BackAround 60% of Jabong.com’s revenue comes from small towns: founder
The online retailer is growing at high double digits, says founder Arun Chandra Mohan
Premium(Priyanka Parashar/Mint)
New Delhi: Arun Chandra Mohan, founder of Jabong.com, said the online fashion retailer is getting more than half of its sales from small towns, where people do not have access to brands such as DKNY and Benetton. The retailer’s sales have increased in “high double digits" in the past three months, Mohan said in an interview, even as the Indian economy grew at 4.4% in the three months ended June, the weakest pace since 2009.
In less than 20 months, Jabong.com has become the third-most visited online shopping website after Myntra.com and Flipkart.com, according to a 22 August report by comScore Inc.—an online traffic measurement company.
Jabong.com, a part of the Germany’s Rocket Internet group, gets around 14,000 orders daily, Mohan said. More than 60% of India’s 73.9 million Internet users visit online retail websites, spending an average of 28.4 minutes, less than what people spend in countries such as China, Russia, Brazil and even the worldwide average of 84.3 minutes, according to the comScore report. Edited excerpts:
You launched Jabong last January. How has the journey been so far?
It has been a roller coaster ride but phenomenal. We are playing a very key role in shaping the Indian retail industry.
Online retail still accounts for a minuscule $600 million compared with India’s $518 billion retail industry, according to a report published by Technopak Advisors.
There is no robust infrastructure to meet the demand of the consumer. It is either completely unorganized or then there are retailers like Future Group who are all concentrated in a very small metropolitan area of the country. In India, e-commerce is not going to be another channel. It is going to be the channel. It’s going to be the main pie. We already see this in China, where the market is growing at 50% and forecasts say that by 2015 it will be the single largest market in the world in value. India is very similar to China. Indian e-commerce will be where China is now (China became the world’s second largest e-tail market with an estimated $210 billion revenue in 2012, according to a March report by McKinsey Global Institute) in 4-5 years time. It is basically that the supply infrastructure is not there and it is not going to be there.
Is this working for you?
Today, 50-60% of our sales are coming from small towns. These are not the top 45 cities, but the next rung after that. Very often, e-commerce is the first way that our consumers access brands like Benetton and DKNY. They never had access to any of these brands before.
The sustainability of online retailers in India remains suspect. We are yet to see a profitable venture...
There have been questions about that. But now after 18 months of operations, it just proves that having foresight, vision and relentless focus on execution really pays off. We are extremely pleased with the growth of industry and our role in shaping it.
The perception is that growth is driven by investments. If no funding is available then there is no visibility and no growth.
We are running a business. We are also here to make money. I don’t think any sensible e-commerce company is burning money like crazy. Everyone is very pragmatic. Like retail, costs are high and margins are low so you need to think twice before spending money. When we were entering the market there was a lot of stupidity that has significantly gone down. Unless you take a medium- to long-term view, you will never find answers and never make the right decisions.
The fact is that the Internet is very cheap. Add to that a young population with high aspirations. The share of income they (the youth) spend on discretionary activities of looking good or feeling good is substantial.
How value conscious is this segment? Are promotions and discounts the only way to lure them to shop online?
If you really take the evolution, e-commerce in India started with discounts and deals. That was the first wave of companies like Snapdeal, Groupon, etc. That was the main driver for the consumer to come in besides availability. But most of the stuff that was on discount was not really aspirational. It was not really fashion. One can easily sell products that are three seasons old. That would not really excite anyone. So it is discounted. However, for fashion, there is a genuine lack of supply. What we are seeing is that consumers want the latest, something that is in fashion. Our consumers want fresh season stuff. They know how they want to look and feel.
Who is this consumer?
This is the Indian middle class. Over 85% of our consumers are the Indian middle class. This means that they have access to the Internet. They have bought books and tickets online and have now evolved to buying fashion.
Is the slowdown in the Indian economy affecting your business?
The last three months have been great. We haven’t seen a slowdown in our growth. We have been growing at high double digits.
By when will you be profitable?
We have clear timelines to get there. We have made strong progress in the last 8-9 months and we will beat those targets.
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