 "Supam Maheshwari & Amitava Saha")
In 2002, Supam Maheshwari, a first-time parent, routinely travelled 18 km from his house in Pune to buy baby care products for his new-born daughter. During work-related foreign sojourns, diapers, baby oil, soaps, lotions, toys and apparel topped his shopping list. About 11 years later, Maheshwari, an engineer and an Indian Institute of Management (IIM)-Ahmedabad alumnus, says, "A decent baby care shop is still 18 km away."
However, the baby care landscape has changed dramatically.
Through the last three years, Maheshwari and his ex-colleague Amitava Saha, an alumnus of IIM-Lucknow, have ensured parents don't have to move out of their houses or offices in search of such products. In November 2010, Maheshwari and Saha co-founded Firstcry.com, an online store for baby and kid products. Today, the company has 5,00,000 registered customers who choose from an assortment of 55,000 products across 400-odd brands. Customers, who are delivered the products in two-four days, can either pay online or avail of the cash-on-delivery service. They also enjoy loyalty discounts on repeat purchases.
"As internet penetration grows and young parents become more comfortable buying baby products online, this niche segment is poised for sustained growth," says Gaurav Saraf, director, Epiphany Ventures, an early-stage fund.
At the outset, what sets Firstcry.com apart from competitors is that it has 36 stores (two or three are added every month) across 31 cities and towns, the majority of these in Tier-II and-III towns. These include towns such as Hosur, Kota, Malegaon, Baramulla, Karnal and Raichur and cities such as Surat, Jodhpur, Allahabad, Patiala and Coimbatore.
The company also has a sister concern - 18-month-old Goodlife.com, an online store for home and personal care products.
Baby biz: No kids' stuff
At 27 million, India has the largest number of child births a year. The market size for baby, kid and maternity products is estimated at Rs 40,000 crore annually, growing 15-20 per cent a year. Currently, about one per cent of this market is serviced by about half a dozen online companies.
Typically, about 90 per cent of the products in the baby segment are imported. Gross margins for non-diaper baby and kid products stand at 25-50 per cent, while those for the diapers category are 15-20 per cent. So, companies primarily focus on driving efficiency in supply chain, in terms of product sourcing and assortment, warehousing and logistics.
With estimated gross merchandise sales of about Rs 250 crore in 2013-14, Firstcry is considered the leader in its segment, competing against retail chains such as Mom & Me and a host of online players. The venture has raised about Rs 90 crore through two rounds of funding from marquee funds such as SAIF Partners and IDG Ventures.
Earlier this year, the e-commerce space for baby care saw a round of consolidation, with Hoopos.com merging with BabyOye.com.
Mukul Arora, vice-president, SAIF Partners India, says Firstcry's competitive edge is its mix of click-and-brick model, with a focus on Tier-II and -III towns and a wide assortment of products and a right last-mile delivery model. Sales from small towns - through the website and stores - account for half the company's revenues. While its stores follow a franchisee model, each store is branded Firstcry.com. Maheshwari says the company had opened stores in small towns to help consumers overcome inhibitions about shopping online. It plans to double the number of its stores by the end of 2014.
Firstcry follows an inventory-based model, shipping products across the country from four warehouses in Pune, Delhi, Bangalore and Kolkata. Maheshwari expects the company's business to turn cash-flow positive by 2014-15, with gross sales of about Rs 400 crore. At the end of 2012-13, revenue stood at about Rs 100 crore.
Getting the back-end right
This is 39-year-old Maheshwari's second e-commerce venture. In 2000, he founded Brainvisa Technologies, an e-learning company. In 2007, he sold the company to a US-based group. Subsequently, Maheshwari and Saha kick-started BrainBees Solutions, which owns Firstcry.com and Goodlife.com, with seed capital of Rs 2.5 crore, raised from personal resources and friends. Six months after the venture came about, SAIF Partners put in $4 million of private equity capital. In February 2012, existing investors teamed up with IDG Ventures to raise another $14 million.
From the beginning, Maheshwari and Saha have focused on keeping the cash-burn low. An in-house developed point-of-sale IT system helps track each sale at stores or through the portal. It is estimated this saves at least Rs 1 crore a year in subscription fees to third-party service providers.
To plug cash-burn in the cash-on-delivery service, an automated email or telephone call is made to each customer who places an order online. Only after the customer confirms the order is the product dispatched.
Customer engagement has been high on the agenda through extensive use of social media, discount coupons for repeat buys, assured savings through subscription services, etc. Firstcry adopted a private label strategy early, and this helped improve margins.
The sister sibling portal, Goodlife.com, is part of the customer retention strategy. Currently, about 30 per cent of Goodlife customers are from Firstcry.
Manik Arora, managing director, IDG Ventures India, feels replicating the strong success of Firstcry in new categories would be challenging. Maheshwari, however, says leveraging the existing logistical and technology back-end would help reduce overhead costs.
"As the company scales rapidly, the challenge would be maintaining service quality, as logistics become more complex," says Epiphany Ventures' Saraf. Though Firstcry is the market leader in a niche category, Saraf cautions, "This is a marathon, not a sprint, and there are many more milestones awaiting them."
