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Naaptol leverages media to build a hybrid home-shopping business

Naaptol may not be a pure e-commerce player, but has created a unique home-shopping business

Ranju Sarkar  |  New Delhi 

Manu Agarwal, founder and chief executive, Naaptol
Manu Agarwal, founder and chief executive, Naaptol

Suresh Solanki is a grain trader in Junagadh, Gujarat. The 42-year-old has a personal computer (PC) with internet as well as a smart phone but has not bought anything online. Instead, he tracks hot deals offered by home-shopping firm through readers’ offers in newspapers, and is more comfortable placing an order through its call centre.

In distant Guwahati, Paresh Baruah, a 33-year-old employee with the Assam government, picks up Naaptol’s deals — which could be for a mobile or camcorder — from TV spots on a music channel. Betting on consumers like Solanki and Baruah and by leveraging different media, Naaptol has built a Rs 120-crore

To reach out to more people, the Mumbai-based firm, founded by techie entrepreneur Manu Agarwal, began selling online through its website, which today brings in a third of its revenues. Naaptol isn’t a pure-play e-commerce company but has created a unique that made four private equity investors pump Rs 150 crore in it in two rounds.

Naaptol’s investors are happy with the way it has scaled up. It claims to have grown 50 per cent year-on-year in three years. ‘‘We are happy with the progress it has made, moving heavily into television and thoughtfully approaching e-commerce,’’ says Suresh Shanmugham, managing partner, Sama Capital, which has invested in two rounds of fund-raising by Naaptol. “Manu (Agarwal) saw the opportunity but also took a conscious decision not to compete directly with the likes of Flipkart, Jabong and Snapdeal, which require a different level of capital investment and path to profitability. For us, Naaptol is more about home shopping and less about e-commerce; it’s not the dominant theme here. It’s the third leg of the business, than the first or second.”

Adds Bala Deshpande, senior managing director, New Enterprise (Associates) India: “What we liked about Naaptol is the promoter’s background (he comes from a software background, founded and sold a few start-ups, knows how e-commerce work), its merchandising strategy (offers select stock-keeping units for mobiles than, say, an entire range) and its capital-efficient model (does not carry inventory).”

Naaptol sells a wide range of merchandise from mobiles, durables, clothing and footwear to fitness equipment. It is targeting towns where internet reach is low and the customer base and demand pattern are different. For instance, if a metro customer aspires to buy an LCD television or kitchen chimney, consumers in these cities could be looking for an entry-level smart phone, leading one of its investors, Canaan Partners, to say “Naaptol sells what Bharat buys”.

Early days
Naaptol Online Shopping Pvt Ltd started as a comparison-based social shopping portal in January 2008, and hoped to monetise it through advertising revenues and listing fees from vendors. But collecting membership fees from vendors proved a nightmare, which is when it decided to tweak its business model. The site was getting good traction from users and Naaptol decided to start selling goods online from 2009, converting from a comparison-shopping to a home shopping platform.

It began advertising in print with readers’ offers in The Times of India, and soon found this model worked across publications. Today, it advertises in 50 publications across nine languages, including Amar Ujala, Sandesh, Divya Bhaskar, Rajasthan Patrika and Vijay Karnataka. Naaptol raised its first round of funding ($8.5 million) in 2010 from Canaan Partners and Silicon Valley Bank. In 2011, it raised $25 million from New Enterprise Associates and existing investors.

After print, it began advertising on television channels and settled for the 60- to 120-second spots, instead of the 30-minute format that most home shopping firms do. “Like in print, there’s an accidental viewing of ads in between programmes,” says Agarwal. Naaptol advertises across 10 channels like B4U, B4Movies, Akash Bangla, Udaya Comedy and Udaya Movies. Broadcast became the second source of business. By the beginning of 2012, it began putting more emphasis on its e-commerce site, which has emerged as the third platform for Naaptol, bringing in 30 per cent of its business. TV brings another 30 per cent, while readers’ offers bring the remaining 40 per cent.

The home-shopping business is driven by media. “We have tried to follow a blue ocean strategy, which means don’t get into a red ocean strategy or blood bath competing with everybody, which potentially leads everyone to death,” says Agarwal, a graduate from Indian Institute of Technology-Kanpur, who founded and sold three start-ups before making it big with Naaptol. It is the only home shopping player in India that is present across three media: print, television and e-commerce.

Globally, HSN is the biggest player in the home shopping business, followed by South Korean company CJ. Naaptol competes with HomeShop18, CJ Star and Telebrands, as well as with e-commerce firms such as Snapdeal, Jabong, Myntra and Rediff. Home shopping players in India operate through 24x7 television channels. ‘‘Our view is that you need to go after different media as the boundaries between home-shopping and pure-play e-commerce are starting to blur,” says Agarwal. In India, home shopping is estimated to be a $1-2 billion opportunity.

The company, which follows the marketplace model, hopes to break even soon and is not looking at a fresh round of funding. “We are a bit different than the rest of the e-commerce firms. We are strongly focused on moving towards profitability,” says Agarwal. With this in mind, Naaptol had roped in Shoppers Stop vice-chairman B S Nagesh as adviser. He has been telling the team that at the end of the day, it’s a retail business, where margins are wafer-thin, and, hence, there’s a need to automate processes, technology — to squeeze every paisa from different areas.

First Published: Fri, September 27 2013. 00:47 IST