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The Story Of Resilience And Recovery | Sumit Suneja @ Merlin Brands
166 Plays3 years ago
Ever heard of the Japanese proverb, “Fall seven times, stand up eight.” That is exactly the premise of the story of our guest on this episode of the Founder Thesis podcast.
In this episode, Akshay Datt speaks with Sumit Suneja, CEO, Merlin Brands, a company that houses Rabitat (a parenting brand) and Headway (stainless steel drinkware brand) under its roof.
Sumit is a serial entrepreneur who embarked on his entrepreneurial journey in 2010 with Reado, which was India’s first audiobook platform. While on one of the trips abroad, he realised that he has always been searching for baby products requested from friends and family. To fill this void, he, along with his brother, started Merlin Brands in 2017, intending to resell renowned international baby product brands in India.
In a bid to provide homegrown, safe, and premium quality products in this category, Sumit launched Rabitat in 2019. And since then, it has been growing from strength to strength and has more than 20 product lines today.
Tune in to this episode to hear the resilient journey of Sumit Suneja and his vision behind building and scaling Merlin Brands.
What you must not miss!
- Survival tip: Keep pivoting!
- The power of 4 AM
- Merlin’s revenue generation model
Recommended
Transcript
Introduction and Background
00:00:01
Speaker
This is Sumit Suneja. I am the founder of Modern Brands. We run two unique brands in D2C sector, one being Rabbitat and other being Headway.
00:00:24
Speaker
Hi, I'm Akshay. Hi, this is Aurob. And you are listening to the Founder Thesis Podcast. We meet some of the most celebrated sort of founders in the country. And we want to learn how to build a unicorn.
Early Ventures and Challenges
00:00:39
Speaker
Try and try again until you succeed. I'm sure you've heard this saying before.
00:00:44
Speaker
However, I think for an entrepreneur, the better saying is, pivot and pivot again until you succeed. And Sumit Suneja, the founder of Merlin Brands, is the epitome of this mantra. At the start of the century, his family ran the very successful video and DVD film distribution company called Eagle. If you're from that age in which people rented movies instead of streaming them, then you may recall the Eagle logo which used to come at the start of the movie.
00:01:11
Speaker
Then a decade later, he decided to bring audiobooks to India with his startup called Rideau. However, as you may have guessed it, Rideau struggled to scale up. And after trying for years, someone decided to shut it down. And this time, he wanted to be more thoughtful about his next venture. And that led him to the space of children's products, leading to the creation of Merlin Brands.
00:01:35
Speaker
This conversation is a fascinating peek into the mind of a relentless entrepreneur who persists against all odds and most importantly never stops pivoting. Listen on to Sumit talking about his journey from being in a family business to starting up on his own.
00:01:52
Speaker
2010, I said, okay, let me go back to something that I love. So there is a cliche that I want to connect people saying, do what you love and do what you consume. Right. I used to consume a lot of audio books, a lot. And the Stampede, we used to get 14 series cassette, six series cassette from us.
00:02:09
Speaker
I didn't go to school, but my ability to learn or my love for learning was always there. Only the education was, a structured education was not part of the whole thing, but learning still continues. And that is how I used to buy audio books from US and keep listening to those audio books all the time.
00:02:32
Speaker
That kind of got me here. People tell me, and this is what I heard from everybody, that what you consume do that. And when I started audiobooks in India, there was nobody doing audiobooks. Nobody heard of audiobooks. And I put in my life savings into it.
00:02:48
Speaker
like similar model, like you would buy rights upfront payment and then publish CDs. And then we went beyond that. We published into CDs. Then we licensed from international publishing houses like Penguin, Simon Suesters and Hashtag of the World. And we brought them onto a digital platform where you could download. And these were days where you had to connect your phone to your laptop and through iTunes you could
00:03:15
Speaker
Load. Yeah. So there was 2G. So I say download new NASA and we used to do that. We did that a lot. Well, we got 10,000 books onto the platform and we thought what's wrong? Okay. Okay. You wanted to record the little. Okay. Now you want an app. We built an app and okay. Oh, there is then still there's no business. What do you know? What do you do now?
00:03:40
Speaker
When you said no business, what were the numbers? Was it like a subscription or a purchase? These were a la carte numbers. We at that time didn't have the vision of, to be honest, I had to still learn my way through it. So the company was called Rideau. The brand was called Rideau. Look it up. Rideau was the first company in India that did audiobooks. And friends and everybody used to talk that you're doing great business. This is something very unique.
00:04:07
Speaker
And you used to feel proud of the fact that you're doing something unique, but this is the hotel. You were just running it as a hobby and burning through your cash, right? And we did that for four years. On the fifth year, the last leg of the year, we decided that, okay, one last thing that is left is we need to do marketing.
00:04:25
Speaker
And we got like 100 crore marketing capital from Bennett Coleman, Times of India. And I said, let's do that and see what happens. And we had 100 crore marketing budget. You have the product ready. You have like 20,000 books now in your pocket. Let's do that. And the month we did six crore of advertising, that month we got six lakh of revenue. So the lesson that comes through is
00:04:51
Speaker
It's not enough to consume. Yeah, those passionate things that people talk about, I don't, I kind of stop agreeing to those things. You know, no, everything is, everything is data modeling. Everything is based on data. Everything is based on feedback. I should have heard it on the sixth month, which it took me five years.
