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Building a fast fashion brand from India | Shivani Poddar @ FabAlley
306 Plays1 year ago
Immerse yourself in the decade-long journey of building a large D2C fashion business, starting from an era when fundraising was next to impossible and founders literally had to survive each day with nothing but their grit and hustle. Learn about what makes a D2C fashion business scale up from Shivani.
Read the text version of the episode here.
Read more about FabAlley:-
1.From western wear to wedding luxe, how Shivani Poddar built a large D2C brand
2.VC-Backed FabAlley’s Co-Founder Shivani Poddar On Growth Plan, Offline Biz And More
3.FabAlley: Life In The Fab Lane
4.Tanvi Malik & Shivani Poddar: Fashionably Forward
5.How FabAlley’s expansion plans and strategies are making a mark in the apparel sector
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Transcript
Introduction and Background
00:00:00
Speaker
Hi, I'm Shivani Podhan. I'm the co-founder and CEO of Fashionhouse High State Essentials. We run two brands, Fablea in India, and I'm very, very excited to be here today with Akshay and all of you.
00:00:23
Speaker
It's the year 2011. Shivani Podar is a young and successful working professional in her early 20s. She is working with an investment bank, helping startups to raise funds. And then she realizes that there is no easy way for her to buy smart office wear online or even offline.
Journey into Fashion Entrepreneurship
00:00:40
Speaker
This insight led to the birth of Fab Alley, which is today among the leading D2C fashion brands in India. In this episode of the Sounder Thesis podcast, immerse yourself in the decade-long journey of building a large D2C fashion business starting from an era when fundraising was next to impossible and sounders literally had to survive each day with nothing but their grit and hustle.
00:01:02
Speaker
Your host Akshay Dutt interviews Shivani Podhar, the founder of Fab Ali about this roller coaster ride and in the process learns about what makes a D2C fashion business scale-up. Stay tuned and subscribe to the founder thesis podcast and any audio streaming app to go behind the headlines and hear the real stories of making a start-up scale-up.
00:01:30
Speaker
I think my, you know, for those few years, all I wanted to do was become an investment banker, which I did. So I worked with the vendors and, you know, was a very happy, you know, banker there. But I think always what were you doing exactly? Like, I was.
00:01:45
Speaker
Yeah, the M&A side. The M&A side. Fundrails, you know, at that time in the 20th of 2010, 11, 12, early years, they were also early years generally, right? So, there was something happening in tech, little bit, e-commerce had started coming up, but otherwise, you know, some large deals, but nothing, there's no ecosystem like it is today. So, mostly on the M&A side at that point.
From Banking Passion to Business Ideation
00:02:07
Speaker
So while I was of course a banker and I was actually, even with the super strenuous crazy lifestyle that investment banking has, I was quite, I think I was quite happy. And that's who I am. I like working long hours, I like working weekends. It was something that kind of quite energized me.
00:02:26
Speaker
I always thought that until I became an entrepreneur, which in my mind was at least 10 years post here at that point, I would continue to do banking. That's where I was.
00:02:43
Speaker
me and my co-founder, we started talking and we were like, you know, uh, you were like work sense or like, how did you know, we were, we were friends since we were kids. So, you know, we kind of grew up together, went to the same school, lived in Delhi. Uh, so essentially, so we knew each other, we were friends, uh, for a very long time.
00:03:00
Speaker
We were actually really as young working professionals, I was in Bombay, she was in Bangalore at that time, as young professionals really just started talking like, where is fashion in this country? And that was the first line and the first conversation, ask consumers to say that, you know, where do we shock from? We want to know good, we have a general kind of sense of, you know, what's happening around the world. But in India, nothing is available.
00:03:22
Speaker
And, and, and that was the first need that we identified, nothing to do from a business point of view, but I've never ever thought that I'd be a fashion entrepreneur. Absolutely no sense of fashion design. And you know, everybody asks me, Oh, you're a designer. And I'm like, no, absolutely no sense of design, I think. Okay.
00:03:39
Speaker
But yeah, I think that was the first kind of conversation. And the more I thought about it over those few months, and I started working on e-commerce transactions by then at Avengers. And the more I would meet entrepreneurs, and these were young people like me, like mid-20s, late-20s,
00:04:00
Speaker
What kind of people were you meeting? Did you meet Phalguin? I didn't actually meet her, but these were, you know, some of those companies actually don't exist today, but these were, you know, a lot of, everybody was starting out, right? 2012, 2013, like, you know, those years, I think a lot of companies were just at those that don't exist and do exist today. Mostly those, one of them started in that, that three, four years, you know,
00:04:24
Speaker
Like Clovia also started around that time, I guess. Clovia started then in fashion, there were players like Yapmee, Sovee. Fashioned you also. Fashioned you. Crazy. Lots of companies. Sugar started then. So, I mean, lots of companies had started. You know, different sectors. Lenscard, first cry. I mean, you name it and you'll see that the timing is, it's all in those two, three years.
00:04:47
Speaker
So essentially, so everybody wanted to do something, realized that probably there is something getting bit, and there was so much energy in just thinking that it's new, and we were also seeing parallels at that time, right? So for example, in fashion, in the UK, there were companies like Google resource. Those had already seen seven, eight years, and they were, you know, so while in India, I was very new, but do you believe this was, they were at 2003, four, five, we had reached that point.
00:05:14
Speaker
So I think even for me, when I was doing a lot of comp work and I was working on transactions, I could see that globally, this is happening. And it's a matter of time that, you know, we're going to kind of, India's going to take it on as well. So yes, you know, just those conversations, like a selection member with the intent said, oh, now I want to be a passion entrepreneur because I couldn't even imagine. But just those, you know, those conversations with Tanvi,
00:05:41
Speaker
Again, I started kind of just drawing up a business plan. That's all that I knew how to do. I think I underwent this, so I started doing that. And also, I started talking to women, I think, actually. So the thought was to say that I knew so many people in my ecosystem. And I'm like, where are you guys shopping from? And if it's all abroad, if it's all to say that I either order from resource or I shop only when I travel, then the thought was to say, why aren't we doing enough in India?
00:06:08
Speaker
So what is this ASOP? Sorry, I've not heard of this. We said global, it's a UK based fashion marketplace. And today in India, of course, there's a lot more fashion available. But when you go back 10 years, like nine, 10 years, there was nothing, like nothing is nothing. You had like one or two brands, you had no e-commerce. So it was like a pretty terrible market. And the thing that I realized actually that was changing was that there were not more women who were working.
00:06:34
Speaker
And before the vendors, I was in Leaver's HUL. And there, maybe 25%, 30% or more of her office were women who were in their 20s, 30s, very sharp, working, had income, disposable income, et cetera. And when I started realizing that, and even at the vendors, where you're in financial services, you don't see a lot of women. But even there, I would like to see more women work. They'll want fashion. That is 100% given, and they'll have income to do that.
00:07:01
Speaker
So yes, I spent about six, four, five months, I think, just thinking because leaving a good career at a vendors was slightly kind of risky. And I was like, does it make sense? And I think the thing that really triggered and pushed me was to say that if I can't do it now at 25, I don't think after 10 years with so much baggage, with the family, with all of that, I probably not have the balls to do it then. So I was like, if I have an idea, just do it now. And you were valid at that time?
00:07:32
Speaker
I wasn't married. In fact, I didn't have any obligations. I was not married. I was still dating the guy who's my husband now. And so we've been together for a long time. So I just told him that I need to shift to Delhi and I need to do it. And if it doesn't work, then two years I'll be back.
00:07:51
Speaker
So, what was the plan? Did you want to curate clothes which let's say unorganized from the unorganized market, make them available online? Was that the plan or did you actually want to do design, manufacture, sell, like the whole
00:08:09
Speaker
Yes, I have to not answer it very differently from what I usually answer when I meet investors. I'm going to tell you what I was actually thinking at that time. In 2012, I think actually I decided I want to do something in fashion.
Initial Business Strategies and Pivot
00:08:21
Speaker
And that's all that I knew because I could have made business plans, which I did. But there was no supply at that time. I mean, it was super unorganized, no idea what to do.
