The rise of Indian Vancl?

Statistics show that China’s household internet access far exceeds the reach of the online retail market. Its top 20 retailers hold just 13% of the sales when the internet penetration is in fact 51% meaning 600 million people out of 1,354.04 million of the total population. AT Kearney report states that China has had a 78% annual growth rate in online retail sales and government data for December 2012 shows the total retail sales of consumer goods were up by 15.2 percent year-on-year (2,033.4 billion Yuan). iResearch reports on the other hand reveal that the transaction volume of China’s e-commerce market in the second half of 2012 had reached 1.88 trillion Yuan (226.5 billion USD) with a y-o-y growth rate of 25 percent.

Web exclusive brands, like for instance, have taken into account this market scenario. An online only retail brand that started with just men’s apparel, Vancl expanded to women’s and children’s wear as well lifestyle products, and claims to be the number 1 internet apparel brand in China. It had raised its first two rounds of funding within the first six months and Forbes states that since its launch in 2007 Vancl has raised $430 million in funding from IDG, Softbank and Qiming Ventures.

Are there any Indian equivalents?
Following in China’s footsteps, the Indian market has also come up with ‘online only’ models of its own. Sandeep Agarwal, CEO Shopclues says Indian ecommerce is currently at where China was in 2003. And while current e commerce penetration is 0.1%, Indian retail will likely touch $1 trillion USD by 2020 and at 6% penetration (where China was in 2010) ecommerce will touch $60 billion in India. Ecommerce sales in India are also said to more than triple during by 2015 (Assocham). Taking advantage of this potential, brands like Zovi, Freecultr, Done by None etc are the web exclusives that are establishing themselves in Indian online retail.

Vijay Misra of Done by None says the shift from offline to online is inevitable and this also ensures the viability of an online only concept. “The consumer base offline is moving more and more online. If you read the American statistics of Thanksgiving week and the Christmas time sales, the significant movement and growth that the online (industry) is recording, it’s bound to happen in India if not now, in a few years to come.” So web exclusives seem to be a natural evolution of the market scenario.

What about the monetary investment that such a venture might need?
Misra says the overall environment in e-commerce is a little shaky, and while showing promise, it did not seem to have a very stable 2012 as some reports suggested. It seems “investors are currently on a ‘go slow, let them develop’ watch; but that has nothing to do with whether you’re a brand, or you’re a service provider. There are issues regarding the risk appetite with the investor having seen the performance of the bulk of us”.

But just like the Chinese market, there are Indian online names that have found success with investor confidence. There was a spike in risk capital investments in e-commerce firms through 2011, with 37 announced deals amounting to $305 million, according to data from private equity research service Venture Intelligence. In 2010, there were just 11 deals totalling $49 million.

“We are bullish about the prospects of apparel retail in India both online and offline as we see a big shift from unbranded to branded wear across India “, said Shailendra Singh, Managing Director Sequoia Capital in a report. Launched in December 2011, Freecultr with co-founder Sujal Shah and backed by Harish Bahl of Smile Group had an initial backing of 4 Million USD investment from Sequoia Capital. Russian venture firm, ru-Net, spearheaded by Internet entrepreneur and investor Leonid Boguslavsky later joined Sequoia Capital to further close a $9 million USD, series B, funding in the brand.

Till last year, SAIF Partners & Tiger Global have pumped in $ 15.5 million to seed Zovi, an internet-only menswear brand. Co-founded by Manish Chopra and Kavindra Mishra, also raised a $10 million USD funding in February this year and that makes the total funding raised by them to be around $25 million USD till date.

Once the name is established, being an exclusive brand proves to be a USP in itself. Misra says “creating a helplessly loyal consumer is the key factor for success. With focus on a TG segment, brand positioning and imagery, consumer experience, desirable merchandise and value pricing web exclusive brands of the country are successfully cultivating a large customer base.” Customers are more likely to do repeat shopping from a brand name they find dependable. And web exclusives, if nothing else, are working towards being a dependable brand name.

But despite all the data will Indian web exclusive reach the same peak as it’s Chinese counterpart? And will the concept maintain long term sustainability in a unique market like India?

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    Whatever stat’s show, but the ground reality is that it will take at least another 10 years for Indian eco-system to match the Chinese pace. If VANCL or 360BUY could raise several hundred million $ funding and pace up it sales it purely because of an eco system. Even with robust sales and several hundred dollars funding, hardly anyone is able to break-even. Most of them are bleeding VC funds and hence companies like VANCL aren’t able to raise further funding. Also last year it failed to get listed in Nasdaq. Now they there is a consolidation happening here in China. Several large names are closing down, several mergers and distress buyouts.

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