00:05:13
Speaker
What was the feedback that people don't want to pay for content? The first feedback was, what's audiobooks? So then that feedback, if you're going to train the market, Indian market, it needs much deeper pockets. Right. And then of course they don't want to pay for content, especially digital content, series, we used to make some revenues, but, um, when it came to, when it came to downloads, people didn't want to pay for content, especially in India.
00:05:40
Speaker
So you could have heard through, but no, we weren't there to listen. We were there to just do our passionate project. So when people tell you do your passion, I kind of have lived that and I can tell everybody there has to be a perfect mix of passion and real data behind what you're about to do. If you don't have data, if you don't have real world experiences backing your passion, please don't burn your money into it and your time.
00:06:09
Speaker
The product market fit should be evident. That was your primary learning.
Pivot to Children's Products
00:06:13
Speaker
Yes, and don't try to sell yourself your passion. Don't sell it to your own self. But the business that we do today, those seeds were sown way back, way back in 2010 when Amazon just came to India.
00:06:29
Speaker
okay they were not even coming to they had made an office in Bangalore and they invited us for a conference and we were a DVD giant back then so and they wanted us because books books give up they want DVD and then everything else right so so was Flipkart we were the top few sellers of Flipkart right so and they wanted us to come over and talk about
00:06:51
Speaker
what amazon's plans are and there was a presentation they made to select few companies they were like 10 companies maximum and they made a presentation that how big amazon still is compared to flipkart that their their traffic to their website amazon.com is still higher than what flipkart traffic was back in the day
00:07:13
Speaker
And the kind of data they showed us, which we just couldn't take pictures of, was what kind of exports they do to India. So the number one was that they used to do books, exports. And the number second was electronics. And number three, to my surprise, was parenting products, baby care and child care products.
00:07:37
Speaker
And me and my brother were like, wow. Books are evident. That's okay. Electronics we all know. Especially there was no Apple. So people used to order lots of accessories and stuff and they used to pay duty and get the thing. So there used to be electronics, but baby products was something that was quite surprising to somebody like me.
00:08:02
Speaker
But we kept it at the back of my pocket and we moved forward. Then going forward, when we were doing the audiobooks business, we used to travel to US a lot and used to meet my publishing parent companies to get more books into the platform and meet them regularly. So when you used to travel so frequently to US, every second month I used to be in US,
00:08:23
Speaker
I was like, what are you doing? Get me a diaper bag or get me this feeding bottle. And I was like, and Vauby, who's the man, one of my friend, he ordered like two days before I was leaving and I had to walk around in snow with my brother and with all my shoes got wet. And I said, what, what, what is he making us do? You know, like we are buying milk bottles.
00:08:48
Speaker
From shop to shop and you're not getting it also now. And my shoes were all wet, soaking wet in snow. And it was like, I have to take it. It's his son. It's my friend's son. I have to take it. And so long story short, when we were coming back in the flight and my brother showed me this pattern that you remember what Amazon said back, four years back. And I said, yeah. And how dots connected. It says, wow.
00:09:16
Speaker
And at that time, Rideau was not doing that well. We were just burning through cash. We decided that if Rideau doesn't go the way we think it will not go very high, we may have to exit. So we should look at doing something in parenting. So that's how parenting came into being.
00:09:33
Speaker
But also we learned from Rito's mistakes. We never just jumped into a business. We knew that every business has a modalities that we forgot to learn last time. Right. So and this time we need to learn those modalities. So we decided that we will not go ahead and pick up a business and start doing it and put money in it. And of course, we had lost all our savings. We didn't have much. Very honest. We didn't have much to spend on. So we decided that
00:10:02
Speaker
We're not going to do it that way. Instead, we're going to learn this business. And the only way we can learn this business is we take franchisees for some top brands for India, and let's bring them to India. And we took local franchises for India, exclusively for top four, five brands, and we got them to India one after another.
00:10:22
Speaker
they were like brands like Skippop, Co-Automo, those kinds of brands. And they were the top seller brands in the US. We got one after another. And at that time, look, India made, nobody was doing it. So we kind of pioneering that part of, we did that for two, three years. And suddenly there were brands contacting us. They were retail to sell out, sell their brand in India, because we were selling for the top brands.
00:10:49
Speaker
Did you take this franchisee for setting up offline retail stores or for selling through e-commerce platforms? We decided that we will sell through other platforms, not our own platform. It will be e-commerce or it will be offline, any which ways. So offline would mean like through a distribution network, not through your own retail chains.
00:11:08
Speaker
Yes, of course not and we decided let's do it the right way and we learn our business and see what happens.
00:11:21
Speaker
So we did a lot of hard work around getting the brands, then we did a hard work around building the distribution. We reached 300 standalone retail stores across the country. It's not very easy, especially 300, those kind of stores that can sell to high net worth individuals in India, because whatever said and done, those are very expensive products, right? So those are not coming in cheap, like a feeding bottle would still be 2000 bucks.
00:11:49
Speaker
And probably that time these chains would not have been there like First Cry and Bomb and Me. We became very important to First Cries of the world, Amazon of the world and Mother Case of the world because we were the only company bringing a lot of brands under one umbrella. And for a very short while, we kind of fancied that we may not even want to build our own brand because this is looking like a good model where we can continue to add brands under one umbrella.
