Fashion marketplace Voonik’s appetite for acquiring tech startups that can help expand its business remains strong with the company looking to strike more deals after taking over six firms over the past year.
Bengaluru-based Voonik Technologies Pvt. Ltd will also keep its marketing spends under control and focus on strengthening its technology backbone, boosting sales and improving profitability, chief executive Sujayath Ali told TechCircle.
“We are not planning to increase the marketing spend, which means the amount we raise can directly go in the technology part,” Ali said. “And technologies essentially mean people, who could be through acqui-hires or hiring people from other companies.”
Voonik, which was started in 2013, competes with the likes of Flipkart-owned Myntra and Tiger Global-backed LimeRoad, besides horizontal e-commerce players such as Amazon and Snapdeal and a host of other fashion shopping portals.
The company has raised $27 million in funding so far from investors including Sequoia Capital, Times Internet Ltd and Seedfund. This includes $20 million in a Series B round earlier this year.
Voonik has acquired or acqui-hired six companies since August last year, starting with TrialKart, a mobile platform that offered a virtual dressing room experience. This year, it has acqui-hired Bengaluru-based shopping site for men Getsy, salon and spa booking app Styland, online silk store Picksilk, and Zohraa, a marketplace for designers and boutiques. Earlier this month, it acquired styling and personalisation app Dekkoh.
Ali said the company is now scouting for acquisition opportunities to fill gaps in the analytics and personalisation segments. He didn’t disclose any details.
Ali also said that having a lean marketplace business, which operates without inventory and fulfillment centers, is helping Voonik save cost.
“When you are handling inventory, you take the inventory risk, you have to pay for the warehouse cost, the fulfillment cost. For every order you pay for the photographs, tagging, cataloguing,” he explained. “They (competitors) are operating like retail companies whereas Voonik doesn’t consider itself as a retail company. When you act as a platform, the cost you pay is only for technology.”
This business model has also helped the company keep costs per order low and gross margins positive overall. Ali claimed Voonik incurs total cost of Rs 65 per order compared with Rs 140 for its competitors.
“After the marketing spends, we are breaking even on every order on the Voonik app. The margin varies from -5% to 5% depending upon the day and the month,” said Ali.
Most e-commerce companies in India struggle to achieve profitability, thanks to high cash burn on marketing and discounts as well as logistics costs. Still, the opportunity is growing. India’s online fashion business is slated to grow to $35 billion by 2020, according to a report by Google released last year. The report said that fashion will become the largest category, ahead of consumer electronics, and account for 35% of the total online spending by 2020.
Voonik’s business model gets a thumbs-up from Harminder Sahni, founder and managing director of Wazir Advisors, a consulting firm. “Voonik’s focus on technology and making suppliers pay for warehousing and cataloguing is the way to go,” Sahni said. “I think leveraging technology, reducing costs and making everyone including suppliers, brands and consumers pay for the service which is being offered is the right thing to do.”
Voonik differs from other online fashion retailers in an important aspect—it offers products for men and women on separate platforms. The main brand Voonik is for women while Mr Voonik is the dedicated platform for men. Both run independently with different apps and websites.
The company is now gearing up to launch Vilara, its premium products platform, in December.
“If we provide products for men and women on the same app, then we would have to cut some corners to make it suitable for both the genders… starting from the product experience, to menu items to colours to modification,” said Ali. “We also foresee multiple apps targeting multiple segments.”
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