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What is ShopClues’ New Strategy?

Posted on Monday, Apr 1st 2019

Gurugram-based e-commerce marketplace ShopClues has tightened its reins and trimmed its losses. In October 2018, ShopClues reportedly broke even at the unit-economics level.

ShopClues’ Financials

Founded in 2011, ShopClues is more of an online flea market that focuses on the fragmented and unstructured retail in the smaller Tier II and Tier III cities. It has over 350,000 merchants and 28,000,000 products on its platform. Read our earlier coverage: Billion Dollar Unicorns: Indian Small Town Marketplace ShopClues Looks Shaky

For fiscal 2018, ShopClues reported a 44% growth in revenue to INR 271.29 crore ($37.42 million). Net losses narrowed by 40% to INR 208.14 crore ($28.17 million).

Total expenses for the year were down 10% to $66.41 million with employee benefit expenses declining 8% to $15.32 million and advertising promotional expenses declining 9.65% to $17.93 million.

Overall, ShopClues has raised $255.9 million in funding from investors including GIC, Tiger Global Management, Nexus Venture Partners, Helion Venture Partners, LionBird, Unilazer Ventures, and Matrix Partners India. Last year, it raised $16 million in August and $1 million in February at an undisclosed valuation. In January 2016, the company raised $100 million in a Series E at a valuation of $1.1 billion. A previous Series D round of funding for $100 million in January 2015 valued them at $350 million.

ShopClues’ New Strategy

ShopClues has been focusing on categories where the margins could be optimized. It has stayed away from high-competition and low-margin categories like branded smartphones, branded fashion, and large appliances. It has rather focused on women’s ethnic fashion, kitchenware, costume jewelry, and mobile and laptop accessories.

About 30% of ShopClues’ orders are sourced from China, which is known to offer very high margins. It lists sellers from China on its platform and partners with Chinese merchants and manufacturers. It has a dedicated team that meets the merchants there to understand what is selling on the platform and what isn’t.

Another important part of its strategy is its exclusive private labels that account for about 10% of its overall business. Its labels include Homeberry for home furnishings, Meia for fashion, DigiMate for electronics, Code Yellow for women’s western fashion, and 29K for men’s fashion accessories.

As a result of the restructuring, ShopClues has reduced its headcount by over 20% to 830.

ShopClues is looking at other monetization channels apart from its e-commerce business. The SmartOps enterprise solution optimizes operations for e-commerce such as shipping, cataloging, merchandising and marketing to achieve scale at the best ROI. It offers dashboards to monitor key metrics, fulfillment operations, and customer support. It uses AI and machine learning to optimize digital operations and for end-to-end process management. Its clients include brands such as The Mom Co, The Man Company, Hangout Store, CyanKart, and Vplak.

ShopClues currently generates about 20% of its revenue from technological and operational services. SmartOps processes over two million orders a month and is looking at an annualized revenue run rate of INR 20 crore ($2.8 million).

I like the new ShopClues’ strategy. We have covered a lot of e-commerce case studies and what is common to most successes, especially to counter deep-pocketed giants like Amazon, is niche businesses and private labels. They need a loyal customer base that would keep coming back to them. The SmartOps business is a smart move to offset losses. I’d like to see a mix of 30% private label, and 30% B-to-B in the upcoming quarters.

Overall, ShopClues is focusing on its unit economics, which is the way to go to build any successful venture.

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