Baby care products is one e-com category in India where the vertical players have managed to stand on their own and Firstcry.com seems to be breaking out of the pack. Founded by Supam Maheshwari in 2010, Brainbees Solutions, which runs Firstcry.com besides family wellness focused site Goodlife.com, has raised two rounds of VC funding worth $18 million from SAIF Partners and IDG Ventures. Maheshwari, who previously founded education startup Brainvisa Technologies and later sold it to Indecomm Global services, says his firm will break even by end of the this year and is hoping to become a complete family wellness shop rather than just being a baby products e-tailer. Techcircle caught up with Maheshwari to get an insight into the business strategy, market opportunity and more. Edited excerpts:
What makes the baby care products segment hot-sell for e-tailers and how does a vertical play stand against horizontal players having or entering the business?We need to first see what's happening internationally. Diapers.com, when they started in 2005, entered a very well established organised e-commerce market. Players like Amazon, which had a strong baby care segment, had all the money that they needed to dominate the market. Despite that, in a matter of five years, Diapers.com grew in revenues from zero to $300 million before being acquired by Amazon. So this speaks of the tremendous opportunity of not only the conversion rate of buyers from offline to online, but also the advantages of an online play.We have seen exponential growth in revenue which has led us to become the market leader.
But the dynamics of the play in India are different, what market opportunity are you chasing?
The entire baby care segment market opportunity in India, mostly offline and the rest online is around $7 billion. The best part about this business is that it has one of the highest profit margins in any retail segment in India. The only issue here is that in this market, 95 per cent of products are imported. Other than a few players like Johnson & Johnson and some local players, no one else is manufacturing in India. So bringing efficiency in the supply chain is going to be a big focus area for us.
For Firstcry.com which category is the highest revenue generator?
For every player, not just for Firstcry.com, clothes and shoes followed by toys and then diapers are the segments that will always dominate in any baby care platform.
Brainbees Solution's flagship brand is Firstcry.com and its success has, by far, overshadowed Goodlife.com, which is your family wellness platform. What really is the strategy for Goodlife.com?
So there is a long journey ahead of us. We are trying to follow the business strategy of Quidsi, the company that operates Diapers.com. We are trying to traverse their path because it not only gels well with Indian demographics but it offers opportunities which we think will play out in India exactly how it has played out in the US. If you look at their model you will notice that they have seven other sister sites like soap.com, beautybar.com, yoyo.com, wag.com and so the underlying theme is to cater towards the entire family. And so Goodlife.com helps us move in that direction.
At present how much revenue does Goodlife.com bring in?
So at present it's around 15-20 per cent of our entire revenue contribution, which is pretty decent considering most of our funding dollars are being used to promote Firstcry.com.
So going ahead baby care will not be your sole focus?
No, baby care will not be our sole focus. This is because once a customer is used to buying from our brand and trusts us, we do not want that customer to leave after a few years just because their kids have grown up. We want to make sure that we can cater to the customer's wallet as much as possible because there is a strong appetite from the customer to buy online. Firstcry.com will be an independent profitable venture, which could one day have an IPO or even a trade sale depending on the opportunity.
You've been looking to acquire.. any developments in finding the acquisitions targets? What about consolidation in the business?
Consolidation in this market is bound to happen because this is a one winner market. If you look at the US, Brazil and many other countries you will see that there is typically one large player. So it will happen in India as well. So acquisitions will happen to boost a category. Babycare is a business which requires a lot of capital and talented manpower, and sooner or later shareholders of all baby care companies will realise that it is unfair to compete in the same market for the same constrained resources and same customers. And hence they will realise that it is in their best interest to consolidate the best of all businesses into one big team. Hopefully we are in good shape to do that.
How is the company doing on the funding front? Are you looking to raise more funds?
As of now, we are well funded. We have raised $ 18 million till now and that should sustain us for some time to come. We will be looking to raise some money in a couple of quarters down the line and not necessarily for M&A. In fact for M&A, we may not need funds. We will need funds to add more warehouses and to increase customer engagement.
What's the strategy to go offline with retail stores? If bulk of the stores are coming up in Tier 2-3 cities and your products can be tagged as premium in pricing, isn't there a contradiction in strategy?
Not really. The idea behind the offline store strategy was more for brand familiarisation. There are many customers who are first time parents or even first time customers to the Firstcry brand. These customers all want to see and feel the product. We've started this via a franchisee model and it is a business which can scale up and be profitable too. So we may have started looking at Tier 3 cities. However, today we have 30 odd stores in 27 cities and Bangalore, Hyderabad and other metros are also in this list.
You'd set targets to break even by the end of 2013 and a gross merchandise value of $250 million by 2015. Are you on course to achieve this?
I would say that most of our businesses are moving in the direction and growing at the pace that we've wanted. Now it depends on what we want to focus on and if we want to push hard we can even beat these targets. Yet, unlike most players our bottom line is a major focus area. Our top line has been growing at 5 to 6x hitherto. Now, this will start coming down considering our base is becoming larger. But just see the potential in this business. Amazon who works on a $60 billion base grows by 25 per cent y-o-y. So it's pretty incredible.
Many big e-commerce players are looking to enter or have already entered the baby care segment. How do you look at that side of competition?
Quite frankly, I do not see much competition happening in this space, but I do see a lot of consolidation taking place in the next 3-6 months. Today no other e-commerce player can offer the kind of variety that we do in the category of baby care. The second reason is shipping costs. In the next 12 months, I see the shipping cost barriers to move up from Rs 300 to Rs 600. So if consumers have to avoid shipping costs, they will want to buy from one shop and currently there is no other brand in baby care stronger than Firstcry.com.
(Edited by Prem Udayabhanu)