Niche e-commerce firms find venture capital favour

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SummaryMajor deals in online niche category include auto marketplace CarDekho.com & eyewear retailer Lenskart.

Srivatsa, who is well funded for the next two years.

The furniture website, which was launched mid last year, at present, is seeing a 10-15% month on month growth in transaction.

Pune-based TastyKhana, which started in October 2007 and clocked sales of R2.5 crore in 2012, is aiming to cross a turnover of R10 crore by the end of this year. “Niche players always have their own standing in the market. Once you distinguish yourself on services and quality standards people would always want to transact from an 'expert' than a have it all player,” says Shachin Bharadwaj, CEO & Founder, TastyKhana.com.

Even though most online retailers have not managed to be profitable as they are struggling to grow, it hasn’t stopped investors from cherrypicking opportunities and parking their funds in single product and services companies lured by higher margins and faster growth rate to breakeven. It is also a fact that there are not many attractive sectors where investors find good returns.

“The niche companies usually have higher margins. While the initial customer acquisition is as costly as a multi-product company, the niche companies tend to achieve break-even at a customer level is faster as the brand effect and product differentiation gives them a stickiness effect. Their products also cannot be compared with other sites and thus do not get commoditised and lower price is not a factor,” says Prashanth Prakash, partner, Accel Partners India, the venture capital firm which has backed Facebook and Groupon, and invested about $5 million in online jewellery store BlueStone.com last year.

“Niche e-commerce must be categories that allow you to go deep. Such a category will not be a great success for big players as it will be just another icon or tab for them and is not their focus area,” notes Gaurav Singh Kushwaha, CEO and founder, BlueStone.com, which was started in April 2012 and has managed to grow at more than three times over the past year, is expecting R35-40 crore in 2013-14.

The e-commerce industry, which is estimated at about $2.5 billion, growing at 40-50% annually, forms 6-7% of the country's organised retail market. According to data available with management consulting firm Technopak, e-commerce is projected to grow at a CAGR of 45% to reach $200 billion by 2020. Currently, the travel transactions account for about 80% of all online sales in India.

Pragya Singh, associate

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