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Vaibhav Global: India's successful e-tail model

Mudar Patherya 

Mudar Patherya
Mudar Patherya

There is an e-commerce and online revolution underway when an Indian School of Business graduate (a relative) is proud to have been offered a job by a Bengaluru-based online major that is some quarters away from profit.

There is an e-commerce and online revolution underway when companies engaged in this business attract fancy valuations even before they break even, whereas brick and mortar equivalents reporting reasonable numbers are priced at a fraction.

The big question: Is this excitement misplaced?

The answer: No and yes.

'No' because a number of segments within, say, Amazon have achieved the desired scale and are reporting attractive profits at humongous margins; the company is utilising the accruals from these profitable verticals to extend into new segments, widening its portfolio and growing its balance sheet from within.

'Yes' because it could be years before these companies finally break even and begin to return money to shareholders.

In this challenging environment, the one online retail company that merits a deeper scrutiny is Vaibhav Global Limited. It is a company nobody would have given a prayer of a chance five years ago. Why would anyone want to buy jewellery or lifestyle accessories online? What if the material turned out to be junk on receipt? What if the precious stones were counterfeit?

Now consider Vaibhav Global's numbers. The company reported a gross profit margin of 60 per cent, return on employed capital of 43 per cent, return on equity of 40 per cent and a net debt-equity ratio of zero in 2014-15. Vaibhav Global is not just another company; it is now being spoken of as one of the world's few profitable online discount jewellery and lifestyle accessory retailers.

Unsustainable? Here it gets even more interesting. The company's integration extends from global sourcing hubs to a low-cost, high quality manufacturing competence to 100-million households coupled with repeat customer purchase pattern (17.5 times, average purchase of 26 pieces, 40 per cent sales from repeat purchases). Its US market access is facilitated by major television distributors and satellite television providers (DishTV, AT&T, Verizon and DIRECTV, among others) that make it possible to reach 77 million households (out of 117 million households) 24x7, complemented by a web presence ( Its call centre is equipped to handle 40,000 calls a day. Its scale economies - procurement, operations and advertising (procuring airtime) - moderate costs. Its homegrown brands comprise ILIANA, Rhapsody, J Francis, FH, Karis, Elanza, Strada, Genoa and Eon1865. It ships around 95 per cent of its orders within 48 hours of order placement. It generated average per product realisations of $18-20 in 2014-15.

Vaibhav Global's sourcing infrastructure is established across most major procurement hubs of the world (China, Thailand and Indonesia). Its low-cost manufacturing facility in Jaipur employs 2,000 trained people, optimising overheads. It possesses 65,000 designs comprising fine and fashion jewellery (bracelets, bangles, earrings, studded jewellery, etc), fashion accessories (watches, handbags, scarves, phone protective shells, etc) and other lifestyle products (for office and home decor).

It is amazing that when we seek global models of online and e-commerce success, there is a case study sitting right here at home.

The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where are not headed

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First Published: Sun, June 21 2015. 23:46 IST