With frugality and deep data analysis, ShopClues claims to become profitable in 2013 [first for an ecommerce company?]

While early evangelizers of ecommerce space in India are still wary to project the turnaround time for real profitability and seems continue to be in red (negative profit), 10 months old ShopClues.com claims confidently to attain profitability by Q4-CY2013, and importantly the company also promises to show operating margin positive. As far as traction is concerned, over the past 10 months ShopClues has grown 50x and 100x respectively in Alexa Ranking and Facebook community Size.

The company backed by international investors claims to make positive gross margin in every transaction and attributes frugality and data analysis for achieving more from less money.

Unlike other ecommerce players, ShopClues hardly spends money on Google “as it does not offer the kind of ROI ShopClues looks for.” However, Sandeep Aggarwal, CEO & co- founder believes that social media offers tremendous and compelling ROI and plans to increase its budgets for social media for future growth and continues to limit spend with Google.

In an interview with NextBigWhat.com, Aggarwal spoke on various aspects ranging from secret sauce to become profitable, how to attain 22% traffic conversion from Facebook, problem of inventory led ecommerce business model and outlook of ecommerce in India in 2013. Edited excerpts:

NBW: During an earlier interaction with Pluggd.in, you have said that Shopclues would become the first ecommerce company in India to turn profitable. Please elaborate and corroborate facts behind this claim and how could you contemplate so confidently?

SA: The inventory led E-Commerce companies that is most of the India E-Commerce are spending 55% in Cost of Goods Sold (COGS) plus Opex to make 25% in gross margin and that is not changing until 2015-16.   And most of the time these inventory led E-Commerce companies  have negative gross margin.

But ShopClues makes positive gross margin in every transaction and beyond that combination of our business model and culture of frugality  & data driven  result into us achieving more from less money.    By Q4-CY2013, we will be not only contribution margin positive but also operating margin positive. Unlike other E-Commerce companies, we also have multiple revenue sources and they all are sizing up. As of today, we are not profitable but we think we incur the least amount of negative margins.

NBW: Share the growth pattern of Shopclues since its inception and how fast the company has grown over the past 6 months in terms of traffic, revenue, orders, number of store registrations.

SA: We do not disclose our revenue or orders but in our view, we are among the top 6-7 E-Commerce companies in India on both of those parameters. What is more important is that we have reached among the top 6-7 E-Commerce companies in less than 10 months (vs. 3 years by our competition) and at much lower cost vs. our competitors.  In terms of traffic, Alex Ranking and Facebook community Size etc. we have seen 50x to 100x growth from January until now.

NBW: While ShopClues claim to have 22% traffic conversion from Facebook (which is 3x from standard (7-8%) conversion rate by other ecommerce players), some say it’s not a right number as 22% conversion rate from Facebook is too lofty. So, how come ShopClues manages to get such traffic conversion from Facebook?

SA: I am not going to comment on what other feel but after direct traffic, the single biggest source of traffic for us is social media.  We hardly spend money on Google as it does not offer the kind of ROI we are looking for and Google allows competitors to bid for our brand names etc.  For us social media offers great ROI and compelling ROI. We plan to increase our budgets for social media for future growth and continue to limit spend with Google.  In terms of offline, we do very limited ad spend there.

NBW: As an analyst – how do you see the outlook of ecommerce in India in 2013?

SA: E-Commerce in 2012 remains among the fastest growing industries globally and I do not see that changing in 2013 either.   Overall ecosystem is strengthening and everyone in the ecosystem understands their role more responsibly.  Given that retail footprint in India has its own structural constraint, I believe E-Commerce remains the most exciting industry in India for next several years to come. In terms of evolution of market, I truly believe that someone offering large catalog and low prices will win combined with great service.

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