Ethnic e-tailer Craftsvilla to shift focus from marketplace model to private brands

Craftsvilla, an online marketplace for ethnic and traditional products, is slowly and steadily shifting its focus to private brands in a bid to boost its revenue as well as margins.

The Mumbai-based company, which launched its private-brand business in the middle of 2016, plans to launch 3-4 more brands this year.

At present, it has three brands — Avanya, Jharokha and Anusura — that are in the affordable ethnic and handloom segment.

Manoj Gupta, founder and CEO of Craftsvilla, told BusinessLine that the main reason behind focussing on brands is the firm’s need to improve margins.

“Private brands can fetch margins as high as 60-70 per cent. Also, as this is not a very high-capex model, the business can also be scaled up fast.

“Brands have a lot more value and consumer-stickiness compared with a marketplace model, as brands are not run on discounts. In a marketplace model, one has to burn a lot of cash and the business becomes inefficient as it grows in volumes.,” Gupta said.

He said the company expects 25-30 per cent of its overall revenues to come from private brands by the end of this year.

The traction in private brands has been encouraging, at 20-30 per cent growth month-on-month, primarily coming from non-metros as the consumers there have less or no access to big retailers in the traditional/ethnic segment.

Craftsvilla Handicrafts Pvt Ltd, the holding company of Crafstvilla.com, posted a revenue of ₹37 crore in FY2016 with a loss of ₹119 crore.

“We will also take an omni-channel approach for the retailing of our brands. We will ensure that consumers get to buy our products both online (across all marketplaces) and offline,” Gupta said, and added the company is in talks with some retailers that have presence in small towns, in this regard.

Going forward, the company might also look at having its own stores, but he did not elaborate on it.

Craftsvilla has so far raised $54 million in four rounds, with the latest being a $34-million funding in 2016, from investors including Sequoia Capital India, Lightspeed Venture Partners, DST Global, Nexus Venture Partners and Rocket Internet founders Samwer brothers’ Global Founders Capital.

The company, which has been struggling with its marketplace model for quite sometime, is learnt to be trimming down costs to boost profitability, according to sources.

It has also clipped employee costs by the way of lay-offs and is also understood to have reduced its merchant base.

Gupta conceded that running a marketplace is quite challenging, but said the business is set to break even in the next 2-3 months.

He, however, declined to give any further details.

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