00:08:31
Speaker
There was no demand on e-commerce also at that time. In retail, I couldn't even think about because we were bootstrapped, didn't have money, 20 lakhs investment, you know, so essentially that. So that's all that I genuinely just knew that when I shifted to Delhi to start. And then basically the easiest thing to start was with accessories, which is jewelry, bags, and this was also traded because, you know, with clothing, there's a lot of sizing that needs to be figured and kind of done.
00:08:58
Speaker
With accessories, it's a no-size, single piece, kind of a place. So I knew that fundamentally, probably easiest to do it, then I figured out some of the other things. And also as a person, I'm generally very action-oriented. So I can't sit and be like, over two years, let me think, then I'll do something. So I have like four months, let's get a website, let's get some products, let's get started, and we'll figure it out along the way.
00:09:21
Speaker
So that was the first business. It was just accessories. Actually, just on our website, it was called family.com, which is our parent brand even now. And so we were just single website. There were no marketplaces at that time. Myntra had just started with a closed marketplace. Jabong, again, very new. But that's it. So there was nowhere else. So we just started with the website and a little bit performance marketing. We started doing Facebook ads.
00:09:46
Speaker
Uh, started spreading the word and even things like I would, you know, I would go to exhibitions because I was like, you know, once I take a target for a month, it was like, say I have to do 10 lakhs this month, just have to do it. So we were just like, we would go to exhibitions, stand all day and, uh, do whenever, whenever we could. So those were the, that was probably, those were the first, uh, maybe even year and a half, two years.
00:10:09
Speaker
Okay. So this was like artificial jewelry and bagels and stuff like that. So jewelry, bank shoes, all kinds of accessories. But, you know, even after we'd launched within seven, eight months of launching accessories, I did figure that, you know, it's not, it's not going to be a large business. And this is not because the, so one of the demands for those categories at that point was not enough. It was, it was, it was more unorganized. I will have one or two organized players.
00:10:36
Speaker
And a parallel is of course 20x the size of accessories in India, especially. So very early, I was like, if we need to make this big, we need to crack the parallel supply chain, which is very complicated. So we said, so that's when after 7-8 months, I was like, we need to get into a parallel, you take us time, you make mistakes.
00:10:58
Speaker
But that is what we need to build. If you want to build for the next 30-40 years, then you want to build a large company. So I think those learnings, kind of that realization happened early. And we started pivoting from 2013-14 and started getting into a panel more and more. And then from there, of course, there was more looking back. So by the end of that first year, what kind of top line were you doing with just the accessory business?
00:11:22
Speaker
Yeah, so first year we did about three crores. And this is in about six months that year because we didn't get a full financial year. And, and I was, you know, of course, it was not a big sum, but it was still, you know, we were okay. I think you were just getting. It's a phenomenal sum for like a completely bootstrap.
00:11:41
Speaker
Yeah, at that time, we didn't have money. And actually, the next year after that, actually, we didn't feel it was with again, no money in there. And I think this was just by shifting gears from from accessories to apparel. And like I said, no money, just just basic investment from and me and that was the that was the first was when I think we found the right space early on. I think that's what I would think that that was helpful.
00:12:07
Speaker
Tell me the journey of the apparel launch. Did you want to curate or did you want to design, build, sell?
00:12:17
Speaker
So we've never been in the curation model. Again, actually, the thoughts been you can't build something meaningful. If you do what everybody else is doing, which means if I curate, anybody can curate, right? It's very difficult to kind of build differentiation unless you're building a marketplace. So for a brand, it's almost impossible. So never wanted to curate, always wanted to design. Now, then we need a fast way designers because we are both business graduates.
00:12:42
Speaker
What was Tabi's background? She comes from a marketing background. After doing an MBA from Micah, she was working with Titan as a brand manager. So she understood consumer marketing. She understood the consumer side and also was always better at design than I was. So this is what we did. So we said we want to launch the freestyle.
00:13:03
Speaker
No idea how to design, of course, we didn't know how to make a pattern or sketch or do all of those things. So we bought 50 products from exactly the company I told you, ASOS. So we bought 50, 50 garments and we copied them. And we said that let's make the pattern to the best of our ability. We went to the fabric market in Delhi, picked up fabrics that were available 100 meters, basically, and married. With Chandichak, you went there.
00:13:31
Speaker
We would go ourselves, we would walk on fabrics. It's a crazy place. So we bought that and we married the two. And I would pretty much sit at the factories where the stitching is done. And this is now you have to imagine like tenors. There's no, this is not like a great job where you're sitting in an office. So 20, 30 tenors. And this was your parents quickly. They were running like four times.
00:13:57
Speaker
This wasn't my parents' faculty. These were some local job work units that they had no identity for. But your parents would have at least given you that market knowledge of where to get things done, where to source from, where to support us, where to source from, where to go. And I think that support in the first few years and even till then continues to kind of be invaluable.
00:14:18
Speaker
So they did support us, but we had to get the job done, right? So I would go and just stand there for days and days and weeks and just kind of get the production done. And those were the first, so we launched exactly 50 styles and those were the first 50 styles, which were designs from A-Source, fabrics from Charnichok on Hero Place and Becca by Dittu.
00:14:37
Speaker
And when we launched that, which was around April 2013, and within a while for accessories, if we were getting maybe 20 orders a day or 30 orders a day, the minute we shifted to apparel, it became, say, 70 or 80 or 100, which is how we saw the growth within that one year.
00:14:56
Speaker
What kind of clothes were you selling, like t-shirts, shirts, or formal wear? Western wear. Western wear, tops, dresses, more and more casual from a women's represent. Smart casuals. Smart casuals, yeah. So we did that. And yeah, and that was the first lot. And then from there, you know, we just knew this is it. And we have to do more of this. How did you...
00:15:21
Speaker
I'm guessing the key thing here is scaling up supply. You also realized that India doesn't have that supply in place. The demand is there, more women are working. So how did you scale up supply? Am I right in my understanding that supply was the key challenge to solve?
00:15:40
Speaker
So I think Akshay was both ways because demand for e-commerce retail was about 99.9% of the channel at that time, like of the overall segment. One link was very small. So even from a demand point of view, you had to tell women to come online and shop, right? Because you weren't sure of your sizes. Returns were not half as smooth as they are today. So you had to really educate them as to why they should go online and buy at all and not go to the closest store.
00:16:06
Speaker
And that was something that took us a lot of kind of marketing push, branding in a certain way, talking to the consumer to be able to tell them that you don't like the product, we'll take it back. But at least go and try it. So that is something that I think even on the demand side, and hence there was of course a lot that had to be done.
00:16:25
Speaker
But supply, yes, I think there was, you know, again, ecosystem was poor. Like, you know, people, there was nothing quite a domestic, a large domestic market. People would usually, everybody in North America, they were exporters. And I have, I probably met hundreds and they would be like, they wouldn't even entertain us. They would be like, you know, if you want to make like 50 pieces per garment, please, you know, it's like my office time. It's too swollen. They have a bit of a harder quantity requirement.
00:16:49
Speaker
minimum of thousands of pieces per style and they're like you know looking at 15 there's no way right and then you know we were we were also young they would look at the tanvi and me typically and be like oh you're young girls you know why are you wasting our time and that is something that I have heard for and I continue to hear that actually so that's something that I've heard for so many years that you know they'd look at me and they would be like you know I
00:17:12
Speaker
I don't think we can, you know, you know, we don't sell here, this is not a retail shop, like, that's so many, there would be places I would go to say in Sura, I thought these kind of places and they would they would actually tell me and my team who were kind of young girls, to be like, you know, this is we don't retail here, this is not a wholesale, this is a wholesale shop. So please family, and then explain the business to them that we're not here to shop. So thanks for those those kind of things. You know,
00:17:40
Speaker
like as it continues to happen. It was, I'm guessing, like a very male-dominated kind of an industry of these people who make the garments. You will very rarely see a woman running a factory. I mean, it's just not that business or even on the fabric side, all the large people on everybody who supplies fabrics, they're 100% male. Even the tailors would all be males of the year. Sorry?
