Wednesday, January 27, 2016

STARTUP SPECIAL............... Not just Another Marketplace

Not just Another Marketplace


ShopClues may be much smaller than the Flipkarts, Snapdeals and Paytms but it's also very different from them

At first blush, it is easy to be skeptical about ShopClues which, as an online marketplace, would tend to come to mind only after the Big Four -Flipkart, Snapdeal, Amazon and Paytm.Compared to the funding, buzz and headlines these etailers have generated, ShopClues would come a poor fifth. And to top it all ShopClues started on a bad note. In 2013, cofounder Sandeep Aggarwal -the man at the helm then -was charged in a case of insider trading in the US. Since, Sandeep has pleaded guilty and stepped down from ShopClues and has no active role in the startup.
So why then are investors still excited about the startup? In early 2015, for instance, Tiger Global -a big investor in Flipkart that has also funded Amazon -invested in ShopClues. And the buzz is that the startup is close to tying up another round of funding -this at a time when the ecommerce space looks distinctly crowded, overvalued and prime for consolidation.
Set up in 2011, ShopClues has 950 employees and has raised $120 million so far (Flipkart in contrast has raised over $3 billion and was last valued at $15 billion in 2015). It has 3 lakh merchants on its platform across 6,000 categories and 2.5 crore stock keeping units (SKU), and ships 3 million orders every month.
But here's what differentiates ShopClues in a crowded space. It is tightly focused on the unstructured, often unbranded (or catering to local and regional brands) mass market segment, a notch lower than the segments Flipkart, Snapdeal, Amazon are looking at. About 70% of its orders come from smaller towns and cities, it says. “The marketplace is part of our DNA. And that is our USP,“ says Radhika Aggarwal, cofounder, ShopClues, comparing it with Taobao of the Alibaba group in China. Shunning the bruising deep-discount driven model, the startup is focused on smaller merchants where it has greater scope for margin negotiation.
In a world where gross merchandise volume (GMV), valuations and large marketing-branding budgets are normal, ShopClues says it prefers a more conservative approach. It has almost avoided mainstream media, leaning on economical and efficient social media and regional and vernacular outlets to reach out to its target segment. “We spend 110th the money that our bigger competitors do to generate similar returns on investment,“ claims cofounder Sanjay Sethi.
Sethi says ShopClues isn't focused just on consumers but also on enabling and empowering its merchants to grow its ecosystem.For example, as soon as a merchant signs up on its platform, ShopClues helps build a dedicated website for them and supports them with branding and marketing tools. Now it is helping them go hyperlocal. This shows up in the way it earns money -about 70% of its income comes from transactions, and the rest from non-transactional areas like support and services provided to the merchants. “Remember, nontransaction income is technology-based and scalable without incurring any cost. We would like to see that go up to 40%,“ says Sethi, who honed his skills as senior director, products, at eBay, California, before cofounding ShopClues.
ShopClues is confident it will make an operation al cash profit by 2016 end. “They will never be the volume player. They have chosen to fight the profitabil ity game. They have the best margin structure in the indus try. Their cash burn is low,“ says Sanjeev Aggarwal, co founder, Helion Venture Partners, one of Shop Clues' investors.

ETM3JAN16

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