“Though a retail revolution is happening, a SMB retailer has nowhere to sell his products”

The combination of rising per capita income coupled with improved broadband penetration leads Sandeep Aggarwal, Founder and CEO ShopClues.com to believe that the site will break even in the next two years. In conversation with Pupul Dutta

What’s the state of the Indian e-commerce market?
The Indian market appears to be a lucrative opportunity for aspiring retailers. According to available estimates, the market is valued at roughly $550 billion and, of this, only $500 million is online. That’s hardly 0.1% penetration.

The retail market of US, on the other hand, stands at $3 trillion and, of this, $200 billion is online. So, there’s about 6.5% penetration in the US. In China, retail is a $1.2 trillion industry of which almost $165 billion is online. It is the highest in terms of online retail presence with almost 16% penetration.

Given the convenience of inventory management and the low entry barrier, the trend is expected to pick up in India as well, with more e-commerce companies mushrooming to address the fragmented retail market.

How is ShopClues.com different from other existing e-commerce websites?
ShopClues.com is India’s first and largest fully managed marketplace. When we talk about other e-commerce sites, most of them follow the inventory business model wherein they sell the same products available in the market at a lower price, making small margins. A classic example of this model would be flipkart.com.

On the other hand, there are companies like Snapdeal.com that survive on deals which are timebound and limited in availability. Then there are flash sales sites like 99labels which sell end of cycle products.

An important fact of retail is that there is about 30% unsold inventory in every category of products. Therefore, while some products sell independent of discount, there are some that, despite heavy discounting, do not sell. It is for these products that flash sales are put up to help merchants get rid of them.

At ShopClues.com, we provide a platform to the sellers. As per McKinsey there are 90 lakh people who sell commodities to make a living. We have created this platform for them to sell their products while we provide them with the benefits of marketing, customer fulfillment, payments and service.

In a nutshell, there is a retail revolution happening in the country where a SMB retailer has nowhere to go to sell his product. On the one hand, there are malls cropping up and on the other there are giant sites like Flipkart. We help small time merchants make their living.

What do you mean by a fully managed marketplace?
Fully managed means that we manage everything for a merchant from payments to services. Whenever there is a sale, we collect the payments and do not release it to the merchant till the buyer gives a satisfied feedback. Secondly, irrespective of the profile of the seller, we have a uniform policy for warranty, replacement and returns. Thirdly, whatever the profile of trader, we manage the fulfillment and do not allow consumers to sell on our site.

How do you manage discounts?
Every company has some unsold inventory. So, what we do is that help these merchants get rid of these liabilities. For example, if Micromax has some 15,000 unsold phones, they can sell all of that through ShopClues.com at a lower cost without the help of customer support etc and we charge only a small selling price in return from all the buyers.

We also come up with jaw dropping deals, which are partly funded by us and partly by merchants. This helps the site receive traction.

With so many e-commerce websites coming up don’t you think there has to be consolidation that needs to take place?
The Indian e-commerce industry is a Rs 1,000 crores business. Right now there is lot of incremental spending happening online. While the Indian retail market is growing at the rate of 12%, the e-commerce market is growing at the rate of 150%. So, though there is lot of competition and the market is cluttered, we are still far from a zero sum game.

However, consolidation is inevitable and will happen once the VC funded companies become unviable and are unable to recover costs. These companies will then have to either merge with bigger companies or die out.