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After coming across LimeRoad.com, a lifestyle portal on Facebook, 19-year-old Ranchi-based college student Meena Munda fell in love with it. The portal offers Scrapbook, a feature allowing users such as her to create looks (combine clothes, jewellery and footwear). A fashion-conscious girl, Meena often spends her free time creating interesting looks on LimeRoad.
As with Meena, hundreds of users across the country create new looks on LimeRoad and the unique ones are lapped by customers. With users constantly creating new looks, the site's homepage is regularly updated. User-generated looks and affordable prices have helped LimeRoad draw a million users.
Last month, the portal raised $15 million in series-B funding from a group of investors led by e-commerce major Tiger Global, which has also backed Myntra and Flipkart. Lightspeed Ventures and Matrix Partners, which had invested $5 million in seed-stage funding, also participated in the funding round.
The concept
A few years ago, when eBay veteran Suchi Mukherjee, popularly known as Suchi, was going through a magazine, she came across a beautiful dress in an ad of a Bombay-based store. Wondering why it wasn't an online store, Suchi, who wanted to return to India from the UK, saw an opportunity. "India produces $200 billion worth of apparel, footwear and jewellery. Yet, there is no way you can buy a tanter saree (hand-woven sarees from Bengal) online. How do you give access to this vast array of supply?" she asks.
After many trips to India and research, she decided to create a platform,
LimeRoad.com, that enabled women to access the vast array of supply across stores and brands. It also offered users tools to express various styles, or suggest combinations of dresses with a set of earrings or footwear, through a scrapbook.
In the lifestyle space, a major challenge is discovering products. "How do you define the dress you want, or a neon-geometric neckpiece in gold and neon, not in silver and neon? That's the reason people window-shop and go to shopping malls," says Suchi, founder & chief executive. The portal's scrapbook addresses this issue, acting exactly like a store's window.
The opportunity
In 2011, the market for electronics was $80 billion in the US; of this, half was online. And, 10 per cent of the online segment of the $320-billion soft goods and lifestyle market was online. There wasn't much difference between the online segments of both. Though it is easier for electronics to go online, the lifestyle segment, once online, grows rapidly.
In a recent study, venture capital firms Inventus and Accel Partners estimated in the next three years, $3-5 billion of online lifestyle-space buying by women would be accounted for by India.
"India accounts for about 20 per cent of the global lifestyle manufacturing market and the shift of long-tail apparel brands wanting to sell online has begun," says Tarun Davda of Matrix Partners, an investor in LimeRoad. Other players include Jabong, Myntra, Flipkart and Snapdeal. LimeRoad claims a wider range than most of these; also, no other company has a scrapbook or user-generated content.
Business model
LimeRoad doesn't carry any inventory; the inventory belongs to vendors. The company makes money when vendors sell. After factoring in its courier costs, LimeRoad records double-digit net margins. "This we have not optimised, as that's not the game. With scale, net margin can easily be in the 18-20 per cent range," says Suchi. "Right now, our big goal is to see if our users are completely addicted to us, as well as reaching more women."
LimeRoad says for success, discounts are neither necessary nor sufficient. "We don't want Meena to buy because we are giving her a 50 per cent discount. We want her to fall in love with the product. We want beautiful products, a vast array, affordable prices and the discovery to be painless and delightful," says Suchi. Every scrap-booker who posts on LimeRoad shares a link. That gives the site fresh traffic, which creates a virtuous cycle.
LimeRoad has started well; it sells 200,000 products; it claims 80-90 per cent of these are unique to it. It has 500 vendors and claims a vendor retention rate of 90 per cent. The site also has thousands of scrap-bookers and more than a million users. In the past four months, it has doubled its orders, without much marketing.
The company isn't comfortable discussing its gross merchandise value (GMV); it merely claims it is growing 30 per cent month-on-month. "If your headline target is to grow GMV, you will start doing things detrimental to building a great product; you will start discounting. Once a user buys on a discount, she'll never buy for a full price," says Suchi.
The road ahead
LimeRoad's immediate goal is to hit five-10 million users in 12-15 months and ensure these are highly engaged. It wants to add new vendors and scale up much faster. It needs capability, for which it has to invest. Recently, the company launched an Android application. It wants to ensure it is present in as many mobile devices as possible and, subsequently, take the mobile experience to the next level. And, as gains scale, it needs to ensure its back-end doesn't crumble.
FOUNDERS' BACKGROUND
Suchi Mukherjee, founder & CEO, passionate about building consumer technology products, selected as one of 15 global women 'Rising Talents, high potential leaders under 40'. Ex-eBay, Skype and Gumtree
Prashant Malik, co-founder and CTO, was one of the early employees at Facebook and co-creator of Apache Cassandra. He has returned to India from the Silicon Valley, after spending 14 years in the Bay area
Ankush Mehra, co-founder & vice-president (supply chain operations); has 18 years of experience in supply chain; ex-head of supply chain at Reliance Hypermarkets
EXPERT TAKE
Lifestyle discovery and shopping is transforming with Pinterest, Fancy, Wanelo and Polyvore. For the clothing, footwear and accessories worth $200 billion originating from India each year, LimeRoad is leading that transformation.
The process of discovery is driven by its user community, which creates thousands of 'looks'-pieces of clothing they feel fit really well together - and shares these with the entire community. But it goes beyond 'discovery'. Everything shared by users can be bought instantly, unique for a discovery-based platform.
LimeRoad does not hold any inventory, is always fresh with new items, has a lot of niche items and uses little working capital. A total of 80 per cent of the items on LimeRoad are unique to it. This can only be achieved by being in India, close to thousands of producers. Users clearly love this, with LimeRoad being the third-largest Facebook marketplace.
The key challenge is to match the front-end world class discovery experience that the LimeRoad team has so obviously built with a back-end experience. When you do not have control on your inventory as a marketplace, there are fulfilment challenges, out-of-stock issues and delivery in one-three days. The great news is this is a team which, in its very DNA, is both hyper customer-centric and technology-driven. Globally, marketplaces that have scaled these problems successfully have had those characteristics.
Michael van Swaaij is an investor in tech start-ups and a mentor for LimeRoad. He's also former chairman and chief executive of Skype Technologies and former chief strategy officer of eBay
