Mukesh Bansal, CEO at fashion retailer Myntra.com, is eyeing the 'single largest fashion retailer' tag by 2015. He spoke with BT's Taslima Khan on the plans to differentiate through private labels, getting into the kids wear segment and what has worked well for his company so far:
Q. What is the tech team like at Myntra?
A. There are almost a hundred people now. Most are engineers from big companies such as Google, Amazon and Microsoft. Our Chief Technology and Product Officer (CTO) is Shamik Sharma, who earlier had a senior role at Yahoo! Shopping in the US. A lot of things at Myntra-the front end, personalisation elements, strong mobile presence and the backend, which includes warehouse management, logistics management, customer relationship management (CRM) systems and vendor management-are custom developed and these systems are tightly integrated with each other. Not many ecommerce companies have invested a lot in technology. Many are using outsourced packaged software, which has challenges in terms of scaling up.
Q. What is your tech team building at present?
A. As far as tech is concerned, personalisation and analytics engine are the big focus areas for us. We are building tech-enabled features that can make fashion shopping easier. We are building further on the virtual wardrobe, matching recommendations, etc., as well as offering a strong social experience in shopping. In offline shopping, you shop and only the next day do other people notice it. But for an online purchase, you can collect feedback, even before a purchase.
Q. What sort of acquisitions has Myntra done so far?
A. While all our broader core technology is home-grown, last year, we acquired a US-based company Fitiquette, which has a very specialised technology for online fitting solutions. In January last year, we also acquired Sher Singh to accelerate our private brands business.
Q. Private label or brands? Which one is going to have a bigger play now?
A. Private label is going to be much bigger, but our brands business is growing as well. In the longer term, private brands will be 35 to 40 per cent of our business in terms of revenues (from about 18 per cent currently), while third-party brands will be more than 60 per cent of our business. That's the balance we are trying to achieve, which will take two to three years.
Q. Tell us more about your private label business.
A. We have an in-house design team which looks at the current fashion trends globally. They come up with the initial concept and design the whole thing which then goes into manufacturing. We see a huge opportunity in building brands for different segments. We have been building separate brands such as Roadster (jeans and casual wear), DressBerry (woman western) and Anouk (ethnic wear), which we are marketing big time with Bollywood celebrities. There is also another one called HRX for which we have tied up with Hrithik Roshan as a brand ambassador. At about 60 per cent, margins are also much better with our own brands as opposed to 35 to 40 per cent from third-party brands.
At the same time, cost to the consumer is cheaper by at least 20 to 25 per cent. So, DressBerry competes with 'W' and Anouk competes with Biba. We are approaching private labels very very seriously because they give us a strong differentiator. Success will depend on how strong our design team is. There is an art to creating a brand. It is not just about putting a label. A brand needs to have a personality, it has to stand for something.
Q. How else will Myntra be different?
A. Apart from private brands, we also differentiate strongly on overall fashion content and imagery. If you go to Myntra versus Jabong, you will find a lot of relevant content and imagery, i.e., how-to videos, trend videos, look books, celebrity interviews, etc. Fashion is a very impulse-driven purchase.
There is no urgency for buying. So, you need to make an emotional connect by building content around fashion. We have a team of fashion writers (coming from fashion journalism background), stylists, who develop content on how to put together a look, and photographers, who continue to churn out more content.
We are hiring more people in this team. It is about merging a fashion magazine experience with retail. UK-based online retailer ASOS also works on similar lines. They own one of the largest circulating fashion magazines in UK, which has a print version also. Usual fashion magazines don't have all the content that is relevant to the consumer. Most of it goes over the consumer's head. We are trying to create content that is relevant for making a purchase.
Q. What is your total number of stock keeping units (SKUs), number of orders shipped per day?
A. We have about 700 brands now and about 50,000 products in our catalogue. On an average, we are processing about 15,000 orders a day with about 30,000 products a day, which can go as high as 25,000 orders on peak days. Overall, we are doing about Rs 100 crore in revenues per month now. That is the money that the consumer is paying us after all the discounts, etc.
Q. Is fashion as a category doing well on mobile?
A. Currently, about 20 per cent of our business is from mobile. A year from now, it will be in the 30 to 35 per cent range.
Q. How does Myntra go about its delivery?
A. We have our own delivery, Myntra Logistics, in 30 cities. Unlike Flipkart , Myntra does not want to get into the logistics business, facilitating logistics for others. Our intention is only to improve customer experience and command better costs. We don't want to go into 200 cities with our own logistics, but only the top 50 cities, with a population of five lakh and above, which we will cover by the end of this year. Through third-party logistics providers, we are delivering across 400 cities all over India.
Q. You are focusing big on personalisation through analytics. How?
A. We collect all the data about all interactions happening on Myntra. Then we leverage the data for almost everything like what banners you see, what products you see, etc. Even the mailers and coupons you get are personalised. People get offers for the brands they are interested in. So, if someone likes Nike, he will get an offer from Nike, instead of carpet bombing everyone with the same offer. The idea is that Myntra should be like "My own personal fashion store". Myntra knows what my taste in fashion is and what my wardrobe looks like.
