms of competition, let me give an example. In Delhi, you have a Sarojini Nagar, and also a DLF Place in Saket. They are market places, but are different price points. The customer going to each one is asking a different question in terms of selection across price points. The same thing happens in an e-commerce market place.

And ShopClues is positioned like a Sarojini Nagar market; a lower price point for the masses. People who generally look for products across a certain price point, are ShopClues’ customers. We cater to a different consumer set.

Majority of customers for Flipkart or Snapdeal are metro customers. Of course, they have some in Tier-II and Tier-III cities. For ShopClues, nearly 70 per cent of our business is from Tier-II and Tier-III cities. Most of our business is either through local brands, regional brands or no brands at all. And, in this segment, there is no competition.

People aspire for brands and e-commerce seems to be catering to that aspiration. Is such segregation possible?

In the west, e-commerce growth has been fuelled primarily by convenience and not availability. But in India, it is availability. Here, the difference between commerce and e-commerce is very thin. People here come online because they do not get what they are looking for in stores.

In the offline space, the divide is clear. Segmentation of market is not a niche phenomenon. Over a period of time, you will see different players (in e-comm) take different positions. Our take is – the first wave of e-commerce happened from metropolitan citizens and high-income groups.

They were aspirational consumers looking for brands. The next wave will be powered by smart-phones and the middle-income group. This is the price-conscious segment. Nearly 65–70 per cent of our traffic is from mobile phones.

Eighteen months back, it was 5 per cent.

Will this model ensure profitability?

ShopClues has shown that you can have hyper growth while being fundamentally very strong in the business. We are on record to become profitable next year, by December 2016.

In this time of deep discount, what is your strategy to turn profitable?

We will not get into the pricing battle. In a structured category (where large brands are operating), you’ll see pricing wars.

But, ShopClues will give you the option of a wide selection in categories across a price point. Hence, marketing is done differently and our marketing spends are low.

Secondly, when you talk about smaller or regional brands, their gross margins are very different from structured ones.

So we look to be in categories where the margin and revenue mix is better.

This apart, we provide value to the merchants through technology that will help them run their businesses not just online but also offline.

Any new fund raising plans?

Yes, we will look to have our Series E round of funding before we explore an IPO. However, we do not want to disclose the amount now. Since we don’t need capital soon, the timing (for fund raising) will be more opportunistic.

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