00:18:05
Speaker
Even the tailors would all be mails, like the people working. Yeah, yeah, yeah. Everybody. So the whole ecosystem. And it's such a funny incident that once worked five, six years back, I went to Surak, which is basically the hub for fabrics in India. And when I was there, there were lots of these buildings which have lots of wholesale kind of garment shops.
00:18:26
Speaker
And we and another two colleagues, three of us, we were kind of walking through. And actually, we would have entered 50 stores and probably from every store we heard, this is not a retail store. This is not a retail store. We've been walking through your shopping. And we've been like, they have been shopping. And in those buildings where there were maybe 5,000 men in each building, I didn't see a single woman.
00:18:51
Speaker
except the three of us. And we're from Delhi, we, of course, you know, just the way we are, the way we dress, and they were like amazed. And then one of our vendors told us, let me send like
Scaling Operations and Funding Success
00:19:02
Speaker
two bodyguards with you guys because you can't enter these places without men. And I was, I was amazed. And I think from then till now, it's just been five, six years, I do see a difference still in terms of how they kind of create and respect women. But so many years I was amazed that this can happen.
00:19:19
Speaker
So how did you like set up your like, how did that one order of 50, which you kind of like bootstrapped it and did it very manually? How did that become into a like a well oiled machine? Did you set up your own manufacturing or did you set up a reliable chain of suppliers and vendors and third party manufacturers? How did that become a well oiled machine?
00:19:48
Speaker
Yeah, so I think restarting the essentially, you know, so in fashion, how it works is that we have to have churn out new designs every month. So it's not that you know, you make 10 styles or make 10, you know, kind of products from a lifestyle perspective, or 10 face creams, and then you can sell it for like two years. So, so we, so once we identified the styles that were working, we said that already every month, we make 30, 40, 50, 80, depending on the season.
00:20:11
Speaker
We keep kind of making low styles and initially for a long time those styles were made based on the same model which means we were ordering clothes and references because we could afford to get our own tailors and our own pattern masters etc. So we would be like let's order those clothes, let's make the fabrics. So we continue to kind of
00:20:28
Speaker
focus on this machinery, which we could see was getting a little bit better and better. Also, since our own volumes were increasing, like, so for example, earlier I could only make 20 pieces per style, I could now make 50 and 80. So just by virtue of that, suddenly people started becoming maybe a little bit more interested than they were. Plus, of course, my parents and they were in the government business, so we really requested them, they could kind of support us for the first three, four years and get like, say, 20, 30 machines just for us, that would be helpful.
00:20:56
Speaker
So as a combination of these two, three things, I think those were the, that was the first, how we could have set things up. But we never really ever set up our own manufacturing. Because again, something that I understood was that, you know, if I'm in the business, like if I'm in the retail business, I don't want to be in the manufacturing business because they're generally, they're two different businesses.
00:21:16
Speaker
the way they are. Absolutely. So the back end, if you have to do that, and I have to manage like, you know, today, maybe we've got 3,000, 4,000 tenors for to manage that, then cannot be doing, you know, cannot be selling, you know, at the front end of the business that we're in. So I think never kind of fully set up the back, except we found enough people who wanted to work with us over time. And every year, actually, we were doubling, right? So, I mean, I think also for a lot of vendors, I would just sit with them and tell them,
00:21:40
Speaker
that this is our journey we're starting, and you know, support us, right? Today you're giving us 500 meters, tomorrow's product becomes 2,000. There's some vendors who've been with us for years now, just because, you know, at that point they supported us, and now there's such high loyalty that they've been with us in this entire journey of us, us growing. So I think I've been fortunate to find those people, fortunate that my parents were there to support, and I think, like I said, as a combination, we were able to scale.
00:22:06
Speaker
What are the machines that you're talking about that you, what is the, I mean, where do machines come in? I thought it was Taylor's making clothes, right? Yeah. So Taylor's hem stitching machine. So those machines and then there are a bunch of other tools that you need for garment. So it's a combination of all of that.
00:22:24
Speaker
So you basically work with a lot of small shops which have 20, 30, 50 tailors. Yes, actually, it's like whoever wants to work with us. So they could even have five machines. I would be like, you want to work with us, please do. Because when you're in that place and on demand was probably like...
00:22:44
Speaker
three or four eggs of our supplies for a very long time. In 2014-15, because we were making small knots, it was very difficult to find people to work with us, quality, sizing. A paddle is very, very complicated, right? The fits have to be perfect.
00:23:00
Speaker
So essentially, we were not able to, you know, so for a very long time, why? Because e-commerce, like once Mintra opened up in marketplaces, opened up in 2014-15, then e-commerce really started booming. And a lot of, you know, there was a lot of acceptance. And at that point, we were probably, we were the largest brand on Mintra, because you know, there was a new ecosystem, so much demand, and we really couldn't keep up.
00:23:22
Speaker
So I think those, those two years, I mean, but that's, I think I always look back and tell myself it's always a better place to be in where your demand is a lot more than a lot more than the supply than the other way. So yes, we were okay. And then we started like, you know, so we were like, as in working with anybody who wanted to work with us, like anybody would come to an office and be like, I have five machines. I want to work. We would, I would be like next door. So that's, that's how we were, we were expanding at that time. And how did you, uh, uh,
00:23:49
Speaker
How do you maintain consistency in quality? Because if you have so many different vendors doing it, that risk of inconsistent product is there, right?
00:23:57
Speaker
Yeah, so that was that and there were a lot of cases when we would make the wrong products, somebody would cut the wrong fabric to reject the entire style, very complicated and it was very challenging because there were times when we would give a few pieces like say 100 pieces, 200 pieces and the vendors cut the wrong fabric for the wrong style and I can't do anything right, these are manual human mistake and also because we hadn't raised too much capital.
00:24:22
Speaker
By then, we had done one angel route from Indian angel network. It was about one and a half crores of ovens, like any kind of big amount. We had to be very capital conscious in terms of how we were scaling up. These small hits were also huge, but quantity was a concern and ensuring consistency was a concern. We would do bandwidth checks. Once we would get pieces in-house, I was happy to move out of 50% checks myself, take out the garment, see if it looks okay.
00:24:52
Speaker
Again, not a technical person, I could check a hundred things, but I could see and see if this government is going to look okay and fit okay. And I think if that could pass, it could pass my eye, I was, we were broadly okay. This is going to be okay. And again, this is a time when we could afford quality checkers, we could afford top quality people. So this was really done based on common sense. I'm a consumer, if I think it's looking okay, I would assume most women would think it's looking okay.
00:25:20
Speaker
So 2016, you raised your first big round, right? Like a $2 billion series. So by that time, what kind of numbers were you doing? Like what was yours? Yeah, so we were by then almost at about one and a half, two crores a month. So I think the year that we raised the capital, we closed at about 25 crores, net sales broadly about 35 on GMV.
00:25:42
Speaker
And by then, because I've been a banker, my thought was also to say that we don't want to get like large funds early on, which is the exact reason why we didn't get anybody sooner than that. And get to basically a minimum level of traction, ensure that product market fit is kind of broadly proven, and then look at raising money. So that's exactly what we did. So by then, we reached a good scale. And from six years back, at that point, it was probably amongst the nudges.
00:26:11
Speaker
kind of online fast women's wear companies and we were like, you know, things are looking good and it's time to get a good find and found amazing partners in Annal. So I think an India quotient. So yeah, that was the first capital base that we did. What was your pitch to them that this the total addressable market is massive here. Most people will move online and
00:26:32
Speaker
Yeah, so someone reminds me actually of my plan that I presented someone in fact, one of the investors reminded me, you know, a few weeks back, was to say that this is about, of course, a five billion plus opportunity and that it's a massive bucket. And we can reach a billion dollars in like four years from now. So that's essentially what my pitch was, which also said we're going to go from zero to like 500 stores in three years or four years.
00:26:57
Speaker
And it was so funny because one is so naive, right? It was early. We had not raised any capital. And my thought was that without any money, we can get here. Then, of course, if we have a couple of million in the bank, then there's absolutely no reason for us to quickly scale.
00:27:12
Speaker
So that was the pitch. Yes, it was to say that, you know, we are going to build the largest brand and this market is, you know, there's, there's nothing here. And it looks super attractive. So yeah, that was, that was a pitch. And I did pitch to, I think, if I remember correctly, like in a parallel way, but maybe at least 30, 40 investors and.