Q. What type of shopping volumes do you need to have to predict something like this?
A. I think one has to come up and shop at least five times for this.
Q. What is your cost of acquisition per customer now?
A. That's about Rs 300. That was about Rs 1,000 18 months back. Over the last one year, the cost of customer acquisition for us has fallen dramatically. One reason is that the brand is established very strongly. A lot of our traffic is free traffic now. Either people come to Myntra directly or through organic search, i.e., they are searching for Nike shoes and the search directs them to Myntra.
Q. You claim to grow bigger than all offline fashion stores taken together, by when?
A. By 2015. We are doing Rs 100 crore a month, which means a Rs 1,200-crore run rate. Shoppers Stop and Lifestyle taken together are about Rs 2,500 crore in terms of annual revenues. Our business plan is to more than double in the next 12 months. By next January, we should be in the Rs 200 crore to Rs 250 crore monthly range.
Q. What is the key difference between fashion and electronics, another category that is doing well online?
A. The major difference between fashion and electronics is that while electronics is dominated by brands, fashion is dominated by local unbranded players. But fashion is undergoing massive transformation now. People's wardrobes are changing, even in smaller towns where there is more awareness. People are segregating their wardrobes in terms of what to wear on what occasions.
Q.Within fashion, which are the categories you are staying away from?
A. We are staying away from value fashion items which range between Rs 200 and Rs 600. That's where unit economics is very challenging and also dilutes our position as a fashion destination.
So, we stay away from footwear brands such as Lakhani or Rupani. We have also stayed away from kids wear so far because unit economics can be a challenge. There is also the issue of standardisation in sizes. If you see offline, no one has done a good job in kids wear retail. So, Gini & Jony and Lilliput have fizzled out. But now, we are planning to get into kids wear through our private brand by July or so.
Q. How do you handle returns, which are high in general with fashion as a category? Of the total number of products returned, what percentage does actually get converted into actual sales?
A. Yeah, that's true. The return rate on the total number of items shipped is generally 15 per cent. This rate has been constant for sometime. About half of this is in cash-on-delivery shipments. The other half of the returns is due to size or colour issues. About 90 per cent of the returns convert into sales, because half of the products come to us in an unopened state (cash on delivery returns).
Q. Where are the $125 million (funds raised so far) going?
A. By end of 2016, we want to be at a billion-dollar GMV (gross merchandise value). That will be Rs 500 crore a month. So, we see 5X growth over the next three years. That is the lighthouse goal for us. A lot of the money raised will go into building technology, warehouses and supply chain and building the Myntra brand. Supply chain and logistics make up for the biggest cost, followed by investments in brand building, which is followed by technology.
Q. What is Myntra's leadership like?
A. We started with three more people initially, but two of them moved on in 2010. Ashutosh Lawania (Co-founder of Myntra, who now heads Digital Marketing) is the only one who has stayed on. But in the last few years, we have been able to build a pretty strong professional team. Prasad Kompalli heads our strategy and analytics team (he was earlier with SAP Labs). We have Ganesh Subramanian (now Chief Operating officer at Myntra, earlier at Bharti Walmart). We have Shamik Sharma as the CTO (headed engineering for various start-ups and also Yahoo! Shopping). Vikas Ahuja has joined us as Head of Marketing (earlier at Nestle).
Q. What have been Myntra's biggest milestones so far?
A. First, the pivot from personalisation to fashion was a big one. Personalisation was a very niche business and we were eyeing a larger ecommerce opportunity in fashion. When we entered fashion, there were players such as Yebhi and Fashionandyou, who were more on the liquidation play. But we got into the current season full catalogue play. I think that was an important call that put us on the map. In 2010, we got in Tiger Global as a strategic investor. They have got us very strategic inputs on what is happening in ecommerce globally. The decision to venture into private label in 2012 was also an important one because that is a good differentiation strategy and also improved the health of our business model.
Q. There was some speculation about Flipkart acquiring Myntra.
A. Our goal is to reach a billion-dollar GMV, go public, etc. The Flipkart speculation is because we share two common investors with a large shareholding and also common board members from Tiger and Accel (Lee Fixel & Subrata Mitra respectively). Speculations flare up easily because of the common board dynamics. Also, because we are actively exploring using Flipkart's services like ekart or its payment gateway PayZippy. Sometime, we may list our private labels on the Flipkart Marketplace.
Q. What's your take on 100 per cent private label players, such as Zovi?
A. I think not only Zovi, but other such companies like Yepme or Inkfruit have lost steam. I think they were trying to do too much at the same time-building a private brand and an online retail platform together at the same time. Whereas what worked for us was that we started with big brands such as Nike and Puma to establish trust. Then once we had critical mass, we launched our private label.
Q. Tell us about your personal journey.
A. I grew up in Haridwar. My parents have moved to Bangalore now. My father worked for Bharat Heavy Electricals Ltd (BHEL). Ancestrally, my family used to be in apparel trade. Then my father changed that by getting into government service. I did my graduation in Computer Science from IIT Kanpur in 1997. Then spent 10 years in the US, most of the time, in the Bay area working with early start-ups, first one being Nextag and eWanted in engineering and product management roles. In 2007 I moved back to India to start my own venture. I have bought the apparel trade back to the family (laughs).