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Billion Dollar Unicorns: ShopClues in India Shows Unicorn Characteristics

Posted on Wednesday, Feb 18th 2015

According to a recent study, active Internet users in India have grown from 21 million in 2006 to over 243 million by June 2014. And the trend is catching faster within the mobile segment. India had an impressive 185 million active mobile device Internet users last year. The growth of Internet penetration is leading to significant growth in e-commerce in the country as well. The e-commerce market in the country is estimated to have grown to $10 billion-$16 billion in 2014 and is projected to grow to $60 billion-$80 billion by the year 2020. The trend is helping set the stage for several potential Billion Dollar Unicorn club members in India as well.

ShopClues’ Offerings

Gurgaon, India-based ShopClues was founded in the Silicon Valley by Washington University alumnus Sandeep Aggarwal, eBay’s former Global Product Head Sanjay Sethi, and IIT alumnus Radhika Agarwal.

ShopClues was set up in 2011 when their core team came together to establish the country’s first managed marketplace e-commerce company. At that time, eBay was the only online marketplace in India. But, eBay was an open marketplace while ShopClues lets retailers display their product catalogues to ShopClues’ customer base while ensuring some controls over what is listed for sale and who lists them. For instance, ShopClues does not let individual sellers list their products and only merchants can sell through their site. Additionally, it offers the merchants access to business management and marketing tools along with analytics. To protect sellers, ShopClues ensures that the transaction payment is transferred to the seller only after the buyer confirms satisfactory delivery of the product.

ShopClues focuses on the fragmented and unstructured retail in the country, which is dominated by smaller merchants in Tier II and Tier III cities. ShopClues believes that these segments offer higher product margins. These markets account for nearly 70% of their annual revenues. It is these practices that have helped ShopClues become the fifth largest e-commerce player in India. They have more than 40 million monthly visitors conducting over 1.5 million monthly transactions on their site. ShopClues is targeting to grow to 10 million sellers and 1 billion products within the next three years.

ShopClues’ Financials

ShopClues does not disclose their financials. They earn revenues by charging their merchants a service fee for products sold through their website. The sales commission ranges from 4% on goods like memory cards and thumb drives to 17% on fragrances and jewelry. According to recent reports, the Gross Merchandise Value on transactions on their website grew 600% in 2013. They are targeting to report a GMV of $325 million for fiscal 2014. They are not yet profitable, but since 2013, have become gross margin positive and expect to achieve net profitability by the end of fiscal 2015.

Unlike other e-commerce players, they are known for their cost conscious structure. ShopClues does not host any inventory and also uses their advertising money rather frugally. They use social media, email marketing, and targeted outdoor marketing to attract buyers, thus maintaining strict control over advertising spend.

ShopClues is venture funded so far. They have raised $116.3 million in funding from investors including Tiger Global Management, Nexus Venture Partners, Helion Venture Partners, and LionBird. They were formed using the $250,000 seed fund that the founders had put in. They had their last round of funding last month when they raised $100 million from Tiger Global Management at a valuation of $350 million. They are targeting to go public by the year 2016. ShopClues may still be a far cry from the billion dollar valuation, but it is surely flying fast to reach that status. And the industry trends are in their favor to help them reach the elusive destination.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here.  The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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