00:12:15
Speaker
and become a giant power player in the market where retailers, two brands, everybody wants to work with as a consolidator. So we fancied that idea for a very short while and we got kicked very fast back in when in May of 2019 our biggest brand fired us.
00:12:36
Speaker
okay and they fired us because Reliance had given them a very good offer so we had to and we learned our earlier vision back into the space that you know we should have planned our brand well before and that night was one of the most difficult nights for me and my brother
00:13:01
Speaker
It was the 19th of May, 2019. And it was one of the most difficult nights we had. How much of your revenue was coming from that brand? 40% of our revenue. So overnight 40% of your revenue is gone.
Setbacks and Lessons Learned
00:13:14
Speaker
Yeah. And we had been scaling up like crazy, right? And what everybody told us was that you have to quickly get two, three new brands to fill up this vacuum.
00:13:25
Speaker
right? And that is what everybody was telling us include, you would say the same, right? And most people would. And what good thing would mean or rather does is we whenever we have a problem, we solve it at 4am. So any small or big problem, we do it at 4am. And we tell ourselves that we are we are going to Japan timezone.
00:13:45
Speaker
and we'll get about 4AM. So we have to sleep by 9 and we have to get about 4 no matter what it is. And we realize there is some power in 4AM.
00:13:57
Speaker
Okay. And we got to keep problem and forum coming in, right? So, and, and there is, and then I won't bring this to everybody. Try it. It's an open challenge. Take a problem to four AM. I promise you. And I promise take the biggest problem you have and just, just get up at four AM, get up at three 30 start to open your laptop at four AM. I promise you by the time it's 10 PM, you'll solve it.
00:14:23
Speaker
Yeah. I guess one is that you are waking up fresh as in, you know, the, it's like a reset. Your mind is reset and ready for work. And then there is no external disturbance.
00:14:36
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:14:57
Speaker
There is something else. There is some power in the nature and the universe. Around 4M is different. There are so many places I may shut off my phone. I'll do other things. But I wake up at even 7 or 8, right? What generally everybody wakes up at.
00:15:14
Speaker
Right? And we get out 4AM, we go to a hotel lobby or a cafe, and we go and open our laptops there. And we sit and talk. Or we work towards a new design. Or we stuck on a design product or design problem today. We know what we have to do. It's called 4AM.
00:15:33
Speaker
That's the only thing. So we do 4AM sessions and we solve it. So I want to tell everybody, all of your listeners, guys, please, once, try this. This talked to me by one of my mentors. And I didn't believe him. I used to wake up till 4AM.
00:15:53
Speaker
He changed me completely. And now I have a problem. We got up at 4am, we do it. So we got up at 4am and it was Eroas Hotel in New Delhi that very next morning. And we were like devastated, devastated that night.
00:16:12
Speaker
My brother's daughter's baby shower that night. So it was a very, very sad baby shower for me and my brother. But next morning, we got some coffees in our system. And by the time we started working on an Excel sheet, like I said, data, we started working on Excel sheet, what sold in that many years, what was the profit margins? When everything came together, the result was totally different.
00:16:39
Speaker
The result wasn't ever to get new brands. The result was make your fucking brand. That's the only way. What did the data show you? Did it show you that this category is doing well and is underserved? What did it show you?
00:16:55
Speaker
The data showed us that no matter how many more brands we get, we'd only make a certain amount of gross profit, which will never be enough to build a company that can feed hundreds of homes. It'll always be a lala business, even for Reliance. Reliance would do it for different reasons, right? They would do it for reasons of power that they have all the brands under one roof.
00:17:18
Speaker
but they'll not do it for the profit reasons. If you're a distributor, you can't build a company through profit and nurture the company through that profit. It is too miniscule. It can serve our lifestyle, our lifestyle, but you'll already be salaried and be working for these brands.
00:17:37
Speaker
So we decided key and we worked through the data and how, what costs we could make demand and what feedback customers gave us. Like a lot of those feeding bottles was such a small size that a lot of those school bottles was such a small size. India may, people don't want it. They want a little bigger bottles or they want a little bigger bags or they want, they want a lot of different things, right? So we took those feedback to our heart and said, dear 10 first products that we can launch.
00:18:05
Speaker
But where will the money come from? Now, you need a lot of money to make those 10 products. Because in this business, it's in the business that we are, it's not easy. You have to get the industrial design going. Then you need to get the molds and the tooling coming in. You have to invest on those molds. They may start from 10 lakhs to go to 30, 40 lakhs per mold. And sometimes the product may have three molds. So you have to invest very heavily into tooling. And of course, your first inventory and everything. And we said, we don't have the money.
00:18:34
Speaker
All the money we have is in all the other brands that we're doing. The only way it came out to be that we have to fire all the rest of the brands. Liquidate that inventory and then use that money. Yes. And of course, raise more debt. But to even raise debt, you've got to put in 50% of your money.
00:18:52
Speaker
Where was that? We had to fire all the brands within the next one week and give them notices for six months. We helped them find new distributors. We told them that we are going to start our own brand. This is what we're going to do. We were still good friends with all of those brands.
00:19:13
Speaker
But we learned this the hard way. And what good came out was something totally different. With all those brands, they got us in the market. Everybody knew us.
00:19:27
Speaker
You built the distribution relationships. Yes, and we built the relationships with the distributors, we built the relationship with the retailers, with the online retailers, and we had a ready infrastructure that we could start on day one, day zero. Apart from that, a lot of learning. What kind of compliances you have to go through?
