For Mukesh Bansal (36), founder and CEO of Myntra.com, becoming an
entrepreneur was not an accident. Since his early days in IIT-Kanpur,
Bansal was clear that he wanted to start his own venture. Having worked
with four Silicon valley start-ups in the e-commerce and software space,
he picked up the nuances of running a successful business going way
back to 1999. Backed by a funding of $70 million from leading global
investors, the online fashion retailer is aiming for an IPO in the US
market in the next two years. In conversation with Darlington Jose
Hector and Debojyoti Ghosh, Bansal talks about his plans for the company
and how his start-up is reaching out to the aspirational consumer of
middle India and taking the e-commerce phenomenon to smaller cities.
In any sunrise industry, if there is a credible opportunity, a lot of people tend to come in. There is a gold rush kind of mentality. Too many players are crowding the market today but you can see this in two ways. On the one hand, this validates the credibility of the opportunity. On the other hand, not all of the players are likely to get funded. To achieve scale, you need to get the right team, investors and application of the right technology. Already there is some consolidation happening. Some companies have started to fold up. Over the next 3-4 years, 1-2 very big horizontal players will emerge, vertically there will be 2-3 players dominating the show. They will have 80-85% of the market between them.
What kind of players will survive?
E-commerce is mostly about execution and requires a lot of funding. Subsequent rounds of investments will only go to people who are number 1-2 in their categories. For numbers 3, 4 and 5, it will be very difficult to find investors. Small players won’t be able to compete with the larger ones. They will have to settle for being a small player, growing organically and trying to get to profitability. Or they will have to sell out to a larger player. Or shut shop. I’m sure we will see all three cases happening, depending on the entrepreneurs’ mindset.
How big is the addressable e-commerce market in the country? What is the growth rate?
Overall, the off-line fashion and lifestyle market in India is about $50 billion (around R2.5 lakh crore). Of the overall market, online constitutes a very small portion, which is estimated to be about R2,000-2,500 crore currently. We see the online fashion segment growing 100% yoy. In the next 4-5 years we see the market touching R15,000-20,000 crore. Wherever e-commerce has grown, growth has been more than 100% yoy. In China, for instance, growth has been more than 100% yoy over the last 5 years.
People say that the cash-on-delivery model is not sustainable over a period of time. But it is also one of the key drivers of the e-commerce business in India.
Cash-on-delivery is a huge part of Indian e-commerce. It offers a comfort factor. I feel the cash-on-delivery model is here to stay. E-commerce companies have to make this model more efficient and cost effective. To make this model more efficient, we have invested heavily in logistics, so that we are able to offer a better cash-on-delivery experience. We now get cash on the same day and not in 2-3 days. Currently our cash-on-delivery return rates are 5-6% and if we can bring this down to 3-4%, that will be very healthy.
What do you think will enable you to continue to be in the forefront of this sector?
Today our size is our strength. We had multiple rounds of investments and have raised about $70 million in funding so far. After Flipkart, we are the second-best-funded company in the space and the second-largest. We have a very strong team in place at both the management and the mid-management levels. The brand is fairly well established, as people know Myntra and what it stands for. We have invested heavily in a number of areas like call centres, supply chains and product experience. We have built a very strong technology team. Myntra has about 60 engineers; most of them are IIT graduates and from leading product companies like Google, Yahoo and Amazon. Barring 2-3 e-commerce companies, not many are investing in technology. I think a lot of the players aren’t approaching technology in the right way.
We are seeing a lot of e-commerce players enter the high-margin apparel space. How is Myntra handling the online apparel business, which is your core business?
Apparel as a category offers about 30-40% margin depending on the brand and price point. It is one of the higher margin categories. There is a lot of interest among start-ups in the fashion and lifestyle business, to enter the apparel space. Even other horizontal players are getting into this. The market for apparel is very big and overall it is a very healthy business model compared to other categories in the e-commerce business. We are doing close to 8,000 transactions per day in the apparel segment. And this segment has been growing steadily month on month. On an average, we are growing 50% every quarter. For us, apparel is half of our business, and the rest includes footwear and accessories. I feel other players may not be able to do justice in retailing fashion, as the market is already crowded.
You were into apparel, accessories and shoes, but recently you have forayed into cosmetics. Are you looking at expanding into newer segments?
