Starting an e-commerce venture was nothing less than a rage amongst Indian entrepreneurs during the 2012-15 period. But, soon the space got crowded and things turned difficult for those who were eying the sector.
The following years were marred by fighting between India’s biggest (Flipkart) and world’s biggest (Amazon) to emerge as a market leader, besides the number 3 (Snapdeal) was crumbling under the price-war waged by formers.
Amidst the troubled times, pundits were busy writing off the sector, investment pipeline was shrinking, and in general, the great Indian startup story seemed like a bubble.
But ex-Flipsters (as Flipkart employees are referred internally) – Khushnud Khan and Rishi Raj had an idea which they believed had space and potential to disrupt and achieve scale at the same time. The entrepreneurial ambition made the duo to give up their well-paying jobs with India’s biggest e-commerce company, in January last year.
About a year ago, the duo started out to build a vertical commerce platform for home appliances and electronics, aimed at solving the problems of discovery, quality of selection and after-sales service.
“These are still some of the key problems associated with the category that all popular e-commerce websites have ignored,” says Khushnud. Such pain-points triggered the duo to start Arzooo in Bengaluru in July 2017.
Arzooo is a real-time reverse auction-based commerce platform for high value branded goods such as refrigerator, air conditions, and televisions. It claims to offer prices better than Amazon and Flipkart in most cases.
“Because of our right partnerships and Innovative business model, we were not just competitive with our prices, but were able to offer prices better than large horizontal e-commerce companies,” adds Khushnud.
Khushnud has spent over 10 years working with brands like Tata Sky, IFB, and Videocon. Previously, he was with Flipkart as an associate director where he started large appliances category.
Rishi is an IIT-Kharagpur alumnus and has spent two years with the SoftBank-backed company in the product management role. He worked on two hyperlocal platforms within the company and scaled them up.
Why reverse auction model?
Unlike in low ticket size verticals such as fashion and grocery, reverse auction model works well with all high value branded goods like home appliances, mobiles, IT and gaming products.
“We have started with appliances category for now, as it’s still 97 per cent offline. Besides, there is a big scope to disrupt the industry through our real-time reverse auction model,” explains Rishi.
The company would expand to other categories too as it scales further.
Serving 1,000 customers with Rs 5 million monthly run-rate
So far, the company claims to serve more than 1,000 customers with an average ticket size of Rs 20,000, beating Flipkart and Amazon prices more than 3,000 times. “Our current monthly run rate is Rs 5 million,” says Rishi.
TV, Washing machine, refrigerators are the highest selling categories for Arzooo. It also claims to have unit economics positive on the operational level.
The company has been operational in Bengaluru for nearly seven months. “So far, we have done Rs 2 crore turnover for the same period,” mentions Rishi. It snaps up 5-8 per cent commission on each sale it makes. The company works on an asset-light model with no burn on warehousing or logistics.
Market opportunity, competition, and road ahead
At present, studies suggest that home electronics market is a $12 billion opportunity in India. “Our aim is to take up a major share and reached to a $500 million annual run rate target in the next three years,” adds Khushnud.
The biggest challenge is the perception that the currently online players give the best price for home appliances in the market. The appliance is an offline-driven market. The only way to disrupt this market is leveraging offline channels, and empowering consumers to bring down prices through unique business models such as Arzooo.
Arzooo competes with large horizontal players such as Amazon, Flipkart, ShopClues and vertically integrated startups such as Zefo focusing on appliances.
The company plans to disrupt high-value e-commerce purchases pan India. “We will expand in top 50 Indian cities across categories in the next three years,” concludes Rishi.