00:19:46
Speaker
A product has to go through a lot of compliances. If you have to become an international brand, you have to be EN certified, FDA certified. Why do you need an FDA certification? Because you are selling in India, right? We as a brand, at least we aspire to be a brand that is in what we call India for the world.
00:20:04
Speaker
We thought that all the brands that we used to distribute, they were American or Canadian brands or German brands, but those were all manufacturing in China, Malaysia, Thailand and everywhere in the world and they were selling to the world.
00:20:18
Speaker
And why can't an Indian brand do that? And if you want to be globally compliant and we care about, if you care about the part that business that you're doing, now this is where passion comes in. Not choosing the business that we do, but how we do it. If you care about parenting as a whole, then you need to care about what a parent cares about.
00:20:41
Speaker
They care about safety, health, right? They care about how long that thing lasts, right? They care about that if their kid uses their bag, it should not feel very heavy on their shoulders. You don't have to make it that cheap. So we care about those things and we do care about the fact that no child should ever get hurt or ever had to because they use your product. That's not what we are made for.
00:21:05
Speaker
So the FDA certification and these certifications would help ensure and put pressure on you to make sure that they are safe. Yes, and if we are compliant and the best part is, and this is what I want to talk about people if they are listening from India, that to make the best product, it doesn't take too much more extra. In India, we just cut corners for no reason.
00:21:32
Speaker
if something costed 100 bucks to make it the best one, it may just cost you 115. It will not cost you 200, trust me, in most cases. Just the extra length of effort it will take.
00:21:44
Speaker
Yeah, it's just a time investment, thinking about it more, designing it more thoughtfully, doing more research about it. Yeah, it's just a time investment, essentially. It's essentially a time investment. I agree. And I imagine that your promise that you will not compromise. That's all. If you promise to yourself that you will not compromise, you will get the best product, more often than not.
00:22:07
Speaker
So how did you make that pivot, like make a distributor to launching your own brand? Like tell me that journey. That is when the real struggle started and the roller coaster ride. So the modern roller coaster ride, between me and my brother, we fired all the brands and I went into hibernation of four AM's and not coming to office and started designing all the products.
00:22:35
Speaker
What about your employees? We got all the designers to come to office at 4 a.m. and leave at 2 p.m. That's the best time I got them to, I convinced them to come at 4 a.m. and let's sit together and design the shit out of these products. So we were, we remember November, December and January 2019 and 2020 were horrible. We had to just pay out of our pockets to keep the team.
00:23:01
Speaker
We were not going to fire anybody, right? We were coming up with new products. We were not downscaling. In fact, we were looking to upscale. So there was no reason to fire anybody. So we did that for two months. We went into hibernation and not meet anybody. Don't want to talk to even my friends because they'll waste my time. They'll not get me to sleep early. So I literally divorced all my friends and my wife and my kids, everybody.
00:23:31
Speaker
So and took a sabbatical from a human life and for two months and just designed the shit out of products and then went to different factories across the world and the maybe China, Malaysia, Thailand and
00:23:49
Speaker
We were only concerned about what factories we can find that are compliant and that work for Western countries. There are two types of factories across the world. There are ones that work for African nations and Indian nations.
00:24:04
Speaker
indian subcontinent and the one that works for compliant nations. The compliant factories and people looking for compliant factories and how to do the QC and how to make sure that they make according to your specifications.
00:24:20
Speaker
It's a journey, you have to sit with the factory owners and you have to decide the timelines, prices and the qualities and quality assurances and close agreements with them because of course these are copyrighted designs and by God's grace we got everything copyrighted globally. So we had to make sure that designs never get copied because if you work in China, Thailand or anywhere else, your design especially nation region is
00:24:50
Speaker
very irrelevant if they like it. So you have to work with very compliant factories and who have experience into working those kind of products. So we did that and we got a product line in. How many products did you start initially with? Like what was your initial range?
00:25:07
Speaker
Our initial range was about 10 products with of course variants many colors many prints but 10 different products and there was so the funny thing is we were planning for back to school of 2020.
00:25:23
Speaker
which was going to start in March and if everybody here listens that what I'm getting at is we were planning for March 2020 back to school. We were making lunch boxes, we were making school bags, two types of bottles, lunch bags and
00:25:43
Speaker
thankfully some baby products as well just back to school but yeah majority was back to school because we wanted to make a big bang buck of a new design language and stuff like that. How did you do the branding part? I think between our entire team at my company which we
00:26:04
Speaker
which should be given credit for it because they have worked in this parenting business for a long time. We wanted to come up with a name that should not have a problem sounding on a phone. If I tell you that you should be understanding what the spelling of that word would be, we should get a .com of it.
00:26:23
Speaker
And we should not be waiting. We should not be waiting any copyright or stuff like that. I think somebody in our team came up with this name called Rabitat and meeting the two words, Rabit's habitat.
00:26:40
Speaker
So, but more importantly, it was more like sounds nice. There is not much to it. If I tell you there were some swanky ideas about it, no, there is. Yeah, there wasn't. We are quite desi that way. So, don't think she's in here, but you should know the spelling. And the other thing should be when you Google us, they shouldn't read too many habitats.
00:27:09
Speaker
So those were the two things. And so we're planning for the 2020 back to school season. And we put all our money into like 70% of our money was going towards back to school. And mind you, we had raised a lot of debt, a lot of debt. And in January, February 10th or 12th of February, we got the first inventory.
