The biggest challenge online retailers face in India is figuring out how to expand their reach to far-flung areas, where the network for delivering merchandise severely lags the demand for goods, says Jabong?s founder and chief executive Arun Chandra Mohan. In an interview with Aveek Datta, Mohan says 65% of Jabong?s sales come from non-metropolitan Indian cities, and the e-tailer was figuring out how to expand reach by tying up with agencies like India Post. He also explains why Indian e-commerce isn?t overvalued, as perceived. Edited excerpts
How is Jabong doing operationally and what will be the company?s focus going forward?
We realised a gross merchandise value (value of goods sold) of $35 million in July and have been growing 10-12% month-on-month over the last six months. We see ourselves as becoming the premium fashion destination in the country and are focusing on a couple of key areas.
First, we plan to position our fashion merchandise in line with rapidly evolving consumer taste ? be it by introducing international brands like Selfridges and River Island, or developing our own private labels. We have a dedicated 15 member-team in London that is working on our private labels. We have hired the best of talent from brands like Asos and River Island and are focusing on two-three private labels we want to develop strongly.
Second, we are looking to expand reach. We service around 12,500 pin codes across India and even if we can expand this to 20,000 pin codes, it will be a big move for us.
We are also scaling up our warehousing capacity. We have around 150,000 square feet of leased warehouse space at present and we are doubling that capacity over the next 3-4 months.
What, according to you, is the biggest challenge facing online retailers in India?
The biggest challenge for online retailers in India is reach. The 12,500 pin codes we service is only a third of the country. Around 70-75% of Jabong?s business is fulfilled through its own logistics, with help from third party vendors. The postal system is not reliable yet. Scaling up that is the real big opportunity and that is why we are piloting with petrol stations and coffee shops to see if we can work out a delivery mechanism with them, whereby the customer can pick up the merchandise from these outlets at their convenience.
We have also had discussions with India Post about how we can service far-flung areas. But their tracking system is weak and we need to figure out how elements like cash-on-delivery and merchandise returns (around 10-12% of Jabong?s GMV is returned) will be sorted out. The idea is to offer the same quality of service to, say, a small village in Assam as in Mumbai. People in tier II and tier III cities are very mobile-savvy and around 65% of our sales comes from here, but I am not being able to address this opportunity fully due to lack of reach.
With the kind of investments that have been pouring into e-commerce ventures in India, do you think the sector is overvalued?
I don?t think e-commerce has been overvalued by investors. We need to take a broader view of the value e-commerce brings to Indian retail. In the US and Europe, you have strong physical retail infrastructure wherever you go. In India, we don?t have more than 10 malls matching the size and scale of the average mall that you find in the US. Real estate developers will tell you that the mall pipeline in India is not as strong as it needs to be. Online retail fills that void. The situation is similar to what it was in China where retail infrastructure wasn?t great and that is what propelled e-commerce in China. E-commerce in emerging markets will be far more valuable as it is not just another sales channel, but an integral part of the equation, and that is why the valuations here need to be much higher.
Are you concerned about rising competition in the space with the entry of Amazon and rivals like Flipkart and Myntra joining hands?
Players like Myntra were there five years back, they were there when we entered the market, and they will continue to be there. It doesn?t change our competitive position. It will eventually come down to differentiation in the assortment of offerings you provide. We have brands like River Island, Selfridges and Dorothy Bridges, which no one else has.
Have you achieved cash break-even? Are you looking to raise fresh funds?
Jabong is less than two-and-a-half years old. We haven?t achieved cash break-even yet. We are still in the investment and brand building phase, and on track to achieve the milestones we have set for ourselves. We raised around $130 million in March and are well-capitalised to fund our growth.