Sandeep Aggarwal, Founder and Ex-CEO Shopclues speaks exclusively with Iamwire.com on his entrepreneurial journey, the hardships he faced, Flipkart’s business model, and his latest venture Droom.
Let’s start with your journey as an entrepreneur.
I acted as an entrepreneur in front of the mirror and in the bathroom before I could be one in real life. And I have had my share of failures as well -.I moved to the US in 1999 for my MBA and by the time I graduated in 2001, the dotcom Bubble had burst.
Thereafter, I was involved in many startups. None of them could yield results due to some reason or the other. In fact, I started an online real estate startup, which not many would know about, called Aapkabroker. We thought, we had everything in place. But unfortunately, at the eleventh hour, the VC chickened out. So, even that plan could not culminate into a success.
So, during that time, I was working as an Analyst at Wall Street covering companies like Google, Linkedin, Facebook etc, making millions. But soon I realized, there was no point in regrets – for letting go of my real passion which was to have a company of my own. So, on Father’s day, June 2011, I quit my job to start ShopClues. Technically I had already founded the company at my home in Silicon Valley in early 2011 but it was only after I had left my job that I could give my 100% to it. I moved to India in August 2011 and launched Shopclues as India’s first managed online marketplace in November, the same year. The idea was to create a marketplace platform to bring 15 million SMEs and 1 billion products online, and to bring the power of marketplace to both buyers & sellers in a way that it was a win-win situation for the entire ecosystem.
For how long were you associated with Shopclues as the CEO? How sure you about the decision of stepping down?
For two years…no, actually more than two years technically. I stepped down from the position of the CEO in 2013. Due to some legal controversy, I had to go to the US for about a year. So, I nominated Sanjay Sethi for the position of CEO. However, I had already made a long term planning for Shopclues – even in my absence, my vision was enacted upon.
Radhika, my spouse, and Sanjay Sethi were pivotal in shaping Shopclues and its success.. In times of my crisis, the company was managed under their guidance . The situation demanded sacrifices and was a tough phase for all of us.
You left Shopclues in 2013, a time which witnessed an extraordinary boom in Indian eCommerce. Do have any regrets?
I started creating the vision for Shopclues in September 2010. We were the 35th entrant into the market, but soon became the 5th largest eCommerce company in the country. We have proven everything in terms of our value proposition; raised several rounds of funding, and have a growing team of 450 employees. Until my last day at Shopclues, the company was going at the rate of 700% year on year. It was the fastest growing eCommerce company in India.
I stepped out in October to deal with my personal situation. I went to the US for a certain time. So, I used that time to make myself physically healthy and create a stronger vision for my next venture, which eventually culminated into Droom. Our vision, use of data analytics and technology was no less than any fortune 500 company. That’s the reason the company could survive without me.
If I think of it now, I ascertain, it was a blessing in disguise. If someone loses their eyesight, their ability to hear becomes stronger. My legal case had its own repercussions but it gave me the opportunity to cherry pick. The situation ignited a survival spirit in my team. The moment I got into trouble, we created a nine month plan. It takes 9 months for a baby to come. Likewise, we divided those nine months into 3 sections of 3 months each- first included a plan for survival, second was dedicated to stabilization, and the third for getting ready for growth.
When you look back at those hard times, how do you feel?
My legal case happened by the end of November 2013. It is very easy to search my name on Google and read about the controversy and judge me. But no one really cared what I was going through or what the actual matter was – I am a family person, a god fearing personbut I found myself in a situation which was very difficult to deal with.
In August last year I came here only to see Shopclues doing immensely well. It is amazing if you look at our resilience. Now Shopclues is worth $1.5 billion.
What is so unique about Shopclues?
If you think of the largest eCommerce companies in India- Flipkart, Snapdeal, Amazon and Shopclues, ours is the only horizontal company with a clear differentiation. Someone is hiring Aamir Khan or some other celebrity, but I do not find any thing exceptionally unique in them. But if you speak of Shopclues, from day 1, it is designed for small and medium sellers. And our company is the number 1 platform for them. We stand on the top in terms of number of sellers, for we have over 2lakh of those. Still we have only touched 1% of the total SMEs. We focus only on non-standard categories, such as clothing, footwears, gifts, flowers etc., rather than selling consumer goods. I can bet you, even today the best unit economics from day 1 till date remains with Shopclues.
I must tell you, Shopclues will be an IPO candidate in the next couple of years.
Let’s come to Droom now. How did the idea strike you?
When I realized things were stable enough, I thought what’s next for me. So, the first thing I focussed on was how to bring transparency for a marketplace. Now I have a patent for that!