00:27:32
Speaker
To add fuel to this fire, what we did was we loved the rain so much and some of our industry partners gave us an idea that you go ahead and make a full ad film on it. Nobody's ever done it. And let's make a TV ad film for it for back to school collection because nobody's ever made a collection like this in India. And it was so beautiful. It came out really nice, not because it's my brand, but
00:27:59
Speaker
It actually did. And that's the reason today we are among the top ones in our category. So moving forward, we went on and went to Bombay. We made ad film. We had around first of March, we were shooting. We raised some more debt and we were shooting a full blown ad film.
00:28:22
Speaker
on a cinematic camera with 20 artists and a three-day schedule, heavy investment. And we were so proud of our thing, right? And on the way back from Bombay, we got a phone call that for tomorrow morning, you have to order a lot of groceries from Amazon because groceries are running out on stores now already.
00:28:42
Speaker
And you know that gave me chunks in my stomach like nobody's business. So that happened and everybody knows this is history. By March 20th it came to fruition that we cannot open and we cannot even, whatever we shipped out before that had to come back.
Adapting During the Pandemic
00:29:03
Speaker
It went into the trade, it went to the store and it came back. I cannot even explain on an audio or a video podcast
00:29:08
Speaker
what it felt to us at that moment. We were in debt. We were in debt. And there was banks at the door. How much debt had you taken by that time? A couple of crores or more? I think four or five crores. And a totally new business. And we had let go of the entire previous business. And we were feeling this would be the second business we have crashed in five years.
00:29:32
Speaker
But literally, what did you think about it? Everything. Everything. And we owe money to banks, to people, to other factories, right? We owed money left, right and center. And everything came to a halt. But that was the... I think, again, we went to 4am.
00:29:57
Speaker
Right? And we decided that we're not going to sit back. We're going to do something. And let's start work from home. And we were like, work from next morning. Next morning, we started. We brought our company together on a Zoom. And the first time, we were like, Zoom, let's go. And to my surprise, our team was not used to it. And our team was not a team. It was very well experienced into a corporate infrastructure.
00:30:24
Speaker
They are into a startup. They don't know much. But to their credit, they stood by us. And they learned their way through. And everybody got internet connection in two hours into their homes. And everybody got, even to the best, our security guard. Our company security learned on his phone and got a Zoom and how he has to operate during the lockdown. He was learning through a video call.
00:30:50
Speaker
I'm so thankful it's unbelievable. There is no words I can say that are ready towards Siddharth, Neha, Sunny, Pankaj, all these guys I want to mention today. These guys stood by me and Archana, Rima.
00:31:08
Speaker
and everybody had mauling please if i'm forgetting anybody everybody guys everybody love you all so but i came to a point where okay
00:31:28
Speaker
Banks, if you're not paying to the bank, they still charging you double the interest, right? So you screwed left, right and center. So we went back and we borrowed some money from my dad to sustain through the day the lockdown happened. We barely had 10,000 rupees in our account. I had to sustain through that. It was very, very challenging. We had to make salary. We had to make everything on at least if not bank payments, right? So we went into, uh,
00:31:57
Speaker
Regroup mode and our team suggested that let's do one thing. We can do our own website if we can supply to customers Directly so and One of our team members say I can make it overnight if you want sir, but how will you supply right? We can make it on Shopify. We can make everything. Okay, perfect So being Delhi wallas, we are a little bit connected people Sometimes and we got ourselves a license to operate
00:32:25
Speaker
because we had feeding bottles and baby blankets and stuff like that. We got licensed to operate and we were the only brand we were operating.
00:32:35
Speaker
And by the third day, we launched our website and we could ship to entire country and only from our website. So for those who do internet marketing, we experienced ROAS of 12. Let this be clear. What is ROAS? Return on ad spend. And we saw 12 for maybe good two months.
00:32:57
Speaker
Do you know how to pay rent? A few businesses were able to ship and that's what kind of and then we were of course deciding that we will start a campaign called School from Home. How were you doing the shipping like what delivery and all were working? If you were licensed then they will ship it. We got licensed from the Delhi government and then we were able to ship. Apart from that we also we also started a campaign called School from Home.
00:33:23
Speaker
which kind of gave you know, we sold school bags. You can't imagine what what amazing team that we had that made that happen. I'm so thankful and I'm so lucky to have that kind of team and and to be honest, there was a time where 70% of our sales was this back to school with schools opening.
00:33:46
Speaker
like by creating that story of make your child feel like he's in school. Yes collection is so interconnected that if you buy one product say for example you buy a mad eye
00:34:00
Speaker
right then the child wants the madai bag the child wants the madai pencil box the lunch box the madai everything is and to build the entire collection so interconnected madai is that a character what is is one of is one of the character so we have madai spunky diva shy guy like that so we have eight different characters
00:34:18
Speaker
These characters are like your intellectual property. Yes, we developed characters, generally look, Bachukuna, Animus, Beech, from Disney to everybody for the longest time. We thought that we had to do something different. And for that reason, we built characters that are children themselves who have characteristics of their own. Diva is a different kind of a girl. She's always very well-dressed. She's always very up to the point, right? She knows how to dress up.
