Expect an inflexion point soon, says Jabong’s Praveen Sinha

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By indiantelevision.com Team Posted on : 06 Feb 2014 03:43 pm

MUMBAI: With our increasingly frenetic lives, especially in metros and towns, more and more people are opting to shop online instead of tiring themselves out at stores and malls.
 
No wonder online retail is booming business with an e-commerce website going live almost every other day. That these portals often make little or no profit and are forced to raise funds to stay alive is a separate story. 
 
The journey of Jabong.com – the Indian fashion and lifestyle e-commerce site co-founded by Praveen Sinha, Arun Chandra Mohan, Manu Jain and Mukul Bafana in January 2012 – is no different.
 
One of the most visited e-commerce sites during the Great Online Shopping Festival 2013, reportedly, Jabong is currently raising a fresh round of equity funding, estimated at $100 million, of which it has received $27.5 million from British development finance institution CDC. Just last month, another online retailer, Myntra.com, raised $50 million through equity funding.
 
While Jabong co-founder and MD, Sinha, refused to comment on raising funds, he spoke of where the company and the business of e-commerce is headed in an interview to indiantelevision.com.
 
Excerpts...
 
How would you think Jabong.com fared in 2013?
 
The year was pretty good; in terms of growth and health, the financial and operational matrix, and when it comes to revenue. We saw twice the growth and almost thrice the revenue last year.
 
The interesting insight is that in 2013, we saw more than 50 per cent purchases from consumers from cities other than the top four metros. Secondly, the combination of social media and mobile worked in our favour as both play the role of influencer and act as enablers for people to buy online. So, for us, these platforms have become more important. And with a good balance between payment options, we didn’t see a significant change/imbalance in terms of cash-on-delivery (COD) or online payment. As we grow, the percentage of online buyers is increasing, though not significantly, and that shows trust is building among people and they are putting more faith in us.
 
Where do you see the company going in 2014?
 
Similar growth is obvious. I think there will be an inflexion point, where we will see even more growth than what we are seeing today. I’m not sure whether that point will come in 2014 or 2015 and the reason I’m saying so is because the growth which I’m referring to will only happen in the fashion and apparel categories.
 
These categories have the highest demand, followed by electronics. That said, if you compare India with other countries, there is a huge gap between where we are and where we need to be.
 
For example in telecom, when we started, we had least penetrated landline numbers but with the onset of mobile, we saw good penetration. Now, it is really high. So, if we compare e-commerce to telecom penetration, e-commerce will see a huge jump. Internet penetration and usage for retailing is around 15-20 per cent in India while in other countries, it is up to 40-60 per cent. Therefore, the gap will be filled up though we don’t know if it will happen this year or next year or year-on-year.
 
The e-commerce business has changed drastically over the years. What are the reasons behind the changes? How big is the industry now?
 
There are multiple reasons for the change. Firstly, it is trust. There is a history to why people didn’t trust. E-commerce is not very new in the country; there were a few players already in the market but the quality of products wasn’t right, delivery was an issue, so was pricing. People were not happy with the experience. Secondly, there has been an increase in the number of people online. Thirdly, the players, especially new entrants, wanted to build on trust so they came up with return policy, COD. Fourthly, it was not only about selling unknown or luxury brands which only a few people knew about, but also popular brands. Assortment build was huge. It is now value for money. People are now getting a good choice and at a lower price. It is a win-win situation for the customers.
 
Another point is about the infrastructure where logistics have evolved; some companies have built their own logistics to have better payment options. Also, brands are ready as they are getting more space. For instance, a brand with a presence in 40-60 cities would reach say 6,000 cities at one go through e-commerce.
 
Do you see e-commerce companies cutting across age-groups or will they continue to target the youth?
 
By the next generation, e-commerce will cut cross all ages. The internet is new, so most of the internet population is made up of people in the age group of 15-35 years. This age group is very comfortable using technology while the older generation spends more time online checking emails rather than buying. However, this will change over time and people will shift from just content to purchasing as well.
 
Will too much competition benefit or harm the industry as companies have special discounts to lure customers?
 
If you don’t give discounts, how do you make profit? Globally too, there are a lot of e-commerce companies but very few have scaled up. It’s not that these don’t give discounts.
 
Both the offline and online worlds have their pros and cons. A strong plus point of the online world is that we don’t have to open up a high-end physical infrastructure. So, you don’t have high rentals and high operation costs. Also, you don’t have limited period of service. All these factors allow us to have savings.
 
What e-commerce companies do is they give out that saving to customers as discounts so that the whole sector grows. Even today, the sector is not even one per cent of the economy. Even in the case of developed countries like the US and developing ones like China, this was the model followed before it became profitable.
 
Which period of the year is best for Jabong.com? What makes it the best?
 
There is no best season for us. We create our own throughout the year. It is mostly occasion-based, for example Diwali, Valentine's Day etc. but we create our own occasions and repeat the patterns.

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