Ishita Swarup began her career with Cadburys. Consequently, it was a natural progression for her to create and manage Orion Dialog, a pioneer in the ITES sector in India. She exited by selling the company to Aegis BPO part of the Essar Group, where she continued as COO- India. As the CEO of 99labels, Ishita has been instrumental in leading the company to being a brand in today’s ecommerce market in India. In an exclusive interview with India Digital Review, Ishita Swarup discusses her plans for 99Labels.com
99labels was launched in 2010. Two years into operation, how has it been so far?
It seems like a lifetime in this space. In the last three years, if I take the months before launch in to account, I have seen a company set up along with its ups and lows. It has been an adventurous as well as an interesting journey.
What were the challenges that you faced while scaling up the company?
In the first six months, the challenge was a good challenge. The market exploded and this was something that we didn’t anticipate. Every research that we did show us that the space is promising, secondary research said that women are not online and fashion items won’t sell. So when we launched, we found the demand to be more than what we expected and hence the challenge was to maintain the growth that we actually couldn’t control. In our case, the logistics, dispatches, CoD issues all exploded on us and the challenge was to keep up with the speed that none of us envisaged.
99labels is one of the pioneers of subscription based fashion ecommerce in India. What was the idea behind launching this model rather than opting for a generic ecommerce model?
I wish I could say that it was a well thought through process and we evaluated seven different business models before launching this, but it wasn’t. A member’s only website as a format exists all across the world. What happened was that one of our co-founders mentioned to me about this market and it seemed like an interesting idea to me. Businesses in this space sit on excess stock at the end of their sales and we could reach an all India level and help liquidate. And may be also the fact that, to me, as a person, a more niche appeals more than a generic idea.
In our earlier interactions, we have known that prior to 99Labels, you have been an entrepreneur? How different is this from your previous company?
See the elements of a business remain the same. The audience shifts and what you are selling shifts. You have to make the revenue, control cost and hopefully make profit. For me, my first venture was learning and was the best form of institutional knowledge that anything would have given me. I took it from inception to exit. So as a person it was exciting because it was different. I had enough people coming to me for joining another BPO and scaling that up, but I didn’t want to do the same thing again.
In 2011 you raised from Info Edge. Every VC funded ecommerce firm is advertising on TV. We are yet to see 99Labels there? Any specific reasons?
Firstly, we didn’t raise too much funds to go on TV. Secondly, because we didn’t raise too much and seeing other companies spending so much money, it didn’t make sense to me d a small burst on TV. If you don’t have too much money to spend, then you get outshouted and to me as a marketing person, it didn’t make much sense.
Thirdly, ecommerce is going to be a long term game. I don’t see too many offline retailers out there on TV. I haven’t really understood that apart from chasing valuations, what exactly we are doing on TV? It gives you quick customers and then you give them discounts and multiple things to buy from you literally paying for them to buy for you.
People say that in closed ecommerce model, you can control your sales better. Your take on this.
We started off being closed because that is the international format. Internally, it has been a subject of debate in the last six to eight months that should we open ourselves a little bit more. The good side of being closed is that you know the database and you also know whom you are talking to and market yourself very specifically. It gives comfort to some of the premium brands that don’t want to be openly seen as discounting.
However, the negative is that we do turn off many consumers who don’t want to register to enter a site. I have many friends telling me that they see no reason to register just to see what we are doing. But for us a business it made a lot of sense.
What are your priorities as the CEO of 99Labels this year?
What businesses experience in decades, we have seen in two and half years. This year for us will be to understand the economics of this business and see how does this business make money? Focus on the road to profitability with an eye on satisfying the consumers.
How are you using the funds and when do you plan to raise your series B?
We are spending a little bit on digital marketing. From last year since we took the money, the team size has doubled. We were about 40-50 then and now we have 100-120 head counts. We have spent on the backend and the warehouses have increased, we are also in the process of implementing an ERP and we are experimenting on the products and also on the private label side that gives us higher margins.
Earlier this year, Info Edge had invested additional amount of funds on us, but we didn’t go public with this.
With ecommerce in India, the term funding goes hand in hand. But you have just done your Series A from Info Edge in 2011. Please share with us your sans-funding survival strategy in this cash-starved industry?
We will need to raise funds hopefully by this year-end. But in the last six-eight months, there has been a lot of question on the profitability of the business from potential investors. We also need to get both financial and operating metrics checked and evaluated.
Some time back, someone asked me what is our RTO (return to origin) is and I proudly said it 12%. After that I met another large ecommerce player and they had an RTO on lower single digits and I didn’t even know that it was possible. In most cases we don’t even know what our targets should be; what is a healthy return? International says 5%, so what should it be for India? What is RTO, which doesn’t exist outside India because of CoD. So in a lot of metrics, we don’t know what we are chasing?
Speaking about metrics, Cash on delivery is said to be eroding margins of ecommerce firms. What is your take on this?
Folks who have started with CoD are very afraid to withdraw because the fear is the revenues will become half. I still think that it helped in scaling up the initial buyer numbers. Especially for sites like ours which are very women oriented, I still believe that it is important because in many cases women don’t hold credit cards and their husbands do. India is a cash economy and we are more comfortable in dealing with cash. Of late, in a bit to reduce the abuse on CoD, we have become stringent on customer tracking and monitoring. So if people are returning the items ordered, we start to bar them and take them out. For me, instead of cancelling CoD, we can rather take out the abusive customers.
What is 99Labels’ ratio of Tier I and Tier II consumers?
We are about almost 50:50. Of late a little bit of shift is happening towards Tier II and III cities. A little bit of shift has started to happen. We started out with 70% in metros.
If 2011 was a year of ecommerce companies being funded, 2012 will see consolidation. What are your thoughts on this statement?
I don’t see a lot of consolidation happening. It is a good thing however. In Europe, within a couple of years of getting formed, a lot of ecommerce companies worked towards getting acquired. Through that they would make money and whoever had invested in them would make money. The problem in India is that you don’t see too many M&A happening. And the ones who are getting acquired are getting forced to get acquired. Consolidation happens in all industry and this is not a bad thing. In India there are not much happening.
Another trend in the ecommerce industry is setting up your own logistics network. What are your plans on this?
No. Not my business. Also, there are a lot of small and large outfits getting set up and focussing on the B2C segment of logistics and also some are catering to ecommerce companies like us. They are actually doing a good job and I don’t see any reason why I should replicate their effort.
What are your revenue expectations this year?
I can’t divulge the number, but I can confidently say that our bottom-line is looking much healthier than it ever did and the focus is on returning customer. Today we have 65% of our revenue coming from returning customers and we will be focussing mainly to get people return to the site rather than chase new customers.
What would be your advice to a budding ecommerce entrepreneur in India?
One year back, I would have said get in. Now, I would say get in with a word of caution as the game is changing and the investments are severe. One needs to be clear on the business model and there are interesting niche that will emerge and all need to be patient.