00:27:30
Speaker
Of course, every time we would pitch, this is a women's fashion, right? So we would pitch, they would be like, okay, how do you differentiate? I would be like, okay, how do I explain to you that why is my dress different than the dress that your wife wears or your girlfriend wears or your secretary is wearing right now? Super challenging. And at the end of one, one hour, they would say, okay, I will talk to my, one of these secretary slash girlfriend slash wife. I will ask them to order. I will take this back. And if they, we will get back.
00:27:58
Speaker
And I was like, exactly this, in this order. And every time I would be like, seriously, like, you know, I sat here in the last 60 minutes, told you everything we're doing about supply chain, fast fashion, you're telling me I'm going to ask my secretary to order and I'll come back to you then. So, I mean, that's what happened when there are no women in the VC industry, right? Everybody was building a business that's super, super women oriented. I mean, if you're not in the TV, you don't understand the product, right? Fundamentally.
00:28:27
Speaker
So yeah, so lots of pitches at that time, every single pitch to men and in India, we found a partner who was a woman trained now. And I think that's what that's what changed things for us. Wow. Amazing. Okay. How did you solve the logistics and returns issue? Like that ecosystem was not there, right? Like today, there are a lot of like third party services and you can just plug them in. But at that time, how did you solve that?
00:28:56
Speaker
No, so I think even then there were basic things like picking up the product from the customer's house. Those kind of facilities had started. The other thing that we did is we wanted to ensure that people are returning products like why are they returning it right and how can we improve the fits for future.
00:29:12
Speaker
So from a process orientation perspective, we were able to kind of pick up products from people's house using a third party logistics guide. You're working with the Korea companies basically to deliver the cars, all of that. Absolutely. And we started an in-house return center very early on in our journey, wherein anything that was coming in, we were really looking at it doing 100% like 100% check to say that, why is this return?
00:29:34
Speaker
And taking that data from consumers, so is there a size, is there a pattern? And then we would use that data to ensure that in the future, at least once that product is fixed and the future from a sizing perspective, we keep correcting that. So then data we started collecting, which we continue to rotate and act on it essentially.
00:29:51
Speaker
So that was something that we were connecting. But your returns in this industry is a huge option. For women's, for example, on Mitra, for women's wear, it's at about 35% return. Now, if one third of your products are coming back, then, of course, your logistics has all your costs, kind of your PNN goes through the cost. So that is a challenge that everyone's facing in the women's wear space. But again, I mean, lots of things happening from our entities around how can we improve design, how can we improve size charts, how can we tell people what size they should wear,
00:30:21
Speaker
It's a try to improve this experience. Okay. Okay. So you told me you told it vessels that this is like a fast fashion opportunity. What does it mean to be fast fashion and as opposed to what like
00:30:38
Speaker
Yeah. So fast fashion, I think the basic, I mean, what fast fashion means is that there are two, three things. There are two metrics for fast fashion. One is that your turnaround is super quick, which is to say that I'm launching hundreds of styles every month. And this number could be hundreds of somebody. It could be as much as 5,000 for somebody like a she and for example. I'm launching hundreds of styles on a monthly basis. And I'm launching it based on small quantities.
00:31:04
Speaker
So 100 styles, 550 pieces, 10,000 styles, 100 pieces, depending on your scale. And fundamentally, from a consumer sentiment perspective, it is to say, if I either buy it now, otherwise, I'm not going to get it. So that is essentially what that's the first metric of fast fashion. And the second is on saying that, how can I be so quick to the market that if a trend is spotted, like there are runways and a trend is spotted, I can put that trend
00:31:30
Speaker
on the shelf or on my website in two weeks. So there's a panel session week happening. You see what the designers are doing and you're able to translate that in two weeks and put it on the shelf. Now, when we started talking about that in India, that did not exist. You would go and talk to vendors. They would be like, okay, I will give this to you in 120 days.
00:31:52
Speaker
Like, where do I have 120 days? Because it's going to be everywhere by then. And we would tell them, no, we want it in two weeks or three weeks. And that thought itself was so bizarre to most people in India, and especially, you know, Noida and where we worked, right? And they would be like, this is impossible, and these girls are crazy. So that is basically exactly what we would hear all the time, which is when we started seeing, can we do some part of it ourselves? Which is, if vendors can't turn it around, what do I need to do to do it?
00:32:20
Speaker
So some part of the ecosystem actually over time, which is buying fabrics, making quick design turnaround, all of that we started moving in-house. So over time while we were buying kind of outright or end to end from outside, we started essentially in-housing techniques so that we could move to this fast fashion model because nobody in India could do it.
00:32:41
Speaker
So, this 2 billion fundraise would have helped you bring more things in-house, like what you did there. 100%. I mean, till then, we were, you know, we'd hardly raised half a million. We were absolutely running like 25, 30 of us, doing a 15, 20, 25 crore turnover. And literally, I think I was probably, you know, working seven days and
00:33:00
Speaker
14 hours a day and also loving it. So, you know, when I was a banker, I told like, if I could work like this as a banker, like there is nothing that could be more difficult or challenging. And then I became an entrepreneur and then I was like, okay, I think, you know, when you're in a job or you're a banker, you can still speak for five or six hours peacefully. And especially I think in the first few years, till you kind of said,
00:33:25
Speaker
That's all. It's life, right? And it continues to wait till date. But especially for the first five, six years, I think that's all that I could think of. And you gave five bunnies example, right? And I was just thinking that for me,
00:33:40
Speaker
because I didn't have anything else. I was not married, I didn't have kids, I didn't have anything else. It was just so natural. I could do it all day, all night. I don't know how... I'm sure it's super challenging for people who do have other responsibilities to be an entrepreneur in the early years. And I was lucky that I did it when I was super young and I didn't have to think of anything else except work. And that kind of kept me going. Otherwise, I don't know how many times I would have thought of going back to a vendors and being like, can I get my job back?
00:34:08
Speaker
Yeah. So tell me how you utilize that $2 billion? Like, did you start hiring designers? Like, did you start keeping an inventory of fabric and all of that in house or like?
00:34:20
Speaker
Yeah, so Akshay, we did two large things which we had not done till then. One was that we started, till then we only had one brand, which was called Fair Valley, which was our Western Web brand, which is the brand that we started with. And we had also started identifying kind of spaces in the ethnic wear market. Again, as consumers to say that, where is the brand which you see today is modern ethnic wear brand? Every brand that existed has been there for decades.
00:34:46
Speaker
It was a brand that I could go to, my mom would go to, my grandmom would go to. And that does not happen in Western wear, right? So we said that, where are the new age ethnic wear brands? Most don't exist. And can we build something there? So I think we couldn't have moved till we had capital. Because of course, when you're on half a million, you can't do everything.
00:35:04
Speaker
So after we did this round, we started our second brand, which is called India, I-N-D-Y-E, which is our Let's Make My brand. And India today is actually the larger part of our business, grown extremely well over the last five years, and that is something that we identified. So that was the first thing that we used the capital for, to say that let's do what we've been wanting to do, which is start India.
00:35:25
Speaker
starting branched of family in India, separate kind of Western and ethnic wear brands. So that was the first big use of capital and that also helped us then again scale from this 25 to next year 50 to 90. So the journey post 2016-17 has been till COVID happened and I'm sure you'll get to that.
00:35:42
Speaker
But till then, those three, four years weren't essentially just doubling revenues every year by adding this. So one was India. The other thing which we changed was we started offline.
Market Expansion and Adaptation
00:35:52
Speaker
So for the first five years of our journey, we were only online, only selling through our website and marketplace. And now we had capital to be able to say that, can we try three, four stores? Can we go to some large format stores, say like, you know, say a shop or a central, some of these and start that. And, you know, by then we'd also reach about 45, 50 crores in revenue.
00:36:11
Speaker
And I knew that, you know, continuing the journey only online was, well, offline was 98, 97, 98% of the market on that time was, was going to restrict skin at some point. So we said that while we, you know, it was new for us, it was offline is a completely different business. It's a completely different way of thinking.
