We plan to become profitable by Q2FY18: Sanjay Sethi

Interview with CEO, ShopClues

While the top three e-commerce players, Flipkart, Amazon and Snapdeal, battle it out to dominate the Indian market, ShopClues is relieved for not being in the limelight. With 3 out of its every 4 customers coming from smaller towns, ShopClues’ target customer base is completely different and it is able to generate higher margins at lower price points than the big three, who focus on the same set of customers in urban areas, says Sanjay Sethi, CEO of ShopClues, in an interview with Alnoor Peermohamed.
Edited excerpts:

There’s a sense that ShopClues is being left behind in the conversations about e-commerce in India. What’s your take on this?

I don’t think we’ve been talked about ever. I think the best way to win a war is to avoid a war. If we are talked about in the same breath as Amazon, Flipkart and Snapdeal, then we would be doing the exact same thing that these three guys are doing. Our track is different.

It is being said that India won’t be a winner-takes-all market. Your thoughts?

I have been saying for a long time that India is not a winner-takes-all market. Even in the US, you have the example of Walmart, Macy’s, Neiman Marcus, Target, Lowe’s all being horizontal, multi-billion dollar marketplaces. Can you imagine Walmart catering to entire spectrum of consumers? No. Walmart is very different from Macy’s. However, when we talk about e-commerce, all this goes out of the window and we think there’s going to be only one winner. When you think of retail, you think of price points, whether it is online or offline. If I want a shirt for Rs 350, I know where to buy it from and if I want to buy a Rs 1,500 shirt, it’s a different place. So there’s a price point spectrum, because of which it’s stupid to say that it’s a winner-take-all market. A winner will take it all in a certain segment, but not in entire retail. In India, it’s true that only one out of the big three is going to win the battle, but that’s not the only place where things are happening.

You say that most of your business is coming from smaller towns. What percentage of your business comes from the six big cities?

About 30 per cent of our market is in the metros and 70 per cent in smaller towns. This will never change. The better way to put this is that our target segment is a household that earns between Rs 4 lakh and Rs 10 lakh per annum. It’s not that this segment is missing from larger metros. So I’d say if people from this segment are present in a particular town, we’re also present there, big or small.

What sort of penetration do you have in rural markets?

Anecdotally, we are better known in Bulandshahr than in Mumbai. If you go to smaller towns, we have better reach and that is primarily an outcome or what we are selling. If you are in a smaller town, why do you come to larger cities? People come to Janpath in Delhi from smaller towns to shop.

Let me take another example of a shirt. If a person from a smaller town goes to the local market to buy a shirt for Rs 250, he might find 10 varieties. But when he goes to Janpath, he gets 50,000 shirts at that price point. This is what makes it such a great attraction, the value it offers.

So value is just not about the price?

Value is always about the selection at a price point and you have to pick the price point. You can’t sell different price points under the same roof. Amazon, under the brand called Amazon, caters to both markets. It can be owned by Amazon, but it has to create separate brands. Similarly, today if Myntra has created a brand, it’s for trendy, metropolitan youth, but they can’t sell the same thing to buyers from smaller towns now. The reason why it’s not a winner-takes-all market is because one brand cannot be all-encompassing. Of course, you can create multiple brands and those brands can come from a single company.

Amazon is pumping in a lot of money into India. What’s stopping them from going after the smaller cities and rural segment, and coming after you?

It’s the brand. If I was Amazon and wanted to expand in smaller cities, I would have opened two battle fronts. You have to create a separate brand catering only to smaller towns and rural markets because today one thinks of Amazon as a multinational.

But logistically, and technically, how have you managed to stay ahead in smaller towns?

Our ears are on the ground. We are operating locally, unlike Jeff Bezos calling the shots while sitting somewhere else. Amazon is absolutely the leader in certain aspects since it comes with an experience of 20 years.

Lastly, you’ve spoken about becoming profitable. Are all plans on track?

Absolutely. We plan to become profitable by second quarter next year.