Why FirstCry's Supam Maheshwari sees no threat from quick commerce to his business

FirstCry expects no material impact of quick commerce.

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At a time when the marketplace is abuzz with an estimated $1.28 billion in sales expected to shift from the retail stores to quick commerce in 2024 alone, FirstCry's Supam Maheshwari stands firm to negate any major threat to his business.

What gives Maheshwari the confidence to downplay the onslaught of quick commerce on retail business? It's the business model, perhaps. FirstCry, the child apparel and childcare products brand, operates at a multi-channel level, giving young parents the option to choose from both the mediums.

"At an e-commerce level, we are pan-India. When it comes to stores, we cover over 500 cities, including tier II and III markets. On the other hand, quick commerce is available in metros or top 10-12 cities. We have same-day delivery in more than 40 cities and next-day delivery in over 1,000 cities. We have not been doing this for the last six to nine months, we have been doing it for many years. We were probably the first to build this customer experience model," Maheshwari said in an analyst call on Q2 FY25 earnings.

Read: FirstCry parent Brainbees narrows its losses in Q2 to Rs 63 crore from Rs 119 crore

Category overlap is also minimal, he noted. "So, probably it is only diapers that parents are buying through quick commerce."

There are some young parents who may want to buy on quick commerce but mothers usually make planned purchases. The category overlap is minimal, save for the likes of diapers. So, I don't see a material impact today or going forward of quick commerce on our business. That's what we believe," he added.

The parent company of FirstCry, Brainbees Solutions, saw its shares trade in the black, up 0.12 percent at Rs 519.05 at close on the BSE on November 14.

Brainbees Solutions, the company that runs FirstCry, posted a revenue of Rs 1,904.9 crore in Q2FY25, a 26.4 percent increase from Rs 1,506.88 crore generated in the same quarter last year.

The company reported a loss of Rs 62.85 crore , down from Rs 119.4 crore during the same period a year ago.

Growing online and offline

Maheshwari doesn't even expect the online and offline breakup for the business to make any significant change with 77 percent of the gross merchandise value coming from online and the rest 23 percent from offline.

"FirstCry is the largest organised player in the industry with 1,100 stores today. So, there's headroom to grow offline. We will continue to add FirstCry stores. The offline stores will continue to improve our overall multi-channel story. Yet, the breakup won’t change as both offline and online are growing," he said.

Only online will cut no ice, the FirstCry chief executive said on competition intensifying with Landmark Group entering India with children's wear store, Babyshop, by the end of 2024 as they plan to grow retail footprint by 20 percent. "There is no dearth of competition in India. If we look at our tenet of multi-channel experience, once they built a trust by purchasing offline, then they (customers) buy online. We have a 80-warehouse supply chain network."

Maheshwari also doesn't see consumption slowdown impacting his business and said the focus is on adding more stores. "Our customers who join our platform for the first time offline, make multiple purchases online, or those who come online for the first time, visit the stores in the vicinity for offline purchases. We would like to add more stories over a longer period of time. We have added 40 stores in Q2. We will be able to add a large number of stores in the next four to five years."

Still very small

In the next four to five years, Maheshwari pointed out that their overall TAM (total addressable market) will be close to $120 billion. "In our India multi-channel core business, we are very small, although we are the largest multi-channel player in the mothers, baby and kids domain. We hope to see sustained growth because our TAM is fairly large."

He said India is world’s capital of babies and mothers and makes 25-26 million babies a year. But the spends in this market are higher internationally. Spend per child on childcare products in FY24 in India was Rs 9,280-9,350 as against Rs 61,000-71,000 in Saudi Arabia and Rs 160,000-170,000 in the UAE. The childcare products market size is estimated to reach Rs 5.15-5.45 lakh crore in India in FY29, while it is pegged at Rs 64,000-68,000 crore for Saudi Arabia and Rs 24,000-28,000 crore for the UAE.

FirstCry in its Q2 investor presentation pointed out that its international segment average order value (AOV) is 3.9 times AOV of India business.

Revenue coming from the 0-6 age category forms a large part of the business both online and offline. "The 6-12 age group was launched three quarters back. The 0-6 category is what we had started our business with 14 years back. It will take us a bit of a time to get to balance this as our cohorts get built up," Maheshwari said.

He is also bullish on the education segment with Intelli catering to kids in 2.5 years to 6 years of age. "This is a very big but unorganised and unbranded market. Millions of parents want to give a lot more branded and quality education to their young ones. So, we have a lot of headroom to build our model within the pre-school market. The market has more than 50,000 pre-schools in the country and around 80 percent of them are unbranded. So, we are very small although we are growing meaningfully with 44 percent growth. The branded segment is small but within that we are growing fast. By the end of September, we are sitting on more than 300 schools," the company's management said.

The platform provides curriculum, technology, and facilitates the admissions for children.

GST inspection complete

During the earnings call, the FirstCry management also highlighted the search and seizure by the Goods and Services (GST) department.

"There was a recent search and seizure operation done by the GST authorities in Maharashtra in our corporate and warehouse in Pune. This started on November 6 and ended on 10th. The search and seizure was for the mismatch in what the vendors buy for us and what we show in our returns. It was also for the availability of GST credit for the IPO expenses which is attributable to the shares issued by the company. On this, we have paid a total amount of Rs 1.74 crore to the GST authorities, which includes the mismatch amount as well as the interest component for four years which includes 2018-19 to 2022-2023," the management said.