00:36:28
Speaker
But we said we've got to learn it, and we've got to start that journey. So 2017, after our fundraise, we started offline as well. So now we had Fair Valley, we had India, we had online, and we had offline. And that's how essentially the business started going from there on. Okay, okay. So India was also fast fashion, but your products would have been like, say, Salwar Kamis, and like that kind of casual Indian wares, not like marriage stuff.
00:36:57
Speaker
Actually, it was exactly the matted stuff. Basically, not the matted stuff, it was the festive stuff. And why we did that was because we said that, you know, while in the daevan segment, which is kurta as what you wear to work, there were players, right? There were players like WV Bar, etc., who were scaled up, who were doing okay.
00:37:14
Speaker
And then we said, but in the festive space, not marriage, but festivity, celebrations. In that space, there is nobody in the country. It's only unorganised. So if you want to buy something without your neighbourhood boutique, Chani Chokarulbach, those kind of places. So then we said, where are high street brands for festive wear? And that's where the market really existed. So what we actually did was, we said what designers are giving to you at like 50,000 maths.
00:37:38
Speaker
We'll make it at 2,000, like 3,000, not copies. It's, of course, 100% designed by us. But create that whole ecosystem, which is to say that, you know, nets build really new age, very modern, festive wear, which you can wear to festivals, kitty parties, pre-wedding productions, like any of those, and let it be modern and new age. So that's what India's philosophy is. Interesting. Okay.
00:38:02
Speaker
And between these two, what is the average order value? What purchase from a customer? Which one gives you a higher average order value?
00:38:12
Speaker
So India is higher because India is, you know, it's a festive-wear product while Fabally is more casual-wear product. So India's average order value in our stores is at about 5000. So typically people buy two products at a time. So that's where India is. Fabally's average order value would be at about 20 to 2300. So that is basically, so Fabally is a much more affordable brand while India is still more occasion-centric and hence people are buying, they're okay to pay a little bit more because it's for occasion.
00:38:42
Speaker
Okay. How did you build the design muscles? Initially, you told me that both of you used to do the pattern making and the designing yourself. You must have evolved to have your core. If you're releasing 50 styles a month, then you really need a strong design muscle in the organization.
00:39:03
Speaker
Absolutely. So we started, we hired our first designer in 2015 and 2015-16. And actually, so we then over time, like started building. So from one designer today, we have got 20 designers, but we started building out that muscle from then, of course, because we understood again, I mean, this whole thing around.
00:39:21
Speaker
making designs by not... we had no idea, right? We were, you know, family and I, you know, we were not designers. So we realised, and as soon as we could kind of afford to start writing designers, we did that. They were all made to graduate, very smart, talented designers. And so that's been the journey. So yeah, 12, 15, 16 is when we started. And that's from one designer for Fab Alley, one for India, that was the beginning.
00:39:42
Speaker
And actually, a lot of those designers that we hired, they are still with us. So they've really built both the brands pretty hands-on from nothing to where we're at now. And so not just design. I mean, there was a lot of muscle to be built around merchandising, sampling, converting the first product to good quality, tailoring, garmenting. So a lot of the supply chain, which is essentially the backbone for fashion, had to be built. And that we really started building after in, like I said, somewhere now, 2015, 2016, and kept kind of strengthening that every year.
00:40:12
Speaker
Just help me understand what like what is merchandising involves or like you said converting a design to a product what does that involve and like how do you do it like you know what is your way of doing it at scale yeah yeah so actually it basically starts with like say it's a monthly process
00:40:30
Speaker
It starts with the moodboards and references of what's happening globally, which is to say that what are the designers doing? What are people wearing on the runway? What are people wearing from our street style perspective? So there's a lot of references that kind of come in from a moodboarding perspective. We start with moodboards. We convert them into styles, which is to say that, OK, these are my themes for this month. And I'm going to make, say, about 200 to 300 styles based on these themes.
00:40:54
Speaker
We buy the fabrics for those. We do our own textile designs. We even make the prints ourselves, the textiles ourselves. And then we combine these two techniques, the silhouettes, along with me, to make the first garment, which is all made in-house. So I have my own team who makes the first garment. So now this would be hundreds of garments every month.
00:41:12
Speaker
So we make that on a monthly basis. And then we have a poll. So it's not what I decide to sell. It's about what people are lighting. So we are about 50 girls who are our target audience in our office itself. We call them, we do a poll. We call our sales teams, we call a bunch of people and they poll on every style. Once we've done the poll, we know what style is good, what's bad, what's selling, what's going to sell, what's then. We do buys based on that. Then will I buy an excess key pieces of a shirt or 500 or 5,000? It depends on how kind of people have liked the style.
00:41:42
Speaker
So basically that's in a nutshell in the process and this process has to be repeated every month and every month you have to kind of churn out three, four, five hundred style and then show that at least 250, 300 are a success from that. Does data play a role in design here? Like, you know, you will be seeing what people are browsing, what they are buying and so on and so forth. So, you know, does that data give you insights which determines what is getting designed?
00:42:09
Speaker
100% actually. So I think there are two forms of data that we kind of use. One is that we are, I mean, as a company, we're super data led, right? Because we started online only. And when you're online first, like all your thoughts are around how can I collect maximum data and kind of improve that.
00:42:24
Speaker
So I think initially, the first point of data that we get is we have our own sales data, right, for years. So I know exactly that, say, for a shirt which is black, now the color is black, the length is X, the color is Y, the sleeve length is Z. There's this technique on that. So I have, for every product, I have 10 attributes. For every attribute, we have historical data to say black shirt in X sleeve at this price has done
00:42:50
Speaker
went at a send-through of, say, 60%, for example. So there is so much data available that what our team does is that they, on a monthly basis, put together the historical SANS data. And one SANS, these could run into hundreds of, say, data points and slides to say that this is what is moving, this is what is not moving, and these are the reasons based on mathematical data orientation alone.
00:43:13
Speaker
That is passed on to the design team and when they're designing, they take a lot of, consume a lot of that data to further design. And that is the only way to improve design efficiency over time.
00:43:24
Speaker
So that is the first kind of data point. And the second is essentially that when we say, because you can't just sell what is sold in fashion, you can't just make what is sold in the past. You have to make for the future as well. So the second data point that we get is we're able to, again, using third party tools, able to say that, you know,
00:43:44
Speaker
for most people in the world, like say on an ASOS, what are the top 10 trending dresses in terms of views? And when we say that, we're able to say that based on new launches, what is doing well for brands across the world? And is that something that will work for India? And is that something that we should kind of also bring in? So both of them on the fashion side and on our own data is like kind of the backend analysis. We're able to combine the two and that's how the collections help made it. Okay, okay, okay.
00:44:13
Speaker
Do you double down on a design that does well, or is it fresh designs every month? No, we double down on modern designs that do well. Actually, that's the brand better of the business. So things that do well, we do a lot of colorways. We do a lot of designs that look a little bit like that, but a little different. So data is everything. And we use that to really make more and more of what's selling, while, of course, always maintaining a percentage of products which are completely new and never see
00:44:42
Speaker
Okay, okay, okay, got it. You said you have a sales team. What is a sales team for? Because you're selling online, right? So, we're a combination of online and offline now. So, we have about 500, 550 points of sale across the country. These are our own stores and these are, you know, department stores like Neistat, Shop Stop, Central, etc.
00:45:06
Speaker
So, which is where the sales teams come in. And even for online insights, for like say marketplaces like Microsoft, Amazon, we don't have people who are part of the sales team. They talk to them regularly, et cetera. So, almost 6,700 people now who are on the sales side. Okay. So, your retail staff is on your payrolls. They are on our payrolls, correct? Okay. Okay. Interesting. Okay.
00:45:30
Speaker
So like, tell me about that, getting through COVID journey, like, you know, 2020, what was it like? What was your scale? What kind of monthly revenue were you doing? And then what happened in the next two years?
00:45:43
Speaker
Yeah, so actually just before, we had done a series B round from Elevation in 2018. So we had raised about, so this was overall, the round was almost little less than 10 million, so about 9 million. I was combination of primary and secondary. So as a company, we never needed a lot of capital. We were capital efficient. We raised by then, maybe about 3-4 million, that's it.
