The Smile Group that incubates number of companies such as FashionandYou, DealsandYou, and Freecultr has been running into controversies for quite some time now. Over the past few months, the group has been questioned by bloggers and industry watchers on various aspects including departure of co-founders, key employees, huge pile-ups (dead inventory), work culture, acquisition of Urbantouch and so on.
To understand the group’s perspective on the sudden onslaught of controversies, we interviewed Harish Bahl, Founder & Group CEO, Smile Group. During the interaction, Bahl threw a candid light on the exit of Pearl Uppal, Gaurav Kacharu, the alleged orchestration of dummy warehouse to Sequoia Capital and future plans of FashionandYou.
About the warehouse fiasco: Bahl denied the claim completely and pointed out that if FashionandYou had fooled them in 2010 the same VC firm would not have funded the group’s online clothing brand Freecultr in 2012. Below are the excerpts of interaction:
Pi: Tell us about the acquisition of Urbantouch. Why did you acquire it? Did you raise funds for it?
Bahl: FashionandYou started with a flash sales model with 3-4 competitors in the market in 2010 and since then we have been the undisputed leader in the space. After taking the pole position in impulse buying with more than 70% transactions happening through women, we have decided to foray into ‘need driven’ segment for them.
And Urbantouch was the only ecommerce player in the market having more women shoppers than FashionandYou.
Following Pearl Uppal’s exit, we were also looking for new CEO, collectively, above reasons led the acquisition. No, we didn’t raise any fund for acquisition, we had enough funds to facilitate it.
Pi: There has been an exodus of co-founders & key employees from FashionandYou and Smile Group. After Pearl Uppal, Gaurav Kacharu left Dealsandyou, and we have also heard that VSSK Prasad (co-founder & Director B2B , bestylish) had left including Aneesh Nair (Group CTO ecommerce) at FnU. Why did these people depart from the Smile Group?
Surprisingly, I don’t see such massive attrition rate, so it would be unfair to term it as an exodus. Pearl Uppal’s exit as a CEO was her own decision and we mutually agreed to it. As far as departures of other employees are concerned, we had fired some of them owing to their inefficiencies and decision was taken with the consultation of board members. Hiring and firing of employee is a routine process in a start-up journey, if 5-10 % of employees depart (fire or willingly left) from group’s portfolio – isn’t an obvious thing?
However, from Pearl-Kacharu episode, we have learnt an important lesson not to hire a husband-wife combination in our group as it poses unique operational challenges.
I see the departure of some Smile Group’s employees was blown out of proportion in the media as a handful of disgruntled employees (mostly fired ones) have connived with the media and doctored a spurious work culture at the group’s portfolio companies. At the same time, if you compare the attrition rate at Smile’s incubator with other incubators in the country, I bet we have better retention rate than them. For example, after leading the first inning of entrepreneurship people like Manish Vij, Sandeep Singh, Deven Dharamdasani and Gopikaa Davar are playing their second inning with group’s new ventures.
Pi: According to some media reports, Fashionandyou is sitting on a huge dead inventory and pile ups. Your take on this. If there is such a pile up, how would FashionandYou sell it?
Bahl: FashionandYou follows a flash sales model where everyday new brands are being showcased on the website. And procurement of 80 % of products happens after collecting the orders from the members for any given day.
We hardly maintain 20 % inventory, especially on products, which are having great demand.
Thus, information about Fashionandyou sitting on pile ups or dead inventory is baseless and manipulated one.
Pi: Future plans? Is consolidation of brands on the cards?
Bahl: We want to maintain the position of being the largest fashion retailer for women and continue to wow consumers through great selection and a superior consumer experience. Certainly, technology and supply chain would be the major areas of focus. After our Urbantouch acquisition, we have ushered in a need driven model and we would be working hard to integrate it with FahionandYou.
Consolidation of brands across group’s portfolio is not possible as every company in the portfolio is being run independently with its own well defined vision.
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