00:34:45
Speaker
Mad eye would be the guy who will always be taking pangas with everybody in the room. He will be trying to be the funny guy. And these are eight different characters we built. And parents can see their children in those characters and then choose the products. That was the idea. What kind of sales were you doing then, once you started selling online?
00:35:07
Speaker
I think on our own website in the first month, we did about 50-60 lakh rupees when nobody was doing and we picked up from the phone.
00:35:25
Speaker
I think by the time the year ended, we reached a run rate of 10 CR by the end of the year. So we did that. Of course, by the end of that year, there was the second wave and everything, but we did decently better.
00:35:43
Speaker
When you were doing the franchisee business, what kind of turnover were you doing then, compared to 10 CR for Rabbitat? What was the turnover then? No, we would be much higher turnovers then, but Madhu was quite good. Today, as we speak today, we are in the 20th month of our launch of our Rabbitat business. We have already beaten all the four brands together.
00:36:06
Speaker
What will be the turnover this year for Rabitat? Rabitat and Helvet Club, we will be targeting upwards of 15 CR and hopefully next year we will be doing at least 30 CR because by the time schools would open, our major thing is that once we have the schools and everything in, then we should be in a much better territory than this.
00:36:28
Speaker
But we are quite in a very happy place, very honestly. We think we can do it. Just focus towards customer experience. That's what we've done well, to be honest. And passion, like I said, passion is what we do. Passion is what we do.
00:36:50
Speaker
Like there is what I will actually you do employee management and recruiting and stuff. I'm sure it's not a passionate passion for somebody to do it. It's how you do that thing is the is where the passion, right? How you recruit those people, how you recruit the best person.
00:37:08
Speaker
Isn't that where the passion is? Yeah, attention to detail. The biggest sign of passion is attention to detail, what is what I feel. Yeah. Yeah. We have to be more practical and that's what I think what I've learned over the years.
00:37:28
Speaker
From Rabita to Headway, tell me that journey. How did Headway come about?
Launching Headway: A New Venture
00:37:34
Speaker
Headway, very different place. What happened was the factories that we were working with, we know they used to make products, especially hydration products. By hydration, I mean stainless steel bottles and flasks and stuff like that.
00:37:51
Speaker
for top brands in the world. And when I say top brands, the number one brands, do you imagine the brand and those factories are making it? We knew how to make them now. The only problem is that people wanted us to make something for adults, but we never had the capital.
00:38:12
Speaker
we never and to invest into new molds and a new inventory so and and and how you start working with some factories and you become you build relationships so couple of factories were very close to us and and as we started talking to them we offered them that you want to try something but we don't want to spend the same kind of money we already did so a couple of them got interested and they
00:38:37
Speaker
Give us a leverage of lower quantities and sharing the cost of the tooling and considering that we also promise to stay with them for a certain longer period, maybe three years and longer, which of course we were happy to agree to. And they gave us five products to try in headway with our designs, totally our thing. And when we launched them in India, people had never seen something like this in India for adults.
00:39:07
Speaker
You can't keep it on your table also and are not insulating for more than two hours. For us, we were surprised to the point. People were like, wow. And these are very regular day-to-day products. So we realized that India always have been, especially in CPGs, consumer products.
00:39:35
Speaker
People have manufactured have been cutting corners to make it more value driven that has been hurting the entire consumer experience we think are today i was in a strange from a parenting company to becoming a cpg company and helping enhance those consumer experiences.
00:39:54
Speaker
How is the headway bottle different from like say a Milton bottle? So we are going to do a video with one of our YouTube partners in the next one where we will be showing top 10 brands in India compared to a headway. We will be putting our bottles into burning coals, villas in them, and let's see what happens on a live video. Above all, we use the most honest materials of steel, which are food-driven, which are compliant globally, which enables
00:40:23
Speaker
a user to stay a rust-free bottle for 5 years, 10 years, 15 years. That you cannot get in products that you get in India. And those rust-thick bottles that you don't know are getting into your water, and they will be carcinogenic. They will not be ever healthy. Yeah, a typical bottle, salver, may rust. They don't last more than a year.
00:40:45
Speaker
Yes, because the material that they're made of and rust is pure poison. So that's where I believe we are sold our souls and conscious just to cut the corners in India. We've literally done that.
00:41:03
Speaker
Capitalism limits everything. But beyond that, one has to not play with these kinds of things. Safety, health, it's not necessary. It's not necessary. It's not necessary. Make it better. Don't take away from it. The headway bottle, what is the capacity? Like one liter bottles or smaller?
00:41:21
Speaker
We started with 550 MLs and 750 MLs. So now, Headway, this year, we served brands like KPMG, Pfizer, Google, DHL. All these companies have served Headway products to their employees or to their customers in their customer acquisition. And we're so proud that we were never been questioned on the price. These brands know what we've done.
00:41:50
Speaker
And what we will continue to achieve going forward. So we're hoping you also do like engraving on the because I can see on the website, like there's a name engraved. Yeah, we do customization. Yes. Anyone buying a bottle on headway, they can get it customized.
00:42:05
Speaker
Yeah, absolutely. So is habitat. They can get the kid's name engraved and stuff. Ah, okay. How do you do that engraving? So you do it like in your Okla office? In-house, yeah. Our dispatch center is in Okla also near to our own head office. We have engraving set up. We also launching embroidered bedding and stuff like that. And kids, they can get the kid's name embroidered and stuff like that.
