Bangalore: Indians bought an estimated 108 million mobile phones last year, most of them from retail outlets ranging from exclusive stores run by Nokia Oyj to some mom-and-pop stores. Here’s an online venture trying to muscle into that turf: CafeGadgets.in, run by Gurgaon-based start-up Crazypricing eTail Pvt. Ltd.
Not just mobile phones. CafeGadgets offers earphones, cellphones, consumer electronic devices such as DVD players, home theatres, LCD/plasma screens, computer hardware, digital cameras, gaming consoles and personal digital assistants, MP3 players and iPods, as also laptops and personal computers. The portal not only offers products directly from 75 vendors, but also allows a buyer to compare and evaluate products by features and prices in one go.
Due to its direct business tie-ups with the likes of Lenovo Group Ltd, Apple Inc., Compaq, Motorola Inc., Nokia, Sony Corp., Toshiba Corp. and Acer Inc., it offers at least 5% discount on all its products. “Being an online retailer, our operations cost are very low as compared to any retail chain as we don’t have any rental, inventory or pilferage cost. Thus we are in a position to pass on better discounts and deals to end customers,” says Hitesh Dhingra, CEO, CafeGadget.
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Purchases are delivered within 72 hours and come with a manufacturer’s warranty on all products. “We do not sell grey products. All our products are procured from the company’s warehouses and shipped by logistics companies,” says Dhingra, who feels these are compelling reasons for a buyer to shop at CafeGadgets.
The portal sees 3,000-4,000 transactions a month, with an average ticket size of Rs3,500. Pen drives are the fastest moving item, while cellphones and MP3 players are also in high demand. CafeGadgets, which was started by Dhingra with Rs10 lakh in 2006, today has 25 employees. The profit making entity had a revenue of Rs3.5 crore in the last fiscal and expects to generate a turnover of Rs12 crore in fiscal 2009.
CafeGadgets makes its money in multiple revenue streams. Transaction margins vary from 5% to 7%, depending on the product category. Another stream is listing fee from vendors who sell on CafeGadgets; for a one-year listing, the fee is Rs1.2 lakh and for six months, it is Rs75,000. Dhingra says the current slump in the market may work in their favour as people look for heavy discounts and value deals.
The firm has tied up with Tata AIG General Insurance Co. Ltd for insuring products for three months against theft and burglary. It is now trying to get experts to post reviews on products online.
Counting Indiaplaza.in and Futurebazaar.com as its competitors, Dhingra says though creating an online retail portal is not difficult, CafeGadgets’ close association with top companies and strong online distribution will keep it above others. The company raised undisclosed capital from a retail company last year and is not looking for more funding.
An investor, who looked at the company’s business model, says though e-commerce is not really big in India (Internet and Mobile Association of India estimates business-to-consumer e-commerce to reach Rs9,210 crore in fiscal 2008), CafeGadgets’ concept of selling only tech and lifestyle gadgets may work in its favour. “Though it is a very small company, its approach of aggregating companies seems right,” says the investor, who requested anonymity.
CafeGadgets sells about 4,000 products online.
The investor cautions against standardizing procuring online, logistics and returning substandard products as hassles that continue to be a roadblock in the growth of e-commerce and CafeGadgets needs to watch out against.
Graphics by Ahmed Raza Khan / Mint