Thereafter, I came up with 53 ideas, each one of them I thought would make a billion dollar company in India. Then I compared those ideas around 2 and half-3 dozen parameters. After comparing and filtering them, I was left with just two ideas and eventually Droom made it to the final decision.
Why Droom? What opportunities did you see for yourself in this market?
First off, it is a $124 billion opportunity out of which $100 billion is for automobile and $25billion is for the services associated with automobiles.
Secondly, I saw buyers and sellers suffering from lack of satisfaction in this market. There were some major pain points in this segment which only technology could remove. Also, I found myself to be uniquely qualified in terms of bringing a discipline in managing the marketplace and fixing the problems of this industry. That’s how I started speaking to some of the angel investors of Shopclues. Within 4 hours I got three times more than what I was looking for. With that money, I created a Silicon Valley office.
In August 2014, I came here. I launched Droom on 21st november 2014 in the same office where I had started Shopclues. Till date we have done two rounds of investment. The very first product that we had sold was a Bajaj Pulsar 2012 model. And since January, we are up by 250 X growth.
What strategies have you designed for Droom?
Our prime strategy is how to remove everything which serves an impediment to transactions between two unknown people. The biggest one is the trust followed by pricing, especially of second hand items. So, these are the two pain points we have to cater to.
Because it is a low trust market, we don’t expect anyone to pay the money upfront.. We have a concept of commitment fee. When you see a vehicle listed on our platform and have a desire to purchase it, you make 2% as a commitment fee. The moment you pay the fee, the listing become deactivated so that you have no fear of losing the vehicle to someone else. After that you have the right to meet the seller, to test drive the vehicle and verify documents.
Eventually, Droom returns the 2% it takes from you to the seller upon receiving its service fee.
Also, since Indians like to negotiate, we offer three types of selling formats- Fixed Price, Best Offer and Auction. Moreover, Droom serves as India’s first marketplace for used items not only for B2C sellers but also C2C. So, you can sell items as well as buy from our platform.
How do you plan to compete with companies like Carwale, Cardekho, OLX etc?
Frankly, I don’t believe we have a direct competition from any of the companies you mentioned. Companies like OLX and Quickr are online classifieds which offer free listings. But there has been no innovation in online classifieds in the last 25 years. None of the companies in this segment in our country have become transactional platform. Secondly, companies like Cardekho, Carwale etc. are discovery platforms. They give you rich content- side by side comparison, videos, brochures etc. So, when they give you content they take your name and address and contact after which the seller starts calling you. My point is, free listings or online classifieds are not the moment of truth. For example, the moment of truth in the eCommerce was not deals – it was fulfillment experience. Flipkart, realized it, solved the problem faster and better than others, and now it is a 15 billion company. Similarly, the moment of truth in the used automobiles is not free listing or lead generation, it is first hand pricing and we are the only company in India which serves as an end to end transactional platform.
What is your revenue model?
We are completely a performance based platform. So we take a selling fee on every successful closure of a transaction. We make 1.5% on every successful transaction. And because there is no fulfillment involved, that 1.5% is the 98% gross margin for us. The only direct cost we have is the 2% we pay on the payment gateway. Then we have our online advertising. We also have pro seller premium programme for large sellers for which they can pay monthly subscription fee.
Our gross revenue was Rs 5 lakh in January which increased to Rs 13 crore in June, making us grow immensely, independent of category. We have 1100 sellers and 6500 listings. We sell roughly 8-10 cars and 10 to 12 two wheelers per day. Droom has crossed more than half a million internet downloads.
What challenges do you come across often on your path to progress?
To start with, talent acquisition is a major problem. We are a tech company, so we need a world class team, which is pretty difficult to build. Second is the struggle to build an ecosystem, which like I mentioned is restricted by deterrents like lack of trust and pricing, especially for used items. Persuading people to buy a car online is very different from making them buy a Chetan Bhagat book.
What is your opinion on India as a Digital economy?
The Industrial Revolution in 1600, Gold Rush in California in 1848, Software and Internet Revolution in Silicon Valley from 1995-present, Consumer Internet Revolution in China from 2000-present and Consumer Internet Revolution in India from 2010 till 2025. I think these are the largest man made wealth creation opportunities the world has ever witnessed. So, I believe, the consumer digital economy is the biggest thing to happen in this age. For the last two decades, the time was for IT services and BPO but as I see, the last 5 years plus the next 10 years, it’s going to be digital economy. However, to accomplish this, India still has a very long way to go in terms of developing its internet infrastructure, which is currently acting as the biggest hindrance on its way.