00:42:31
Speaker
That's like a major USP, to have the name embroidered or engraved on the bottle. Anything personalized makes it your own. We like to do that. I think offline cannot allow you to do that on the fly. I think platforms like Amazon and Flipkart are too huge to allow that to happen.
00:42:54
Speaker
at least not now, maybe in the future, but nothing right now. So we believe that this is going to be very interesting. Today we get a majority of our orders that are customized.
00:43:09
Speaker
They wanted customize and we're going to get, we've seen that and we're going to make extra lens to even customize products further. Like big kids can make their own bag colors. They can choose what part of the bag would look what color we are going to do that kind of stuff. You know, let's talk about pricing. Like for Rabbitat, what is the price range like and how does it compare with competitor products?
00:43:33
Speaker
We don't know what competition is to us because we are especially only in rabbit and we are very unique. We don't have a competition as we speak. We would be the only brand that will be compliant to all these regulations, safety, health wise. Apart from that,
00:43:57
Speaker
pricing would be a lot different if you compare it to a regular Indian brand. We would be at least twice more expensive.
00:44:06
Speaker
a bottle for a kid, like how much would it cost on an average or a school bag? So we start our school bags at 1500 bucks. We're not that expensive. An American brand would cost you much more higher, but in order for us to enable the quality that we promise, we would have to remain compliant and that of course cost money.
00:44:26
Speaker
And what about headway? How much does a headway bottle cost? Headway starts from about $1,000 who goes to about $1,400, $1,500, $1,600. Not very expensive. So we're quite close to what Milton's $1,000 Milton would be, but a little bit more premium. But at least we can keep them on the top of a table and we'll look ugly.
00:44:46
Speaker
Your distribution channel now is primarily online? No, I think today as things started opening up, I hope this continues to open up, fingers crossed. But we believe 60%, 65% would be online and rest all will be offline. This was a totally different story three, four months ago. Must have been on 75%. But as things are looking to open up, we might reach a point where this will be a 50-50 split.
00:45:14
Speaker
And offline means like through these specialized stores that have products for kids. Yes, yes. And to add to a list of more than 200, 250 specialized parenting stores or toy stores, stuff like that.
00:45:30
Speaker
In the online revenue, how much of it is your site? How much from Amazon and like marketplaces? Of the total revenue, we think on our own website, 30% of the total revenue of 25% as of today may be coming from our own website. We're not very Amazon discovery brand because we may not be the cheapest, so we may not index on the top of Amazon index, right?
00:45:55
Speaker
people, 90% of our Amazon sales would come from the search term. But you don't spend on ads on Amazon like sponsored listing. We do it in a different strategy than regular. We don't do a category based. So we tag along our own brand names and we tag along international and premium brand names.
00:46:15
Speaker
You only want to target people who are looking for premium stuff, basically. Is there a difference in the margin when you sell through your own website versus when you sell through Amazon? Our margins are quite different on our own website. I think on our own website, we would be enjoying at least 40% more margin than we sell on Amazon.
00:46:36
Speaker
On your own website, you still have to spend on that customer acquisition cost, like the ads and all. So, including that, you still earn more on your own website. On our website, of course, when you add customer acquisition, we don't do that that well. But when we acquire customers, we look at the lifetime value of the customer. That would make sure for a better return in the future. But as Labidart is growing older as a brand, we get 30-40% of our sales coming from existing customers.
00:47:05
Speaker
And for headway, what do you see as distribution channels? Like this corporate tie up you were telling me about, how did you achieve that? A lot, 100% of these deals were an inbound reach than an outbound. So you do good stuff.
00:47:25
Speaker
If you start using a hardware product, you would want to give it to your fellow employees or to your partners. But this by itself could be like a great channel. You could actually hire one sales guy whose work is just alliances, like corporate alliances. Yeah, I think on the contrary, we never do sales. We never sell. That's what to say. We never go to any customer to sell. Never ever.
00:47:55
Speaker
If we are there to help their cause, then it's good enough. If we're not good enough to help their cause, better not. It's a different world now. Never do outreach. Do good stuff. If I were a retailer, for example, and if I were to come to Yorkshire, then I want to keep my stuff on your store.
00:48:15
Speaker
Instead of selling to you, I would have to look at it totally differently. I would say, Akshay, would you like to experience Zabatat for your customer if Zabat can help your customers better and help you get them coming back to you for more such products? Would you try? Let me give you a 60 days trial. You don't have to pay me. You don't have to do anything. Just keep it.
00:48:37
Speaker
Let me know after 60 days if I do well. Otherwise, just throw me out. Just send it back to me. There's a lot of money to be made through this corporate alliance. I mean, see, the one thing is that your shipping costs would be much lower. So you would probably get better margins. You will get bigger deals like, say, like, say, KPMG or E&Y, if they do a deal with you that they will give you a bottle to all their employees. That's like maybe 10,000 bottles being sold in one deal.
00:49:03
Speaker
So the volume of course makes a lot of sense. If they are bringing you a value of volume, then you've got to bring them the value of pricing. So it all evens out. But the good thing is that we go to so many hands, so many high network customers. That's the win for us. We may make lesser margins on those deals, but a lot of those customers, they just don't stick to one head report. True, true, true. You get noticed basically, discoveries happen.
