Technology Startups

Cloud Computing Start-Up Capillary Taps Retail SMEs For Growth

9 Sep, 2011

Cloud computing, mobile phones, retail outlets and customer relationship management (CRM) – all these combined to make a potent blend behind the $500 million (Rs 2,309 crore) transaction throughput, recorded this year by Capillary Technologies Pvt Ltd. A start-up based in Bangalore, Capillary is aggressively pursuing large, as well as small and medium retail outlets, as it prepares to take the next growth step. In fact, it is targeting an aggressive 8x growth in revenues this fiscal, led by strong global executions.

Techcircle.in takes a look at how the company has been scaling up, its priorities, how it is poised currently and the roadmap.

What It Does

Incubated in August 2008 by IIT Kharagpur engineers Aneesh Reddy and Krishna Mehra, Capillary Technologies Pvt Ltd's flagship product inTouch is a Cloud-based CRM solution, which is integrated with billing and point-of-sale outlets of retail chains.

Using inTouch, SMEs can access and use purchase data to entice buyers with loyalty programmes and discounts. Today, Capillary's CRM system processes an average of four million transactions per month, which has grown by a million since March this year. The company currently works with 100 brands and reaches a pool of 10 million consumers.

The start-up has formidable investor backing, including the high profile angel investor Rajan Anandan; Venkat Tadanki, CEO of Secova, an information services firm, and who also sold the BPO Daksh to IBM in 2003; and Harminder Sahni, who is the founder of Wazir Advisors and ex-managing director of consultancy Technopak. Capillary is a portfolio company of Qualcomm Ventures. Anandan believes that Capillary will become one of India's most valuable technology companies over the coming years.

Loyalty & ROI

The solution inTouch competes with traditional in-house loyalty programmes, such as those offered by Shoppers Stop and Pantaloons. It also competes with coalition loyalty firms like Payback (iMint) and Videocon-owned Loyalty Mine. Payback has upped its focus on India where it currently has 30 partners and around 1,500 branches.

But the key difference between the traditional loyalty programmes mentioned above and Capillary's Cloud-based CRM systems is the return on investment (ROI). While loyalty programmes typically take two-three years to ensure a tangible ROI, Cloud-based CRM systems can bring an immediate increase in sales. Krishna Mehra, co-founder of Capillary, says, "On an average, the stores where our software is deployed, have seen 20 per cent rise in same-store-sales over the past one year." inTouch promises instant gratification not only for the shops but also for the shoppers, via mobile phones. It analyses a customer's past purchase data and sends a relevant discount voucher or coupon to the user's mobile.


The company has recently launched a whittled down version of inTouch called TruTouch, which is an easy-to-use, self-serve-style product. "The enterprise model wasn't working well for SMEs, as it's driven by deep analytics and co-branding, not required by them. So we launched a simpler system that would appeal to them and it came without the frills and features that we offer to large retailers," says Mehra. The soft launch and customer trials of this tool have been conducted over the past three months and the launch is expected soon. Already, TruTouch has been adopted by 500 stores, the company claims.

SMEs Love Cloud Computing

SMEs are taking to Cloud computing faster than ever, as lower IT manpower appeals to them. According to Mehra, "Acceptability of Cloud is everywhere and contrary to popular belief, people prefer a Cloud environment. Most business users want to get things done at the lowest cost and demand highest efficiency. In a retail set-up, the IT team is very small and their hands are always full. Marketing teams continue to demand flexibility, which the IT team is unable to provide. But with Cloud, everybody is happy."

Capillary has 6,000 paying merchant outlets as clients and over 100 brands who are both large and medium retailers – making it possibly India's largest Cloud CRM firm. Madura Garments, Raymond Shop, Gitanjali, Indus League, Pizza Hut, Spice, Woodland, Peter England, William Penn, YLG Salon & Spa, The Mobile Store and SSIPL Retail Ltd, which is a master franchise for sports brands such as Nike, are among the brands that Capillary has on board.

SME retailers vary from those with just one store but with a top line of Rs 40 crore or chains of stores. These include Prestige - The Man Store, Saboo Silks, Davanam Jewellers and a children's retailer, Apple of my I.

Meanwhile, Cloud computing among bigger retail brands has not taken off with the vigour that was expected. "Yes," agrees Mehra. "With very large corporate houses, Cloud computing has not been successful." But the promise of security on the Cloud is winning over the cynics. "They need to be comfortable with security levels," said Mehra. This year, Capillary got itself ISO certified to show clients it is geared up in terms of security and processes.

With more social networking and mobile applications coming up, customer interactions are changing fast and Capillary has been working double time to keep its platforms up to date. "Facebook's API keeps changing and by continually aligning with these changes, we are able to give the brands a robust proposition," explains Mehra. "Brands need their systems to be dynamic. Having in-house software becomes unwieldy with upgrades. So, from their perspective, Cloud is easier to deploy and there isn't any need to keep upgrading. This works well for retailers."

Mehra says that there is a big opportunity with storefronts and the company is leveraging its national footprint to reach out to more of those. "So far, our SME focus has been on the southern region and we are now expanding into other territories," he adds.

International Market

Earlier this year, Capillary has firmly set its foot in the global market – in the UK, the Middle East and Singapore, to be precise – and bagged clients such as Store21; a departmental store in Singapore and Homes R us in the Middle East. Next, the company will expand into the USA and Europe, after the holiday season. "In terms of ROI, we have found that we are able to make a bigger impact internationally," says Mehra. "International markets, especially western ones, are facing sinking revenues and they are cutting down stores. They are also facing massive competition from e-commerce and are looking for anything that helps them increase sales."

Expansion & Hiring

The company had 12 employees on board in August 2009, which went up to 40 by August 2010. Over the past year, it has ramped up significantly, spending $1-$2 million on expansion and hiring. Capillary currently employs 150 people. The company is also targeting 8x growth in revenues this fiscal, having achieved break-even. "We will spend more time executing in international markets before taking the next step and will raise capital to expand further," details Mehra. The firm will need $8-$10 million (Rs 40-Rs 50 crore) to fund its aggressive growth plans, but that's not an immediate priority.

Ramping up its sales and technology forces is the immediate concern. Capillary has 40 in product development and 20 members in its global sales team. "A substantial investment is going into hiring the right sales and account management executives, as well as product localisation, according to geography," concludes Mehra.