 "Velvetcase co-founders Kapil Hetamsaria (left) and Runit Shah")
On the third floor of a building in Mumbai's Andheri East in a tiny L-shaped office, people are working excitedly on a late Friday afternoon. There are signs of recent celebrations -balloons and ribbons, and a colourful banner thanking the team on the closing of a second round of funding for velvetcase.com, an online jewellery site.
Run by Bodhi Brands, Velvetcase raised $1.5 million from Uniqorn Ventures Fund, Chennai Angels and investors TV Mohandas Pai and S Somasegar in June. This came a year after the start-up, which was selling jewellery online under its own brand, pivoted to a marketplace model. Moreover, it brought in the concept of quality verification for every piece sold, to build trust.
Opportunity
Most online jewellery start-ups, including Caratlane and Bluestone, manufacture and sell their own brands, which was how Velvetcase began. However, the two co-founders, Kapil Hetamsaria and Runit Shah, thought it made more sense to have a marketplace because India had close to 500,000 jewellery retailers and demand for online sales was gathering pace.
According to Hetamsaria, jewellery is a Rs 2.5-3 lakh-crore market in India. "Traditional retailers are still following the old way of selling, which is running a store and convincing consumers to buy what they have," he says.
There are specialist jewellers in Jaipur and Ajmer who have been in the business for generations but consumers in other cities do not know of them. And, sellers do not know how to access these consumers, he explains.
Business model
Velvetcase provides a platform for retailers to have their online stores and sell jewellery under their own brands. This way, they retain their brand entity and can access more customers. Meanwhile, customers have access to jewellery experts from small cities and towns along with a huge inventory.
At present, the start-up has 300 jewellers on its platform. As Velvetcase tries to get more, it has put in place a verification process that assesses the quality of products before being shipped. "Our sellers do not ship directly. Every piece bought by a consumer comes to a Velvetcase facility first and we check it for metal, stone and manufacturing quality," said Hetamsaria. "Only then we stamp it as verified. We are responsible for what we sell. It is important because it builds trust," he added.
"Jewellery as a segment has a huge room to grow. There are not too many genuine marketplaces that bring artisans and consumers together," said Shiraz Bugwadia of Uniqorn Ventures. "By delivering products with quality verification, the trust that Velvetcase brings in is very important," he added. "The rationale behind investing in Velvetcase is the marketplace model, which can be scaled up rapidly with minimal working capital and infrastructure expenditure," Bugwadia said.
Velvetcase exports to 15 other countries but 90 per cent of its revenues come from India. The revenue is commission charged from sellers, which ranges from 5 to 30 per cent, depending on the category and type of product. Sales have tripled in the last financial year, and the company expects revenue to grow four times to Rs 100 crore in this financial year, and to Rs 300 crore by 2017-18.
When Hetamsaria and Shah started the company in April 2012, they funded it with their own money, putting in Rs 50-70 lakh. For about 18 months, they bootstrapped it and after reaching sales of $1 million they started looking for investors. In 2014, they raised Rs 6 crore in a first round from Chennai Angels. Hetamsaria expects Velvetcase to reach a healthy balance between growth and profitability by mid- 2018.
Challenges
The main challenge Velvetcase faces is building scale.The company's business model is lean and scalable, according to Hetamsaria. "We have a large enough market on the supply side, and demand for online jewellery is picking up as women are increasingly looking to buy jewellery for casual outings and workplaces. It is becoming part of their lifestyles," he said.
Adding: "We have to have a very strong message for the consumer, so that they can try out this new platform." "The other challenge is to remain true to our verification concept, even at scale."
The company verifies products at its own facility before shipping. Velvetcase is now looking to international labs that certify jewellery. "Each of these labs has close to 10 centres in India. So by leveraging their network, we can start building scale," he said.
Road ahead
To expand its operations, the start-up is looking at omni-channel strategy. The company has offices in three cities, Mumbai, Delhi and Bengaluru, which it is looking to expand it to eight. "We are considering building satellite offices in eight cities that will enable us to do free home trials," said Hetamsaria. The other options the start-up is evaluating include opening franchisee stores and the store-in-store concept, under which Velvetcase will have a separate section with offline retail partners. "We are running a few pilots to see which works better for us," Hetamsaria said.
Meanwhile, Velvetcase is looking at new avenues of revenue. It is planning to charge a marketing media fee from its sellers to promote their exclusive collections on its homepage and other prominent spaces.
The other option the start-up is working on is consumer to consumer selling. While Velvetcase, at present, does this offline when a consumer reaches out to the company to sell jewellery, it plans to create a section on its website that will allow consumers to sell used jewellery directly. The company will charge the same commission it charges its sellers. "This way our consumers can become sellers," Hetamsaria said.
FACT BOX
Area of business: Marketplace for online jewellery
Founded: April 2012
Funding: Rs 6 crore in 2014 (led by Chennai Angels), $1.5 million in 2016 (Uniqorn Ventures Fund, T V Mohandas Pai, S Somasegar and the existing investors)
Revenue target: Rs 100 cr for FY17
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EXPERT TAKE Velvetcase is attempting to solve the problem of accessibility in comparison to Caratlane and Bluestone, which are trying to solve the problem of design. There are a couple of challenges for them - one, their catalogue size. Today, their catalogue size is smaller than the jewellery categories of Amazon and Flipkart. Two, the ability to capture the customer's trust, and hence the need to build a brand. For a vertical marketplace like Velvetcase, it's the shopping experience that will build the brand - as Myntra did in the apparels marketplace. |
Therefore, Velvetcase will need to marry the nuances of online shopping (trust, catalogue, merchandising) with specifics of this category - that is, the need for touch-n-feel, certifications, transparency, etc.
I will probably call them the 'Shopclues of jewellery'. They have managed to carve a niche despite the presence of larger funded players, and have managed it by raising much lesser capital. In this category, everybody is still scratching the surface. Velvetcase has the potential to lead the category if they can overcome these challenges.
Prerna Bhutani is partner at early-stage venture capital firm India Quotient
