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Aim to turn profitable in six months, says Craftsvilla founder Manoj Gupta

Craftsvilla founder Manoj Gupta

Craftsvilla founder Manoj Gupta

Ethnic products e-tailer Craftsvilla has raised nearly $53 million from marquee investors such as Sequoia Capital, Nexus Venture Partners and Lightspeed Venture Partners. But the five-year-old startup, run by Kribha Handicrafts Pvt. Ltd, isn’t looking to mobilise more money anytime soon. Instead, it is turning its focus toward becoming profitable, says co-founder Manoj Gupta during an interaction with TechCircle.

Gupta also talks about fortifying presence in all ethnic categories, including Ayurvedic products and men’s ethnic fashion, expansion in overseas markets and why he thinks Craftsvilla will become profitable sooner than horizontal e-commerce marketplaces. Excerpts:

You had said in July that Craftsvilla would consider a Nasdaq listing of $1 billion. What are your plans?

We are not looking to do any more fundraise, through another round or IPO (initial public offering) right now, because we are focussing on profitability and will be generating cash. That might happen in the future, but not right now.

What are your plans for now?

We are looking to become profitable in six months’ time, which means we will be talking about net revenue more than GMV (gross merchandise value, or the total value of all goods sold on the marketplace). In the ethnic space, we are looking to add categories and have international presence soon. We are doing very well in ethnic foods, home décor, and crafts, so we will be building that. We are also looking at Ayurvedic products and men’s ethnic fashion now. We are thematically horizontal and will have presence in all the categories.

We were thinking of launching a private label, but there is nothing concrete on that front right now. At present, our average ticket size is about Rs 1,300. Our month-on-month growth in order numbers is 5-10%, with around 60% orders coming from Tier II cities. Our repeat customer base stands at 40%.

Do you think the market is in a correction mode at present?

Since new funding is not happening, there is not much scope of correcting previous rounds’ valuations. But yes, e-commerce players are highly overvalued if we look at the metrics in these businesses, whether it’s a multiple of GMV or revenue.

There were high valuations in anticipation of fast growth in these companies. In 2014-15, growth in these companies was more than 300-400% annually. But everyone failed to realise that growth was based on discounts and other such factors. From next year, a lot more such questions will be asked. There would be much stronger companies emerging from this phase next year, though a lot of them would be going down as well.

What are your plans for the upcoming festive season?

The festive season is interesting for us as we curate a large collection of products such as Diwali gifts, rangolis, pooja thalis, and so on. We are also doing a couple of paid events in October. This Diwali, we are looking to earn than burn money.

How difficult or easy is it for a niche platform to compete with horizontal companies?

We don’t like to call ourselves niche, as we work like a typical horizontal company, but with a theme. We would like to call ourselves Amazon, but only for ethnic.

When you are a vertical player, you can build a lot of strength in supply chain, brand building relationships with vendors, among others. And this helps as one can have better margins, which horizontals don’t get to see.

In our case, the margin we get is 2.5-3 times more than horizontal players. Horizontal is all about scale. If you have continuous growth and large scale, then you can offset the low margin with the volume.

While horizontals get 8-10% margins, verticals can get 30-35% margin, and they usually don’t have price wars.

Will you be looking at growing inorganically?

We are not actively looking at expansion, but if there is something interesting, then we do acquire companies. So this year, we had acquired three companies – logistics company Sendd, ethnic foods e-tailer Places of Origin, and clothes rental company F2SO4.

You raised $34 million in November last year. How were the funds used?

We utilised those funds in marketing, enhancing the customer experience, and building a strong tech platform. Now, we are not looking to do any more fundraise, as we are looking to become profitable.

Recently, Future Group’s Kishore Biyani said that 90% of startups do not make sense. What do you think?

I don’t really support what he is saying, but my viewpoint is that many startups in India sprung up because they saw an opportunity to raise funds. Once this opportunity went away, they started folding down. This shows that a lot of them started because VCs were pumping money, and not because they wanted to build a business. We have a great ecosystem, but there are problems to address. These startups are shutting down because they don’t have any money, not because they don’t have an addressable market.

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