We aim to reach 400 million customers: Shopclues CEO
Alibaba cannot come in with a magic wand, they will break and path blaze like anyone else, says Shopclues CEO Sanjay Sethi.
It’s been a month since the Modi government demonetised high value currency notes; amidst reports of lots of inconvenience caused to general public on the ground level, Shopclues CEO, Sanjay Sethi tells Moneycontrol.com how it could have executed in a better manner. In a free-wheeling chat, he also shares why it is not a good time to pump money in advertisements and focus on signing up merchants.
Q: Under your latest initiative – ‘Reach’, you are trying to bring offline sellers to digital payments platform. There are already half a dozen companies offering wallets and digital payments option. What is new that you are offering?
A: If the demonetisation would not have happened, we would have rolled this out in March, 2017 around GST launch. And GST is not about payments. It is just that today what resonates more with merchants and generally in media is payments and cashless. After demonetisation instead of us going to the merchants, they have started coming to us asking for solutions. Today, cashless resonates with the merchants but 'Reach' is not about e-wallet at all. It is one layer above and is more about O2O (offline to online) than anything else.
Q: How many merchants are you expecting on ‘Reach’ a year from now?
A: By 2017, if we add one lakh merchants on this platform, I think, we are in good shape. Right now, there are 5 lakh merchants on the platform. The plan is to get to 10 lakh in 18 months.
Q: Why so much of focus on offline now?
A: It is very efficient to do it right now. We would not have gone ahead with this segment if demonetisation had not happened. Because of demonetisation, the inbound interest has grown. People are asking us... if we had payments solutions. The organic demand increased so much that it will be foolish of us not to take it live right now. It is just more efficient. In the last four-five of days, there have been at least three full page ads on UPI and digitisation done by Modi government itself. It’s like free advertisement coming our way, why should we not encash from that.
Q: What is your take on demonetisation?
A: It would take many years to figure that out. In 1991, if you had asked how opening up of Indian economy would help the country, I would say, we can look back and say it was definitely a historic moment ... we almost went bankrupt and we had to open that up.
Similarly, demonetisation could have been done for many reasons. I don't know whether it was for terrorism or blackmoney. If we believed demonetisation would be one thing that will fix everything, I think we would be in for a rude shock.
But if digitisation, ‘Benami’ and electoral reforms are executed properly, then I think financial inclusion, digital inclusion, ‘Jan Dhan’ will start kicking in 5 to 10 years. We will become a very robust economy. We will look back at this and be very happy that we did this.
If all these things happen, then the Indian population which has always been considered as our burden suddenly becomes our strength. It very exciting when 1.3 billion population becomes your strength. China thought it was a problem, but today it does not say that. Infact they call it their biggest strength because their domestic economy has grown so large.
There are atleast 800 million people who cannot participate in the domestic economy of the country. The key is to get to them.
Q: Given the sort of trouble that is being reported on ground – do you think this could have been executed in a better manner?
A: India conducts the largest general elections in the world. Many government officials become polling booth in-charge and all schools, colleges become polling booth during that time. So if such a move (demonetisation) was to be taken, why can't every school or class become a small ATM? Like poll boot operators why could people (government officials) not be given Rs 5-10 lakh cash, to give in their region or block. The government could have done so many other things to make it better and less painful. In terms of execution, we could have invoked the government machinery to a much larger extent than we chose to do this time.
Q: You have always said, you are not competing with Flipkart or Amazon. Where is Shopclues placed in the Indian e-commerce war?
A: Our vision is to reach out to 400 million consumers. Among them 150 million are those who make Rs 10 lakh or more in annual income. The Rs 4-10 lakh segment is what we are talking about. That population is less than 400 million but the plan is for five years by that time I believe that we should reach to that. I’m also taking into account the GDP growth. Economic flywheel will pump more people in this segment. We have only reached about 12 million of the 400 million.
Q: Would you let go of the creamy layer, people who stay in metros and are online buyers?
A: You stake towards where the puck will be and not where the puck is. I am just saying it is a bet of Indian future.
Q: Your projections are for five years, but anything can happen in five years, especially in a dynamic sector like e-commerce. Alibaba can enter and completely disrupt the market overnight. Don't you think, it is too futuristic a vision for e-commerce?
A: Many a times, we talk in terms of winners and losers as if there's a finish line. But the point is that it is a continuous game, season after season, day after day, this battle is to be fought and won. So Alibaba cannot come in with a magic wand, they will break and path blaze like anyone else. Of course they have deeper pockets. But when it will enter India, what will they target? I have no clue. If I were to take a guess, there is a first-hand opportunity of the creamy layer.
So 18 months or 2 years off there is no serious competition in what we are doing. Just to put things in perspective, Amazon was on television 360 days. We are knowing what we are doing, fairly and efficiently. That is because we are fighting a different battle. My dollar is not competing with your dollar. And that is the reason why we are here today. Don't know what Alibaba will decide to do here. But whatever it is, will take some physical time – year or two years. That gives me an edge. Two years from now, I should be having much deeper interest in merchants business. I have to increase the switching cost. Which means they will have to compete on our turf. We want to bring the battle here, rather than go there and fight.
Q: Which are the largest selling categories for Shopclues?
A: Largest selling category is lifestyle which includes shoes, clothing and accessories. Then almost the same size is home and kitchen. Then general merchandise. Lifestyle is about 30 percent, homes and kitchen is 25 percent, general merchandise and electronics 25 percent each. Electronics have actually grown up for us because when we introduced refurbished electronics on our platform that year we grew significantly.
Q: Average ticket size?
A: Overall, it is Rs 2000. For fashion and home and kitchen Rs 500-800.
Q: Shopclues is not coming up with many campaigns as of now.
A: Right now, it’s a bad time to go into advertisement and brand creation because the consumer is already anxious. I think we should spend the money when they are more open to buying. If you will spend right now, then you will have to overspend. We should focus more on merchants because they are the ones saying can I get a solution. By January-February when the consumer anxiety dries down and then is more liquidity in the market, we may do some.
Q: Any acquisition appetite on mobile wallet front?
A: No. You will hear about exclusive partnership with banks, multiple solutions we will create for capital wing. If there is an acquisition, it could be either be technology acquisition or if there is a great value available in a category, then we will do it. There is nothing in the pipeline though. Any acquisition becomes interesting if the price point is right.