00:49:32
Speaker
Yes. And while we're not losing money to that, what more do you want? So which is why I'm saying you should actually hire a sales guy. We tried that and we learned that it's never good to outsell. If some inward inquiries are much better converted,
00:49:50
Speaker
So better thing would be do better marketing so that you reach more eyes and ears and do better product on top of that marketing before you marketing.
Leveraging Technology and Marketing
00:50:01
Speaker
Do better product every time, every time each large customer has come to us, they have come to us after experiencing a product. So we never had to send to them.
00:50:13
Speaker
So what is the role of technology in the business? One side of technology is, of course, in terms of your online commerce platform and marketing and stuff like that. Or the other is in terms of getting data on what features people need, what products people need, and using that data to design product. Talk to me about that. OK, so technology, of course, plays a huge role. If I'm saying 65% of us come from e-com, of course, technology has a huge role to play there.
00:50:43
Speaker
Apart from that, our supply chain is so technology dependent right now and we are investing very heavily on a better supply chain so that we can serve our customers better at much faster price times because what Amazon and Flipkart of the world have shown you is serve the customer much faster
00:51:04
Speaker
to get that. So for example, the only thing people tell me, and I don't know if they shared with you, that I ordered on Mintra last night and it came to me in the morning. And they remember that one instance. So how do I ship to a consumer much faster? How do I grow to that scale that I can use technology and shipping services that I can ship to consumer directly much faster, much cheaper as well, right?
00:51:29
Speaker
Apart from that, I think technology plays a much bigger role in marketing. Because all you see, Bakshi or anybody listening to us right now, would be looking at the six inch screen.
00:51:45
Speaker
They don't look at their kids as much. What changed is green way but are stuck so badly. And the only way technology enabled us to reach those six inch screen in a meaningful way. Ads inning, not by ad, is the mixture of content like what you are doing.
00:52:07
Speaker
content content content relevant content value addition content that adds value to your listeners that add value to your audiences enabled it with technology delivery right that would make sense that is entire place of technology though i'm making a physical product everything is technology from customer acquisition to customer service
00:52:28
Speaker
How are you doing content marketing? Tell me that strategy. Into the content, we started two of our own podcasts. One is called Meet the Mom for Rabbitat. It's run by Neha, my colleague. She heads marketing here at Merlin overall. And I run the podcast for Forever in Motion, which is a podcast made to target
00:52:52
Speaker
headway consumers. It's mostly targeted towards working professionals. And the central theme of that podcast is stay forever in motion, whatever may come, and their stories and their ideas and their marketing ideas. We've had podcasts with people like Ankit Nagodi and Provost Singh from Zoho. And a lot of our friends of mine, and we want to keep adding to that.
00:53:20
Speaker
So far, you've not raised any external funding, right? It's only been debt funding and your own savings. We have recently closed the seed round for about half a million and we not kind of announced that because it's just a quite small number. So this is the first time we've seen an external capital coming into the company.
00:53:41
Speaker
We believe we will be doing justice to this capital first and do the best value addition to this capital. We are not in a hole to raise more capital before we even need it.
00:53:57
Speaker
But so, you know, the D2C space has this race for capital happening. There are like these Thracio-style companies. I think Mensa became a unicorn in like six months or something crazy like that. And they are constantly looking to acquire D2C brands. And so are you open to such kind of a deal? Or do you want to instead become an acquirer yourself? Because you already have two brands.
00:54:25
Speaker
We don't have any aspirations to acquire or get acquired. We have only one aspiration. We have how to reach 100 crore revenue and what will enable us to reach that first. That's the first step of the journey and we'll see from there. There is no bigger vision.
00:54:44
Speaker
We don't have that kind of vision so far. We may have, but today we are more practical and pragmatic. Whatever enables us to reach 100 crores, we will consider that. So by when do you think you'll hit 100 crores by which year?
00:55:00
Speaker
We want to hit when we want to do that by 2025 and whatever enables us to reach that faster and we want to make a defensible position, just not make 100 crores so that we don't become a brand that can easily be broken by anybody else, white labelling new ideas.
Future Plans and Brand Expansion
00:55:22
Speaker
A defensible brand needs to come with a lot of values. So values make only change and then reach 100 crores.
00:55:28
Speaker
There was something very interesting I found in terms of the IP that you have created of those characters in Rabbitat. I mean, there's a play there also in terms of creating content around those IPs. It could be like a comic book or animation or stuff like that. I mean, that's how Disney's products get sold now. Disney builds the IP and then sells products around that IP.
00:55:54
Speaker
I thought that was a pretty interesting opportunity there. Is that something you're thinking of? Absolutely. We do consider that. We think there is a there is a huge, huge opportunity to do that. You are one of the few people who have recognized it. I don't know how you had. Well, I spoke to 20, 30 people about the business plan so far. And let me tell you, not even the market investors or VCs had come up with thought.
00:56:23
Speaker
And we don't talk about it. But we certainly, certainly see the possibility to do that. This is going to be the bread and butter at some point, we believe. We just have to meet the right creative team. But to meet that scale and to do it on our own, there should be certain scale into the business on its own. And then we may raise the capital only to do that.
00:56:50
Speaker
You will need to, I think, because that will be heavy investment, like creating good quality content. Yes. I mean, Akshit, that is like not anybody has come up with. Between me and my brother, we talk about it and nobody thinks about it. You're the first guy. That's the advantage of interviewing so many founders, that trust learning
00:57:12
Speaker
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