During the dotcom heydays, two companies had caught my eye: online diamond jewelry retailer BlueNile and online gift retailer RedEnvelope.
BlueNile had keyed in on a simple insight: men shop for engagement rings, and the psychology of this shopping experience is informational as opposed to experiential. In other words, men research the complex topic of diamond selection based on cut, color, clarity, carat, shape, and price before they make a purchase decision. The company focused on the demographic of awkward, geeky men shopping for diamond jewelry, and built a $300 million business, surviving the dotcom meltdown with flourish.
In parallel, another company, RedEnvelope, zeroed in on the insight that gift-giving is a complex process, and tried to simplify it. Mike Moritz, the legendary venture capitalist from Sequoia Capital, bought into the concept and invested in the company. The company built up a significant revenue stream of over $100 million, but it was poorly run. Eventually, in 2008, it went out of business.
I looked at RedEnvelope in 2006 as a leverage buy-out opportunity. Much of what we chose to do with Oishi was based on that analysis, and a fundamental belief that the gift category was wide open and building a strong Internet brand would be viable.
There were two problems I saw in RedEnvelope: Brand Positioning and Merchandising. In Oishi, we addressed both.
Oishi was positioned as a high-end online gift retailer with a unique portfolio of merchandise catering to busy, professional women. We served as Personal Shoppers for this demographic, saving one of their most critical scarce resources: time. These women, however, were also style- and taste-conscious, and wanted to give things that were personal, meaningful, and differentiated.
For our core audience, gift-giving occasions were many. There were the usual holidays, birthdays, weddings, Mother’s Day, anniversaries, but then there were also day-to-day occasions. A dinner party at a friend’s house, to which people would normally bring wine, flowers, or chocolate. Our customers wanted to bring something different – something special.
The Oishi website kept track of all those for whom customers purchased gifts and what they purchased, making sure a gift was never repeated. It also had a software personalization engine which tracked the tastes and preferences of (a) the women giving the gifts and (b) those receiving them.
We aligned our merchandising strategy and supply chain to that brand positioning.
A long time ago, my father worked with the Ramakrishna Mission on a slum rehabilitation project in Calcutta called Rambagan. The members of this community had developed good craftsmanship with bamboo and cane products. However, as we experienced in Urja, they lacked in design and quality standards.
Later, at a Santa Fe art gallery, I saw stunningly beautiful cane crafts – baskets and sculptures – by a Japanese artist – at astronomical prices.
I have been a fan of Japanese design and craftsmanship forever, so I connected these two data points, and hired a design team from Japan to work with artisan communities in India and produce high quality, beautifully-designed gift products.
We brought designers who specialized not only in bamboo work, but also in woodwork, textiles, ceramics, jewelry, and paper.
We paired them with artisans in South India who worked with sandalwood, textile artisans in Gujarat, jewelry artisans in Rajasthan, paper artisans in Pondicherry, sea-shell artisans in Orissa, candle artisans in Calcutta.
Products included scarves, table linen, cushion covers, baskets, jewelry boxes, jewelry, candles, incense, oil lamps, photo albums, writing journals, shawls, kaftans, sleepwear, even sculptures and artifacts. Price-points varied between $20-$200, with an average gross margin of 67%. Packaging was exquisite, also drawing from the work of our paper artisans.
One final piece of financial engineering gave us excellent leverage. We structured deals with several of India’s top micro finance institutions – Bandhan, SEWA Bank, SKS – such that they were willing to lend money to our artisans as long as we served as a marketing channel for their products.
We were happy to provide such guarantee as long as the artisans were willing to work with our designers, and produce merchandise that we thought would sell to a sophisticated American audience.
The delighted Oishi customers talked about their gifts at dinner parties and brought us new customers. Our customer acquisition cost was low and retention was high. With each customer, we did an average of 20 transactions per year. At a $40 average transaction size, our total business volume per customer was $800.
Within five years, we grew to $250 million. In 2020, Oishi is a billion-dollar enterprise. Our segments have broadened. Our suppliers have now become international. We have repeated the same supply chain model in Africa, Latin America, and South East Asia, but have continued to work with Japanese designers to provide a certain clarity of vision and brand identity.
We succeeded where RedEnvelope had failed.
A call to Indian entrepreneurs everywhere, Vision India 2020 challenges and inspires readers to build the future now. In this “futuristic retrospective,” author Sramana Mitra shows how over the next decade, start-up companies in India could be turned into billion-dollar enterprises. Vision India 2020, which encompasses a wide range of sectors from technology to infrastructure, healthcare to education, environmental issues to entertainment, proves how even the most sizeable problems can be solved by exercising bold, ambitious measures. Renowned in the business world, author Sramana Mitra conceived Vision India 2020 from her years of experience as a Silicon Valley strategy consultant and entrepreneur. Well aware of the challenges facing today’s aspiring entrepreneurs, Mitra provides strategies, business models, references, and comparables as a guide to help entrepreneurs manifest their own world-changing ideas.
This segment is a part in the series : Vision India 2020