00:46:06
Speaker
to reach and that year when we raised capital from elevation, we did about 120-130 crores in GMB. So we have already fairly scaled up. By the time elevation came in, it was the most tiny state business. It wasn't an early state business anyway. We almost again got to this by raising a few million dollars. We were very, very efficient on the capital side.
00:46:29
Speaker
So until now, by now, we were used to growing, like I was saying, 80-90%. I had never seen any other thing, any other kind of growth journey, and things were actually growing quite well. India was growing very well as a brand. Our offline journey had just started two years back, so it was new, it was doing well.
00:46:47
Speaker
So things were looking, things were looking very good. I was also expecting my son at that time. And so yeah, so I mean, things were quite aligned. So I had actually planned, you know, I'm like, you know, we've got to, I've got to ensure that like I plan the kid between fundraisers.
Navigating Pandemic Challenges
00:47:01
Speaker
We've done series.
00:47:06
Speaker
And now, after that, this is the first time. So yeah, so basically that, and it's the easiest, right? Because I was like, you know, meeting a bunch of investors when you were kind of six months pregnant, it's harder. So I was like, well, it's just time went perfectly for that. So we were, so it was, you know, things were actually going quite well just before COVID. And we were, we were all set to kind of double as we had done. And now again, we had a lot more money than we'd ever had in the history of the company.
00:47:32
Speaker
We also had an investor, so things were looking quite positive. When Covid happened, of course, from early mid-March, when we started discussing that there was a possibility of things shutting down, all of that. Personally, I will say that I don't think I
00:47:53
Speaker
thought in my wildest imagination that India, in this country, anything will even close, even if it was happening in China and Europe, it started kind of shutting down, that we're like, you know, in this kind of population, this is not going to happen. I remember sitting with the senior management team around 10th March, and we were like, you know, this is India, this will not happen, you know, this is okay. I mean, of course, we were not prepared at all, because I think
00:48:22
Speaker
I had, like I said, never imagined this was going to happen. And then when things actually did start closing, which is, you know, from mid-late March, and again, we talked two weeks, four weeks, six weeks. But I think the first realization that hit me, and this is when my son was, you know, he was less than three months old, you know, I had a toddler, kind of an infant kid at home, sorry.
00:48:44
Speaker
And when this started sinking in, which was early April, March, that was the first time I was like, actually it was my exact feeling. We had more than 1000 employees and I was like, our stores are shut. We had some capital. We definitely don't have enough money to be sitting at zero revenue.
00:49:05
Speaker
the nurses that are going to build in the next three months are going to probably take the company down. We don't have enough capital for that. And that, and of course, you know, young, really young kid at home. And so personally, I think I, you know, I was just really, I was very taken aback and I think it was probably the most challenging time that I have seen in my entire life. And not just with the company, but even personally. And as I think those first, those those two, three months,
00:49:33
Speaker
lot of people were like, you know, it's great to be at home. It's great to kind of take this break. I was like, this is like, this is going to take our company down. And if you don't raise more capital quickly, because I mean, one started realizing that you don't know, you don't quite know till when this will last. And I think when that realization came in from April and me, that this could take longer than we'd expected. And sitting on actually the revenue action, that one was zero, like actually zero. So I'm like, okay.
00:50:02
Speaker
Even opposition was not closed. Online was shut too. You were not covered in that. We couldn't do masks immediately because I mean the units were all shut so I couldn't start producing that. So essentially that. So yeah 60 days I think a lot of mentally challenging time and the only thing that I think I was able to get myself to do was talk to my investors very very
00:50:28
Speaker
candidly and tell them that, of course, we have some capital. It's not going to be enough. We have no idea what's happening. Can't even tell you. They put in money at that time in April and May in this company, which nobody knew what's going to happen. So they did that. We said, they were like, OK, let's do a convertible note. Let's put some money in and we'll see how things go. So I think that's a convertible note.
00:50:53
Speaker
Basically to say that, like, you know, put in money today, we won't decide the valuation. And whenever we do the next funding, we'll decide the valuation at that point. So that's the only way to do a round really quickly. And you know, you can close things. So we were able to raise some money then. And I think that was like a huge relief because at least from a capital perspective, I knew that we'd be able to pass this time.
00:51:12
Speaker
And then the other thing, and you know, then May and June happened, the revenue was still zero. And so then we started doing two, three things. One is that we got the license to open for masks. So we started making a jewel made, started making masks legally and illegal. Even like things are short, we'll find a way to do it. You know what, our company is actually called High Street Essentials, which means anything that had the word essentials was allowed to operate at that time.
00:51:48
Speaker
That's basically how we got started. We made about 50 masks quickly using the fabrics that we had. And that's what we started selling. So even if the revenue was 10, 15, 20 lakhs, it was still better than zero. So that's how we got started. And then we also
00:52:06
Speaker
You have to lay off because all your retail stuff was like, just drag on your, I mean, I guess it's just more passwords.
00:52:15
Speaker
Yeah, so for three months, we actually didn't. I didn't have it in me as a founder to do it. Actually, you know, we had limited money. I knew that. But I also knew that if I do it at this point, I can't look at myself. So I think those three months, at least, other people won't find jobs. And in order for people, you know, about 6, 700 people that we employ, at least less than 25,000 a month.
00:52:39
Speaker
So these are people who are not going to get jobs at this point, of course, in the midst of COVID. They'll have nowhere to go. And like I said, I couldn't justify it to myself, so we didn't in that time. When things got better from July, which is when at least online had started opening up,
00:52:57
Speaker
Buffling was still closed till September, October. Then I knew we had to do something with a big bazaar. All of these people had started hiring by then. So then we said that for people who we absolutely helped to let go, which weren't too many, it was less than 5% of our overall workforce.
00:53:18
Speaker
We will ensure that we get jobs, like we get them placed. But I also told them, I think actually that in six months, we're going to get the business back and we'll offer everybody, like every personal job back in this company. And it's up to you to take it or not, but we're going to do it. And we had to lay off like people in July, but by December, maybe on January, I think we had given every person an offer to talk.
00:53:40
Speaker
So I think that is something that I just couldn't do at that point. That was probably one of the hardest things that I have done in addressing the whole team in that town. I still have memories of that and I think that was probably one of the most challenging things before. That must have been a pretty tough town.
00:54:04
Speaker
It was, probably I still remember what I even said, so I think it was challenging. But like I said, I think I just actually knew, I knew that it's a matter of time and we find the way. And in six, eight months, once things get better, we'll be able to get these people back.
00:54:21
Speaker
So what did the revenues bounce back to? Like by December January when you offered everyone a job back? So we were at about 70% pre-COVID by then. And as a company also, you know, FY 20 to 21, we did almost 70% of our, 65% of our revenue, even though the first six months were almost kind of zero.
00:54:40
Speaker
So, we did bounce back. We did a few things. One is that while we were already online first, because of that, that really helped us. Because even with the stores closed, we could push the pedal on online very quickly. While if we were an offline, it would have taken me 1-2 years just to mentally kind of align to the online model.
00:54:58
Speaker
So we were able to do that. So we started building online very aggressive. We are not just in India, internationally. So we went live on Amazon. She's at Aurora Cross Marketplace in the entire world. And we were like, if enough is not selling in India, let's ensure that it's selling across the world at least. So we did. And that's something that really kind of helped us take back the revenue. And in thing, we also start pivoting the products. We were making loungewear now, like pajamas,
00:55:24
Speaker
More work from home products basically. Yeah, you could wear it at home. And these were things that we had not done before. And we're a fashion company, we didn't know how to, you know, kind of, we hadn't weighed like, you know, pajamas before. But then we said that's what selling and that's what we'll make. So we started making loungewear masks, everything that was relevant at that point for that ordeal, we essentially started making that and that's what helped us get the revenue back with you.
00:55:49
Speaker
Okay, okay, okay. So what today what are you at? Like what's your this year? What do you think like what to be your era like?
00:55:59
Speaker
Yeah, so we're actually closer and about 300 crores plus from a sales perspective. And this is something that again, you know, we're also moving a lot like, you know, a lot towards profitability, ensuring that, you know, we're kind of as we kind of build in the next three, four years, we're also super profitable, cash flow positive, all the right metrics in the balance sheet.
