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Women Consumers To Drive E-com Growth In India

12 December, 2011

Earlier today, Ambareesh Murty’s lifestyle e-commerce start-up Pepperfry.com announced that it had raised $5 million from Norwest Venture Partners. Murthy led eBay India before he resigned in May this year. Prior to eBay, he founded an advisory firm called Origin Resources in Bangalore. In an interview with Techcircle.in, Ambareesh Murty, co-founder of Pepperfry.com, talks about his team, the lifestyle e-commerce category, as well as larger trends in the industry and what it takes to be an entrepreneur today. Here are the excerpts.

Can we start with the deal first – how long will this money last and when do you feel you will have to go back to VCs?

As per our current plan, we expect the money to last between 9-12 months.  We might go in for another round of funding over the next 6-9 months. The lifestyle products category typically has very good gross margins and we have a high margin structure and hopefully this, with the right investments, will make sure that we have a prudent burn on a regular basis. While I am unable to say when the next round will be done, the current money will serve till end of 2012.

Norwest has investments in other players in e-commerce with Dealsandyou.com and Fashionandyou.com. Isn’t there a potential conflict of interest?

The Norwest approach to investments has been good in India, they have thought through most of their investments and they are committed to the success of any investment they make. These were significant positives as we made the decision to go with them. In terms of their investment in other players in e-commerce space, I think the future of e-commerce companies in India today is going to be based on the execution. I think that if they have competing investments, they will be prudent and ensure that there are walls between various investments. In general, my take is that a lot of it is about execution and it is very important that you have to have comfort with the partner and that drove our investment round.The Indian e-commerce market is fairly early stage. It’s been growing but is still a miniscule part of the overall retail space. There is scope in India for multiple e-commerce players and it is a little early for me to be worried about competition. The market is booming and a lot of the eventual action has yet to play out.

Please tell us more about Pepperfry – how was it born?

I spent over five years at eBay, and the last 3.5 years I was its CEO. I had a rocking time at eBay and saw the potential for e-commerce in India. After spending my time at eBay I considered what I should be doing. I think fundamentally the opportunity in India is huge and have always had the entrepreneurial streak.

When I changed my LinkedIn status to read ‘starting up’, a whole bunch of people reached out to me. We caught up and interacted and figured out if we were thinking of the same thing – building a great, lasting business. That kind of got me started. And because I got a chance to work again with people whom I had worked with in the past, the initial stage of not having funds became a little bit easier, because we were all in it together. The beginning of the name and setting up of the team was in end of July. I put in an initial fund, and our initial expenses were towards getting infrastructure and product development teams, via partners. I would rather not share the investment I made.

This investment from Norwest got tied up just a month and a half ago. We have been very financial prudent and staged our expansion properly. Things fell into place.

The brand–name reflects our intention. We wanted to build something that was proudly Indian. India has been famous for pepper over many centuries. Pepper adds an Indian flavour to e-commerce. Fry symbolises fun. I am fundamentally an Indophile and believe the opportunity here is huge.

Why did you choose the lifestyle e-commerce category and what’s the opportunity you are chasing?

As an avid online shopper, when I wanted to buy I used to find that something was lacking – variety and choice. Along with this, the Indian consumer is, of course, cost conscious. So it was about how to provide both variety and choice at prices which make it easy for customers to indulge.If you were to take the offline retail space, you would cross about $30 billion for lifestyle products. It is very early to give an estimate of our target within this market. Our immediate term goal is to provide a large amount of variety – we took on the goal of choice and now potentially launch 25,000 items.

What is the pain point in the industry that Pepperfry is addressing?

I think it actually works across the board but if you consider buying furniture offline, you would buy a product off a catalogue, if you do not see it in front of you. The process of getting made and shipped to you then typically takes 3-4 weeks. But we ensure availability of all items ready to ship and outside of transit time, our shipment is fairly rapid. You would get it between 7-14 days. We’ve been conscious of inventory on our site and transit times without compromising on quality.

