Indian ecommerce has been through a lot over the years. What started with earning the consumer trust for online shopping went through phases such as cash on delivery, improved logistics, quality comparisons, better discounts, larger selection, refunds and returns. Today, the Indian ecommerce market has matured a lot but the biggest challenge now is survival i.e. if you are not Flipkart or Amazon.
Though introduced in the 90s, ecommerce in India only gained ground after 2013, when Amazon and Flipkart got into the ecommerce marketplace model. Flipkart, a me-too startup inspired by Amazon, and the US tech giant with no dearth of funds overcame the initial hiccups and fine-tuned their business models for the Indian audience.
The initial success, millions of dollars from investors and possibility of making it bigger attracted newer businesses, who tried to do the same. Startups such as Snapdeal and ShopClues entered the market to take on Flipkart and Amazon, and suddenly the ecommerce market was getting crowded and that meant beating competition through deals, discounts and offers.
As India’s online shopping appetite grew, investor sentiment got stronger and funding poured in to take ecommerce ideas off the ground and create a larger ecosystem in the country. In 2014, ecommerce startups raised $3.1 Bn across 47 deals, according to DataLabs by Inc42. In the next two years, the ecommerce companies raised $999.3 Mn across 173 deals and $3.7 Bn across 102 deals in 2015 and 2016 respectively.
Among these were ShopClues and Snapdeal, but as in the next few years, as investor capital shrunk, businesses found it hard to grow or set themselves apart from Flipkart and Amazon. Both had deeper pockets than most of the competition, which helped them achieve scale faster.
It was not only unicorns who had a tough time surviving, several other ecommerce startups such as YeBhi.com, InksEdge, Kaaryah, Overcart, etc lost their edge and had to shut down.
Despite becoming unicorns, ShopClues and Snapdeal found themselves in a negative spiral of huge expenses and relatively slower growth. Not only did they start bleeding market share, but also started losing relevance to challenge the likes of Flipkart and Amazon.
By the time, Walmart had acquired Flipkart in 2018, ShopClues and Snapdeal were still pivoting and looking for sustainable scaling up and growth. While Snapdeal seems to have bounced back with its so called Snapdeal 2.0 strategy, the same cannot be said of ShopClues which was acquired by Singapore-based Qoo10 in late October 2019.
ShopClues: The Journey From Riches To Ruin
Sandeep Aggarwal, Radhika Aggarwal, and Sanjay Sethi launched ShopClues in 2011 as a managed marketplace that aims to provide a unique online shopping experience to its customers. After getting a funding of over $2 Mn in the seed round in December 2011, ShopClues had got the early momentum.
A year on, Sandeep was talking about profitability for the startup. “ShopClues has earned gross revenue of Rs 12 crore since its inception. We are targeting Rs 100 crore by December 2012 and a GMV of $1 billion by 2016. We also feel that we would be the first Indian e-commerce company to reach profitability. By Q4 2012, we will be fully profitable,” he told TechCircle in a 2012 interview.
But in 2013, ShopClues suffered a big blow as CEO Sandeep Aggarwal was arrested by the FBI in San Jose in relation to an insider trading case in his previous job. The company’s responsibilities came down to Sanjay Sethi, who took over as CEO.
While Aggarwal returned to India in 2014, over the next few months, he was asked to step away from his duties was allegedly sidelined by the other cofounders.
Soon after, there was optimism around ShopClues as it raised a Series E funding round of $100 Mn at a $1.1 Bn valuation from GIC, Tiger Global Management, and Nexus Venture Partners in January 2016, which followed a $100 Mn Series D funding round in January 2015.
Eventually, Sandeep Aggarwal was forced out of the company due to governance issues in 2017 after a huge public spat with wife and cofounder Radhika Aggarwal.
Despite the healthy funding track record, ShopClues had steadily lost momentum by 2017 and 2018, as orders dried up and dropped to under 30K per day.
Compare that to its heyday in 2014, when ShopClues was fulfilling over 85K orders every day. In a high cash burn business such as ecommerce, ShopClues was losing money every month.
In November 2018, ShopClues reported a total income of $37.7 Mn (INR 273.3 Cr), an increase of 46% from $25.81 Mn (INR 187.1 Cr) in the previous year. It also narrowed its net loss by 40% to $28.17 Mn (INR 208.14 Cr) for FY 2017-18.
But that was a minor revival. By mid-2019, ShopClues was said to have reached out to every ecommerce company to talk about getting acquired. The talks had escalated with Snapdeal to the due diligence level by May, however, the deal fell through eventually. ShopClues was also said to have reached out to eBay as an alternative, but that didn’t pan out either.
Further in July 2019, the company laid off nearly 150-200 employees. The majority of the layoffs were said to be in the operations team. “Our customer NPS has been increasing steadily in two years while our workforce has dropped by 50% in the same time period. Our focus has been profitability and this year we plan to achieve that,” a company spokesperson told Inc42.
However, instead of profitability, after several talks of acquisition, Singapore-based Qoo10 Pte Ltd acquired ShopClues in a stock deal. The acquisition is speculated to have valued the company at $100 Mn. So the one-time unicorn had fallen dramatically.
Whether ShopClues can indeed make a dent in the Southeast Asian market with the Qoo10 deal as it said it would is a big unknown. But a source close to the company said the mood was one of optimism within the company.
Uniqueness: The Missing Aspect Of Indian Ecommerce?
Talking to Inc42, K. Vaitheeswaran, founder of India’s first ecommerce company FabMart and known as the father of Indian ecommerce, said that companies in India have never been able to figure out something unique to offer. The pillars of ecommerce are selection, pricing, availability, underlying technology, he added.
“Consumers don’t buy from a company because they have raised huge funding, they buy because it offers better product, prices and delivery, service levels are great and technology.” – K Vaitheeswaran
He explained that besides uniqueness, the model also needs to be sustainable. “So, every company can be funded either by customers or by investors. And for sustainability, you need customers to fund the company because investors may stop one day.”
Customers will fund the company as they find that it provides value, Vaitheeswaran added.
It is to be noted that Snapdeal was also on the corner of ecommerce unicorns caught in a slowdown, but through the sale of all its businesses and narrowing down niche focus, the company claims to have got back on its feet. But still, it is hard to tell how long this strategy will pay off for the company’s market share in the current market.
Similarly, Paytm’s ecommerce arm, Paytm Mall, has also been through ups-and-downs. The company scaled back several of its products and is now revamping its core business to get back in the market visibility. It has partnered with eBay for global expansion, though it’s speculated to be looking for investors for a fund raise.
At the same time, beyond marketplace model, ecommerce has gained ground with newer models such as B2B and social commerce.
The bigger question, of course, is does India have room for a third ecommerce player? Reliance is looking to disrupt the duopoly of Amazon and Flipkart and it does have a unique hybrid model, which Vaitheeshwaran said would be an advantage.
Post the acquisition, ShopClues is eyeing global expansion through cross-border ecommerce. Will this bring it back into contention as a brand, now that it has joined forces with an up-and-coming player in Asia?