Focus on Profitability and Financial Strategy
00:56:19
Speaker
So we're being very, very conscious of that.
00:56:21
Speaker
And while growth is still happening at 40%, 50% plus level, but now as a founder, and given what we've seen in COVID, we really want to build a company, which is super, super kind of cash. It's sustainable and some companies can make kind of an impact. So it doesn't need to be a company that's continuously raising funding, raising capital. We've just done a small round right now. We've raised about 5, 6 million. And we're bad by ideas to say that can we
00:56:48
Speaker
Even if we don't raise any money after this, we should be in a bad place. What are the economics of a fashion business? There would be a certain revenue. There would be some amount of returns which cut down the revenue. There would be some cost of production. Just help me understand that.
00:57:06
Speaker
Yeah, so fashion is actually starts with, you know, sales, overall gross sales, then there are returns, which are typically for us about early 20s, early 20s at a business level. And what's the normal, like, in the market?
00:57:20
Speaker
Yeah, so there are no returns because people try and buy. Online, we had about 30-35%. So NetNet at business level, because we're almost half and half online and offline. So NetNet, it would come to say about 20% or so, 2020. So that's why we would be at company level, and then there's about 5-6% tax. So NetNet, so about 70%, 75% of your overall sales are your net sales.
00:57:43
Speaker
And then there is a cost of goods sold, which is your gross margin. This basically cost of goods sold is essentially the product that you make in the cost of that, the fabric cost, the tailoring cost, et cetera. So that's what else again remains about 30% or maybe about 25, 26% of the overall price of the product.
00:58:00
Speaker
So we put that in, which is quite the first gross margin, like net capital gross margin. And then you have all the expenses, which would be our salaries, which would be our, you know, rent cost facility, marketing, all of those things, which are items before this, and then you get to EBITDA and profit. Okay. And what is your EBITDA like? What's it going to be like this year?
00:58:21
Speaker
So actually, we're targeting to break even the SIF. So we're really on track for that. So that's the first step. And then ideally, you know, start kind of getting to at least a 5%, 6% profit from next.
00:58:31
Speaker
What are you doing to become profitable? Are you focusing on cost? Are you focusing on growing revenue? Reducing returns? What are those levers that you can play with? There are two or three things that we're doing, Akshay. One is that for India, we've also launched our wedding wear business, which is a high ASP, high price product at about 10,000 to 15,000.
00:58:53
Speaker
Now here, you know, this is a business that essentially has inherently has higher margins. It's a business where people are okay to kind of pay slightly more to product quality is top class. So this is something that we're building out. And this is a piece that's going to become almost 30% of India business by next year this time. So this should help us kind of take up the margin profile overall.
00:59:12
Speaker
The other thing that we are doing is we're focusing on international sales a lot. So US, for example, is almost 40% of my online business. And the more we're able to sell to NRIs, again, they're not price-conscious. There is much lower than what it is in this country. So essentially, even the product, the quality, we're able to send higher-priced products to them. We're working with a lot of designers on collaboration, which do very well for the NRI market.
00:59:38
Speaker
So that is something that we're building on. And not just on D2C, even like we've become large brands for Zalora, Namshi, global marketplaces. So we're essentially building that piece out. So as international becomes like a larger part of our business, maybe gets to about, again, 25, 30% of the online business, margin profile there becomes much better. So these are the two key things from a top-top distribution perspective. Third, of course, is that post-COVID, offline is getting back on track. And offline is a super profitable channel. Because there are no returns?
01:00:07
Speaker
There are no returns and discounting is low because of these two things. So, as offline gets back on track, now post-COVID life is kind of settling in. I mean, recession is playing a bit of a role, sentiment's not bad. But, hoping, you know, over time, this is going to get okay. So, from that perspective, as offline becomes a larger part of our business again, so again, I mean, that also starts building out. So, again, the overall margin should go up. So, net-net multiple things across the world. So, to kind of start, they're moving up the needle on the profitability.
01:00:35
Speaker
Amazing. What is your split now, offline versus online? Or by the end of the year? Half and half. So online would be about early 50s, 52-53% and offline is 47-48%. And in online, how much is through your website? How much through marketplaces? Almost 60-55% is through our website. So we are a very heavy, you know, high literacy focus.
01:00:59
Speaker
That's amazing, which would give you much richer data inside. You'd be able to retarget those customers to upselling. 100% the sentiment. I mean, we're able to also understand what people are buying, why are they buying it. We're able to talk to our customers, right? And those are calls that across the company, everybody makes in terms of just talking to the customers, understanding, you know, why are they returning things? Why do they like the brand, et cetera? So because otherwise in online, you have no customer interface.
01:01:24
Speaker
If I'm only selling through Mintra, I have no idea who I'm selling to, where I'm selling to. It's a huge kind of black box, but on D2C, you have so many data points. So definitely building that piece out is very helpful from getting the right data for us.
01:01:40
Speaker
How do you keep on track of this customer listening as the CEO? Is there a particular report that you look at, some sort of dashboard? What is your way of understanding customer insights and keeping your ears to the ground?
01:01:56
Speaker
Yes, so Akshay, there are two, three things. One is that we measure NPS very, very closely. And here we do, in fact, like our NPS is not like a monthly exercise. We essentially, every time our orders delivered post five days, the customer gets that email. And we have like a lot of response on that. So basically, that's what that is the first wet trick to see if there is any change on that, how, I mean, how people are perceiving the brand, the service, the quality, all of those things.
01:02:20
Speaker
Below that email, we have a bunch of parameters to say that, what is it that you like or dislike about us? And when they're able to tell us that, this is from a data perspective, I'm able to get data on a weekly basis to say that, how do people, you know, is there any change? Are they liking it? Not like the results. This is from a data perspective.
01:02:38
Speaker
Then your teams across the board for our company talk to customers, everybody's annotated some customers who they need to speak. These are like customers who triggered a return or just randomly selected? Return or return doesn't matter. These are randomly selected customers. Some could be repeat customers, some could be first-time customers to understand what do they like about the brand, what do they not like, the service, the product, the fit, all of that.
01:03:04
Speaker
And this is the senior management team as well. And then we get together, essentially. And then we're able to kind of say that, you know, what are people saying about us? How do we change that? Improve that, all of that. We've also once in a while commissioned reports from people like Netzir, all of that, to speak to the customer and come back to us with, you know, detailed findings on what they think about the brand and, you know, improvement areas. So across the board, a bunch of things like that. But this is something that I feel we need to do a lot more of because I think the more we know the customer, the better we'll be.
01:03:33
Speaker
and a very conscious effort now to do more of this. What are the things you're doing on social media? Because social media is also a powerful way for both marketing and listening to customers.
01:03:46
Speaker
Yeah, so social media, we're doing like, we were actually amongst the early ones to work with influencers in the country. And we started doing this about five years back when there was a very new culture in India. So for us, for fashion, like influencer marketing is huge. And that's what the influencers in the fashion space, like anybody I would have.
01:04:05
Speaker
I don't know if you would have heard of them but say somebody like Masumina, Wala, Kumar Pandey, Kritika Khurana. So some of these people, they have followers and millions and they're also like Instagrammers. Instagrammers mostly and then they also have YouTube presence. So it's actually Instagram and YouTube. So basically we're working with and we typically work with 200 to 300 influencers in a month.
01:04:26
Speaker
So work with a lot of them, they make content for us. So that is a huge part of our social media strategy, where, you know, they threw their own Instagram and our Facebook Instagram, etc. We kind of pushing out that content.
01:04:39
Speaker
And that also makes it why you have such a high direct sales on your own website. 100%. This influencer marketing would be right. Traffic is getting diverted to the website. Absolutely. So that's one. And the second thing that we do is we also talk like we have amazing women in our office, in our sales teams, et cetera. So we do a lot of real women series where people in our office talk about a product. They wear the product. When they're going out, they talk about it.
01:05:07
Speaker
So one is really to work with celebrities or influencers. And the second is to work with people who are wearing your product, whether they're employees or consumers or customers. And we essentially work with a lot of them. So a lot of the content on our social media will be, you'll see there'll be women from our office, which is amazing, right? So we don't need to go and they're people who love the brand and there's nobody who can better kind of advocate than them. So that is the other thing that we do.