In categories such as furniture, home décor or jewellery, the challenges on getting inventory online are higher.

In personal care, we offer perfumes and cosmetics to complete our range – the inventory is not much of a challenge and the supply chain is relatively established. The offline market for personal care would be between $2-3 billion.  Here we are trying to get as much of hard-to-find personal care inventory as possible and will look to buttress this category with organic, region-specific international products like mud from the Dead Sea and therapeutic products.

How are you addressing logistics requirement?

Our largest spend so far has been on logistics and warehousing. We have three warehouses – the one in Jodhpur is upwards of 20,000 square feet as is the one in New Delhi, where we undertake soft furnishing and clothing and Mumbai is where we do a lot of the jewellery packing and shipping.

For the last mile logistical system as of now, we will rely on partners. We have tied up with Blue Dart, Aramex, Gati, and other couriers, depending on nature of products. We have made a significant investment in our overall supply chain infrastructure and technology with a fantastic warehousing system. We also use open source software.

Can you share how many brands you work with today and what can we expect in Pepperfry?

In furniture, jewellery, home decor – the industry does not have large number of branded players. We work with SME and craftsmen and have partnered with over 35 such businesses in Jodhpur. We do not have international brands in these categories. In the case of clothing, personal care, accessories – we have a total of 100 international and national brands. Discounts would vary by category – between 20-70 per cent. On handcrafted items, there will be fewer discounts but lots of choice. We also offer free shipping. We plan to offer precious jewellery that use gold and diamond at a price less than Rs 10,000 by working closely with suppliers.

What will be unique about Pepperfry?

In terms of differentiation – it will be the sheer range that we offer. The second factor is transparency – when you come to our site, you look at the product page, and there are terms, descriptions, return arrangements.

Besides your co-founding partner how does your team stack up?

Rajesh Iyer is managing jewellery category. Sanjay Netrabile who was the vice president of engineering at Zapak.com has joined us as CTO.

How do you read the current e-commerce industry?

The first would be – e-commerce is picking up. Till about a couple of years back, the overall e-commerce space was defined by travel and it was driving a large component of growth. In the last few years, products and goods-related commerce has come into its own. This is a fundamental shift that has begun happening in the customer’s mind.

Second, there are a lot of investments by all e-commerce companies in putting together a robust delivery for customers. That has created positive word of mouth and therefore more customers are buying online. Third, is more of an underlying demographic shift taking place. There is an emergence of the millennials – those who were born after 1980s. They have always had access to multiple TV channels and have been exposed to communication across the world; they have grown up at a time when India’s economic growth has been fairly stellar. So therefore they are future-confident customers and early adopters of online shopping. This is a very important shift. The second is more specific to Internet – the amount of time spent by women online has risen, driven by social networking sites.

In more evolved e-commerce markets, the primary consumer of goods is the young woman. India, till date, e-commerce has fundamentally been driven by men – and that is why you find the concentration in technology products and books. But as the share of time spent by women increases, India would follow the path that evolved markets follow – women will become the primary customers. That’s why products that are more relevant to women and where they get a ton of choice and the experience requirements that they expect will become key driver of growth.

You launched a start-up before joining eBay and have started another – tell our readers what made you do so and what it takes to be an entrepreneur. Is there any advice that you want to share?

I am as much on the learning curve as anybody else.  I am an FMCG guy who sometime in 2003 set up a financial advisory firm Origin Resources. I was working at Levi’s when I decided to take the plunge. I ran the start-up for about three years, doing consulting assignments and offering financial training. Then I fell into the same questions – investment for scale and how to approach it going forward. That is when I decided to come back into corporate life. The only thing is to put in effort and hope for a lot of luck and right circumstances. I’ve had the fortune of meeting people who are intense about what they do. People who try hard and who are passionate about what they do – that is a large component of success.

 

 

 


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Women Consumers To Drive E-com Growth In India

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