Naaptol Online Shopping Pvt Ltd, owner of the shopping site Naaptol.com, has raised $25 million (Rs 123 crore) in an all cash deal, led by New Enterprise Associates (NEA). Earlier investors Canaan Partners and Silicon Valley Bank also participated in the round that ended in August 2011.
This is NEA's first direct investment in an e-commerce start-up in India. It has previously invested in technology and communications firms such as enterprise mobility solutions company Valuefirst; low-cost netPC developer Novatium Solutions Pvt Ltd; unified communications firm Intellisys; technical support and reverse logistics provider Intarvo and outsourced services company GlobalLogic.
NEA's Bala Deshpande will join the board of directors at Naaptol.com alongside Rahul Khanna of Canaan Partners and the promoters.
The funds will be used to fuel Naaptol's massive hiring plans as well as invest in its Internet business, supply chain and inventory. "Internet is a major thrust area for us. The key areas for investment will be in supply chain and inventory. We will work with more vendors going forth," said Manu Agarwal, Founder and CEO, Naaptol.com, speaking to Techcircle.in. Naaptol currently works with 50 vendors and has three lakh products listed on its e-commerce sites.
Naaptol was founded in August 2008 as an online shopping site and in 2010, raised $7 million (Rs 33 crore) in venture capital funding from Canaan Advisors Pvt Ltd which included a fresh issue of shares and acquisition of shares held by Bennett Coleman & Co. Ltd. It also raised another Rs 7 crore from Silicon Valley Bank in 2010. Since then it has launched a private sales site called Naaptol Club and forayed into television with an investment of Rs 60 crore. Naaptol continues to experiment with more online models and may launch new properties going forth.
TV shopping currently contributes to approximately 15-20 per cent of revenue while online contributes to 25 per cent and private sales (Naaptol Club) contributes to less than 5 per cent of revenue. Responses to print ads, that come directly to the call centre, contribute to 50 per cent of Naaptol's revenues. Naaptol records approximately Rs 2 crore in sales per day but is not profitable yet. Agarwal expects the company to break even by end-2012.
Currently, tier two and three cities contribute to 70 per cent of the company's sales and Naaptol will continue to focus on these towns rather than metros. "E-commerce is driven by accessibility and availability of products. We are gaining a strong foothold in areas where modern retail has not yet been able to reach. Growth is taking place in tier two and three cities, with increasing disposable income and rising Internet connectivity," said Agarwal.
Meanwhile, the company is using Naaptol Club to attract premium brands. Private sales, he said, offers incremental organic growth and the company will continue to ramp up Naaptol Club. "The private sales model has its own set of advantages. It's a different play and premium brands will be featured on Naaptol Club instead of the generic e-commerce site."
Interestingly, cash on delivery contributes to 90 per cent of the company's overall sales. "Cash on delivery has become necessary for online shopping. Fraud is associated with credit card transactions, so almost all transactions that come through the call centre are via cash on delivery. The model is here to stay," said Agarwal.
Naaptol competes with Homeshop18, which also has a TV shopping channel, as well as other horizontal players such as Indiaplaza, Indiatimes Shopping, Myntra.com, Yebhi.com, eBay India, Infibeam.com and Flipkart.com. Naaptol Club is up against invitation-only, flash sales sites such as ThePrivateSales.com, 99Labels.com, Fashionandyou.com, Brandmile.com, BagitToday and Fetise.com. Recently, flash sales site Exclusively.in shrugged off the model to turn into a generic e-commerce site.
Naaptol had recently shared its plans to add 500 employees by end of the year. It is currently hiring 100 people to its call centre operations per month. It is also ramping up its Internet division and is looking to add 100 employees by the year end. Naaptol currently has offices in Mumbai, Jaipur and Gurgaon and is looking to expand its facilities to accommodate the growing team. The company is also on the lookout for a CXO level hire from a collateral industry such as logistics, media or the digital space.