01:05:30
Speaker
So these two or three things, besides the regular social media, we do a lot of giveaways. That's something that does well for us. So besides the regular things, but just working with this bunch, I think people who are our users, that really help. We also get, you know, because India, especially as a brand, because it's a festival brand, people love sharing pictures, right? The time, you know, if I'm wearing something at a wedding or for Diwali, I would love to share that picture in terms of how it's kind of, because India is about celebrations and joy and about kind of bringing people together.
01:06:00
Speaker
So I think so from that perspective, I think a lot of our customers share their pictures when they're born in India. This could be for something as beautiful as a baby shower, it could be for it. And this is across the world now because we have such a large NRI base. So I get pictures from Washington and Boston and UK. So we don't put out a lot of customer pictures as well, saying that this is what it looks like in real life. And I think more than the product, it's also the sentiment, right? Because India's born
01:06:24
Speaker
at times when it's always an emotion because you're wearing it for the festivity and you're kind of emotional about it. So it's a beautiful way of putting that together. Amazing. You get the customers to tag you or use a particular hashtag? Tag us, send us pictures, we're all forms of communication.
01:06:47
Speaker
What are some of those metrics which only an insider would know that you track? So for example, one metric in a lot of startups, I don't know if it's relevant or not, is that CAC to LTV, like, you know, customer acquisition costs versus the longer value. What are some of those metrics for your business?
01:07:05
Speaker
So, okay, so I think Akshay's on LTVCAC, all of these things, all startups would be measuring a bit typical finance metrics, marketing metrics, actually. So this would all be, I mean, personally, I think nearly two, three things that are important for me, for this business. One is, what is the repeat rank looking like? So if, are my consumers coming back? Because typically from a life cycle perspective, for both travel in India, you can wear those products for at least 10 years of your life.
01:07:32
Speaker
So, if they're not coming back within a year, at least three times, we're losing them out somewhere in the journey, which means they don't like to cross.
01:07:39
Speaker
So that for us as a business, for me as a founder, is a metric that, you know, really needs to be kind of tracked. And only challenge in that is because we are also available through third-party marketplaces. We don't always have the data to map it across the consumer, across the board. But for now, I need to see our EBOs. For all our direct channels, we are able to see how many people are coming back. And if they're not, we also talk to them to check why they're not. So I think that is basically the first thing which is super, super critical. How do you track offline if they're coming back?
01:08:08
Speaker
like you have some loyalty card or something like that. Actually, we have all the systems have been inbuilt. They're built by us. So if my customers coming back, I'm able to kind of, we know that it's the second time customers, third time customer, et cetera. Like at the time of billing, you take the phone number or something like that. That's correct. We have the phone number. That's a compulsory input. So that's something that we have. And we're able to track that. So essentially that's that. That would be one super important metric for us on repeat.
01:08:35
Speaker
The other thing that's very, very important for us is on returns, right? Which is to say that, you know, why are 35% people who are buying my product returning it? Which is that either the size is not right, the fabric is not right, or the image is not right. And then connecting this data and kind of being on top to say that, how can we reduce this over time? Because if you can reduce returns in a fashion business by 10%, you will change the company's life in a way the P&L is going to now look very different.
01:09:01
Speaker
So essentially that, so these are the two things that are very, I mean, besides the regular finance and marketing metrics, these are the two things that are super important for our business. And what is your CAC2LTV ratio? Is that relevant also in your business? Yeah, it's relevant. It's relevant. The only thing about us, like I said, is my D2C is only about 30% of my business, which means overall business, which means 70% of my customers are going to other places to buy and I can only track CAC2LTV for D2C.
01:09:27
Speaker
So even for that, it's more than three times over an 18 to 24 month period. So it's still looking good. But having said that, it's just for this part. So if that customer is second, then going to Mintra, and then going to my lifestyle, and then going to shop with, I have no way of flaking the journey. So it's more relevant for a team for business that have at least 70, 80% B2C. But even for us, like I said, it still looks good.
01:09:49
Speaker
So I noticed in your funding journey that you've been taking debt on a consistent basis. Help me understand if I'm a founder, what is my way of thinking about when should I take equity, when should I take debt.
01:10:06
Speaker
Yeah, so I think basic equity debt metrics are to say that if your business can afford interest, and if your business is at a stage where the risk factor is low, then debt is the better option. Because you don't want to give up, because equity is always going to be much more expensive. So debt, even at higher prices, which is at 14, 15% interest, which is where most startups would end.
01:10:31
Speaker
That's also better than giving equity because the cost of equity is definitely more than 40-50. So I think 100%, I would say. When you say low risk, it means you have a predictable monthly revenue cycle. Absolutely. Because the thing about debt is that you make monthly repayments, right? So if you're a business, so for us, for example, because we have 500 stores, we have an online business, the difference would be we'll do 80% or 90%. You'll still do that much of your target. It's not like you'll do 10%.
01:10:57
Speaker
But if it's a business where there is huge variability or variance in revenue, that becomes very expensive. Because you can't pay for two months, then your business could potentially become bank. So from that perspective, I would say that any business that's passed the basic risk stage and like I said, can afford to kind of pay back the interest, debt is a better option. The first few years, I would always say if you can raise equity, raise equity because it's
01:11:21
Speaker
money in the bank without any obligation to pay out and the founder can really focus on using the money to build the business as opposed to using the money in the short term to kind of and then having the pressure of paying back in 18 months or 24 months. So I think that would be the key kind of the sense. First few years essentially take equity, build it out to a certain base, let the risk level in the business be low and then start building with debt because then your equity is also becoming more and more expensive by then. So why did you take this 5 million equities out just now?
01:11:49
Speaker
So actually, we essentially build out that whole wedding, where space we're building out India's max range. So a lot of that essentially will require money, it will require inventory, it will require distribution across the board. So for that, we wanted to build that out aggressively. So this round is primarily for that. So basically, for like a one-time cash per, it's better to take equity. And when it's money for funding business as usual stuff, then debt is better.
01:12:16
Speaker
Yeah, so I think more than one thing, I think for if you, you know, equity for not even cash one, if you're saying that you want to predictability is low, and also the business is loss making, which means paying interest is an add-on burden on the business, then equity is much better. If the business has or will potentially start generating money in the short term, like I said, risk is low because revenue stability is high, then debt is definitely the better option.
01:12:44
Speaker
Okay.
Entrepreneurial Advice and Closing Thoughts
01:12:45
Speaker
So my last question to you, is there any advice you want to give to aspiring founders?
01:12:53
Speaker
Yeah, I would just say actually that if you have an idea, go and do it. Because over the last 10 years, I think heard at least, if not more, like 100 great ideas. And then when I checked with the person who's told me the idea after a few months, oh, what happened to it? And they said that, oh, we weren't quite sure. It's difficult at this point because I have kids, the baggage. And I always tell them, but you can't do it now. It will only get harder. It will only get harder.
01:13:23
Speaker
So just like you have an idea, you know, even if that idea is not fleshed out, even if that thought is then you want to do something, just go and do it. Because, you know, what would you lose, right? Actually, you'll lose two years of your working life, three years by when you probably realize it's all working in worst case scenario. But you would have at least kind of done it right. And I mean, maybe when you're 60, 70, you'll be like, I at least tried. As opposed to being like, oh, I had a great idea and I never tried. So that's what I mean, it's cliche, but that's when I would say like, you know, think of something, just go and do it.
01:13:52
Speaker
Like, I would not change anything about the last 10 years. And they've been difficult years. There have been lots of ups and downs, but I would not take anything back. And that's when I would say, like, take that chance and go and do it. And if it doesn't happen, so be it. But nobody ever regret, nobody ever regrets being an entrepreneur. I'm going for just.
01:14:10
Speaker
And that brings us to the end of this conversation. I want to ask you for a favor now. Did you like listening to this show? I'd love to hear your feedback about it. Do you have your own startup ideas? I'd love to hear them. Do you have questions for any of the guests that you heard about in this show? I'd love to get your questions and pass them on to the guests. Write to me at adatthepodium.in. That's adatthepodium.in.