Online marketplace Shopclues has been through a lot of trouble lately. It’s founder & chief executive officer, Sandeep Aggarwal, was charged by the US regulators on insider trading and a lot of bad press followed. All this hasn’t taken a toll on the company’s performance and the worst is behind them, says Sanjay Sethi, the new CEO of Shopclues. “We are now profitable at a gross level and have met all our targets,” Sethi said in an interview. Edited Excerpts.
What progress have you made since replacing Sandeep as the CEO?
What happened was very unfortunate. None of it was expected. Shopclues came out stronger than before. When something like this happens, organizations fall apart. But we came together and we’ve exceeded most of our goals.
What were these goals you were chasing?
Our focus was to be the place for value and selection for Indian consumers. We are looking at it from two points. One is hyper growth and second is fundamentals. We are doing well on both fronts. With fundamentals, we met our profitability goals 3 months in advance. In growth, with more than 31,000 merchants, we are now the largest merchant base. We’ve beaten our targets for gross merchandise sales. We sold more than 3 million units in the calendar year. We will meet our goals for Rs 350 cr gross merchandise sales this year.
When will you cross Rs 350 cr in GMV?
By the end of this financial year.
When did you become profitable?
In a marketplace context, we don’t hold any inventory. So on a transaction basis, we are margin positive. Once you get here, getting to operating profitability is a matter of scale and time.
So on a net basis, you are losing money.
Yes. Basically, on an operating basis, we are able to recover all our fixed costs and some more. We will become cash flow positive by 2016.
How important is it for you to become cash flow positive? Do you find it difficult to raise funds?
It is not about pressures of the current situation. It is about demonstrating that growth and profitability are not mutually exclusive. Our focus on profitability goes back 18 months ago. We have not disclosed where we are in our series C. We are comfortably capitalized right now. For the right business model and right opportunity, there is no dearth of money in the market. We feel very secure about our differentiation.
How big is your team right now?
We are about 450 employees now.
Rhe recent events including the charges on Sandeep, must have had an impact on your fund raising activities?
Five of us came together as a company and it was never a one man show. Of course you have to have a face to the company. Right now it is me. But I’m not the company. I’m supported by a capable team. It happened 6 months ago. But all of the team is very senior and has lot of operating experience in marketplaces. Shopclues did not miss a beat.
What is the differentiation that you have built?
Over 65% of our business comes from non electronics category. 75% of business comes from 3rd party brands. In the US, top 5 brands of phones have about 98% of the market share. In India, they will probably not be close to 50% of the market share. So there is a need to be a wider range of sellers. Apparels have even more diversity. We are a play on selection and value. Nearly a third of our business comes from tier 3 cities.