Business has to either make money or raise funding to stay afloat. While making money has not been a priority at all for e-commerce companies in India, raising capital is the only option left for covering mounting losses. Be it Flipkart, Amazon and many vertical focused e-commerce platforms, all have been losing money.
Moreover, their losses are being sponsored by venture capitals. But sometimes businesses turn off track to a level where financial backing doesn’t remain feasible. Since e-commerce companies inherently have a loss-making model, surviving on revenue is out of the question.
The above story has been playing out with an e-commerce Unicorn – ShopClues. The company has been going through a patchy ride for over a year. After raising a Rs 50 crore venture debt round, it barely managed to raise a million USD in February this year.
Presently, ShopClues is in talks with its backers Nexus and Tiger Global for a $5 million round to keep the operations running. “The ongoing talks are likely to fructify with above two investors,” said two sources aware of the conversation. The sources also emphasised that the company would fire about 60-80 per cent of its current of 600 workforce.
“It’s planning to be a 120-250 people team eventually and will ask rest to go,” added one of the above sources. Sources requested anonymity as they don’t want to jeopardize their ongoing relationship with the firm.
Meanwhile, in an email response, ShopClues has denied team shrinking plan and claimed to have a strength of 800 head counts.
Although, the Gurugram-based firm has fired about 350 employees across two tranches in the past 15 months. In May 2017, over 250 employees either resigned or were fired from ShopClues. Four months ago, in yet another round of layoff, the company laid off 50 employees.
Many senior employees including Nitin Kochhar and Raunak Raheja had moved out of the company in March this year.
Fast forward in July 2018, ShopClues’ head HR Babu Vittal had moved to contractual position (as a consultant) while Chief Financial Officer (CFO) Deepak Sharma has been exploring for a new role, as per above sources.
ShopClues has confirmed that Vittal is no more a full-time employee with the company owing to personal ambition while the company maintains that Sharma continues to be the CFO.
“The reason for me becoming a consultant is because I want to focus on realising my dream of creating something socially impactful in the field of education,” said Vittal via a company spokesperson.
While any fresh investor is reluctant to put in the capital in the struggling Unicorn, acquisition talks with eBay and Rakuten have also fallen. “ShopClues is left with only a few months’ worth of capital,” said the sources.
When asked – is ShopClues left with a limited runway, and eyeing a $5 million round from Nexus and Tiger? The spokesperson answered, “We do not comment on funding, however, the company is diligently working on its path to profitability.”
Ever since the beginning of the last calendar year, ShopClues’ volume (number of orders), as well as GMV, have been shrinking. “Presently, it barely manages to do 20,000 to 25,000 deliveries a day,” mention sources. Going forward, the company plans for a major pivot. According to the sources, it may go for a rejig.
“Circumstances are leading ShopClues to limit itself to a couple of verticals such as fashion and home decor. The larger plan in the offing is to become affiliate site for e-commerce,” outlined sources.
However, ShopClues has refuted the idea of any rejig. “ShopClues continues to remain a horizontal player in the unstructured categories,” said the spokesperson.
Sources also indicate that co-founder Sanjay Sethi and Radhika Ghai are looking for their replacement. “Sethi’s family is relocating to the US, and he’s likely to spend more time there. Management has started looking for suitable candidates to pass on the leadership baton,” added sources.
ShopClues denied this vehemently as well. “Our Co-Founders are very much based in India and are leading the business. Let me reiterate that such information is nothing but malicious lies,” said the spokesperson.
Conclusion: Game of horizontal e-commerce in India is like playing a test match. Unlike, action-packed shorter format ( i.e; T20 or ODIs), it demands class (long-term approach) and stamina (unlimited access to capital). Since ShopClues has failed to figure out either a sound business model or support of investors, its future seemingly appears painful.
Given that many VC funded startups in India have at least managed to find an acquirer, it would be interesting to see how ShopClues would use the power of its backers – Tiger, Nexus, Beenos and others in finding either a new direction or decent destination.