Arzooo, the business-to-business (B2B) consumer electronics platform, has allocated $10 million, from its latest $70 million fundraising, to launch its B2C play by this festive season (around October-November), the company’s co-founder and CEO, Khushnud Khan told FE.
The platform enables smaller retailers to digitally showcase to their customers a more comprehensive catalogue of electronics, without having to hold any inventory, and works with them on a commission model. The company also earns from the arbitrage — or the price difference — it enjoys by placing bulk orders with brands.
Founded in 2018 by Khushnud Khan and Rishi Raj Rathore, the company so far has remained a B2B player and now looks to increase its income streams.
While the company did not comment on its operating margins, industry sources and analysts explained that a model like Arzooo’s typically has an overall net margin of about 6-8% and with the latest B2C play, those numbers can increase by about 15-20% in steady state.
The additional income should also help the company improve its financial health. According to the latest available results, in FY2021, Arzooo reported a loss of `18 crore, up 500% from the`3 crore it reported in FY20. While the company hasn’t finalised its FY22 numbers yet, Khan expected Arzooo’s operating revenue had jumped 400% from FY21’s `259 crore in FY22.
Through the B2C model, Khan was sure that retailers would be able to increase their conversion rates to 30-40% from the current 12-14% by leveraging the new digital storefronts. All the technology and market solutions that Arzooo will provide to its retailers will also marginally increase Arzooo’s customer acquisition cost (CAC) to around `50 from nearly 0 right now.
“Over the last years, we have been helping our retailer partners solve for supply, pricing and also helping with digital inventory and have done that for a large number of stores. Now, our latest venture will be a destination for customers to shop from digital storefronts. This essentially means different sellers will have separate interfaces on the same, new Arzooo portal. Retailers will always be at the centre of everything we do. Our latest venture will help retailers solve for their customer acquisition as they’re still largely dependent on physical footfalls and we want to dilute that by providing a new channel. We will be launching a new name and logo for that division soon,” Khushnud Khan said.
“The idea is to make each retailer a Reliance or a Croma, in fact, better than them with the help of technology to further their growth,” Khan added.
The company focuses on the largest segment in the electronics retail market. The space can be broadly divided into three: Large e-commerce players like Flipkart and Amazon hold about 17-20% of the market. Retail giants like Vijay Sales, Girias and Croma collectively account for roughly 20-25% of the industry while the smaller players usually spread out and fragmented, command about 55-60%.
Multiple industry players and analysts estimate the overall consumer electronics and durables category industry to be valued at over $60 billion, taking into consideration both offline and online channels and say the growth has been at double-digit rates.
Also working for Arzooo’s business model is its mix of online and physical sell points and boasting of about 10,000 stock keeping units (SKUs). “Key challenges in online purchasing of durables is a lack of support and touch/feel of the physical product. Offline purchasing while working great on assistance and physically reviewing of the products, is hampered by a lack of selection and exorbitant pricing,” analysts at RedSeer Consulting had said in a report.
“The consumer durable industry is mostly driven by general trade, accounting for 69% of the current market share by channel. Despite the growth in online channels, general trade will remain the biggest channel within durables- and will continue to remain so by 2025 as well,” they added.
At present, Arzooo has tied up with 30,000 retailers and plans to capture the entire 50,000 of them over the next few quarters, by also expanding to Northeast India, a region it has been absent in so far, Khan said.
While the latest B2C foray will initially focus on the southern and northern states of India, it will eventually expand to other cities. Khan’s Arzooo competes with new-age players like Udaan, Bikyai and Dukaan and legacy players like Reliance Digital which have similar models and offerings.
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