Pure-play ecommerce model is not sustainable, says FirstCry's Supam Maheshwari
FirstCry founder Supam Maheshwari is not resting on his laurels after creating the largest omni-channel baby care firm in the country. He is planning to unveil a private label and also bring a few global brands to India. In an exclusive chat with Techcircle.in, 42-year-old Maheshwari says omni-channel is only model which can be sustainable and profitable in the country. That is probably why Brainbees Solutions Pvt. Ltd, which runs FirstCry, bought Mahindra Retail's baby care business BabyOye for Rs 362.1 crore recently. FirstCry also raised $34 million afresh from Mahindra Group, Switzerland-based PE fund Adveq and Infosys co-founder Kris Gopalakrishnan.
Maheshwari explains why the pure-play ecommerce model may not be affective going ahead and talks about the company's plans to grow inorganically. Edited excerpts:
What are the terms of the FirstCry-BabyOye deal? Before the deal, FirstCry had 180 stores and Mahindra Retail had around 81 which are company owned and close to 39 stores as franchises. Now, all the 300 stores will be run under the singular brand FirstCry.com, a FirstCry Mahindra venture. The company owned stores of Mahindra will operate via a master franchise agreement—MRPL (Mahindra Retail Pvt. Ltd) and us. These (81) stores will be run by MRPL as a master franchisee to FirstCry. From a consumer point of view, it is a single brand and will offer great customer experience through an omni-channel window.
How do you see this merger? It is a coming together of two large players in the market with formidable presence on both sides, and being able to massively increase the network effect of the two large partners from demand and supply aggregation perspectives and thereby, taking the benefit of this aggregation of demand and supply into faster profitability.
How will this consolidation help both the parties? First of all, it's about building a customer base under one brand, so that the cost of building a brand reduces. Secondly, we will be able to leverage the network effect of a single brand leading to more traffic and more footfalls. Third, through the power of the omni-channel mode, there are more than 300 stores, which are closer to the customer than before. Later on, from the supply window, both Mahindra Retail and FirstCry will bring in a lot of unique merchandise, exclusive global brands. With the economies of scale, it reduces costs and increases growth margin.
What lies ahead for FirstCry? We will start our integration process which will take a couple of months. That is our first priority. Once we align our technology platform and supply chain, we will continue to grow. We will do that organically with a bigger base of revenues and stores. We have less competition and we have far more dominant power in terms of the overall merchandise and customer experience in this vertical. Within three years, we will have at least 700 stores in the country.
We will be investing a fair bit of energy in building our private label. We will be going after some global brands too, to bring them to India. We will be focusing on a few inorganic opportunities also, which will be brands that create value, have great franchise and have stickiness with the customers. There are certain digital properties from a customer engagement perspective that can eventually become fairly significant. Those will also be on our radar in terms of inorganic expansion. After a year or so, we will also expand to Southeast Asia.
How important is an omni-channel model for e-tailers in the country in the current scenario? Going forward, especially in India, pure play ecommerce model will take a long time to become profitable. It should reach a scale. Until then we should be patient. The only model which can become sustainable and profitable is the omni-channel model because 90% of the market still remains offline. You have to provide solutions to the offline world as well.