Our overall focus is fashion and everything that people use and need in order to look good, which basically covers apparel, footwear, jewellery, accessories and cosmetics. We will never get into categories like books, electronics and toys. Myntra is only focused on fashion and lifestyle. We will continue to expand our existing segments and keep adding more brands. We are now focused on bringing some international brands, which are not available in India. The cosmetics category was recently launched and we are already doing 300 transactions per day.
Which are the global brands you are looking to tie up with?
I’m hopeful of launching at least 4-5 new brands this year. These brands will be mostly from the US. However, like Fabindia and New Balance, we are not looking at any exclusive tie-ups right now as most brands are reluctant. We are positioned as a current-season full price player and do very little discounting other than with the end-of-season sale. Brands certainly feel very good about that. Myntra deals with brands directly and this has helped establish strong relationships with the brands. They give us a preview of the latest collections before going into the market. Recently, Puma did an exclusive launch with us 4 weeks before it introduced the same collection in their own stores.
How do you see businesses in the tier II and III markets where penetration is still low?
About 50% of our sales come from outside the top 10 cities, from around 400 cities. We reach out to these markets through TV campaigns. We have also done targeted campaigns in cities like Lucknow, Pune and Chandigarh, through billboards and local newspapers. Facebook has a huge penetration in tier II and III cities, and we have utilised this platform to reach out to young consumers. The cash-on-delivery model helps. And the aspiration for brands is very high as people are willing to spend money to buy branded fashion items.
How did you hit upon this idea of online fashion retailing?
I was in the US for 10 years. I have worked with four different start-ups in the Silicon Valley. I’m from IIT-Kanpur. After IIT, I worked with Deloitte for two years and then moved to the US. I was very clear that I wanted to work with start-ups. I had this idea of starting something of my own. In 2006-07 this ‘personalisation’ business (personalising coffee cups, t-shirts etc) was getting very big in the US. The initial inspiration for Myntra came from there. But I realised that was a very niche category for India and too ahead of its time. That’s when we decided to move to fashion and lifestyle.
Now, we aspire to have an IPO, hopefully in the next 2-2.5 years. It is important for investors to get an exit. An IPO also gives you a reasonable amount of funds for future growth. It is a good thing for all the stakeholders. We are looking for a listing in the US. Meanwhile, we are very well funded for the next two years.
In any sunrise industry, if there is a credible opportunity, a lot of people tend to come in. There is a gold rush kind of mentality. Too many players are crowding the market today but you can see this in two ways. On the one hand, this validates the credibility of the opportunity. On the other hand, not all of the players are likely to get funded. To achieve scale, you need to get the right team, investors and application of the right technology. Already there is some consolidation happening. Some companies have started to fold up. Over the next 3-4 years, 1-2 very big horizontal players will emerge, vertically there will be 2-3 players dominating the show. They will have 80-85% of the market between them.
What kind of players will survive?
E-commerce is mostly about execution and requires a lot of funding. Subsequent rounds of investments will only go to people who are number 1-2 in their categories. For numbers 3, 4 and 5, it will be very difficult to find investors. Small players won’t be able to compete with the larger ones. They will have to settle for being a small player, growing organically and trying to get to profitability. Or they will have to sell out to a larger player. Or shut shop. I’m sure we will see all three cases happening, depending on the entrepreneurs’ mindset.
How big is the addressable e-commerce market in the country? What is the growth rate?
Overall, the off-line fashion and lifestyle market in India is about $50 billion (around R2.5 lakh crore). Of the overall market, online constitutes a very small portion, which is estimated to be about R2,000-2,500 crore currently. We see the online fashion segment growing 100% yoy. In the next 4-5 years we see the market touching R15,000-20,000 crore. Wherever e-commerce has grown, growth has been more than 100% yoy. In China, for instance, growth has been more than 100% yoy over the last 5 years.
People say that the cash-on-delivery model is not sustainable over a period of time. But it is also one of the key drivers of the e-commerce business in India.
Cash-on-delivery is a huge part of Indian e-commerce. It offers a comfort factor. I feel the cash-on-delivery model is here to stay. E-commerce companies have to make this model more efficient and cost effective. To make this model more efficient, we have invested heavily in logistics, so that we are able to offer a better cash-on-delivery experience. We now get cash on the same day and not in 2-3 days. Currently our cash-on-delivery return rates are 5-6% and if we can bring this down to 3-4%, that will be very healthy.
What do you think will enable you to continue to be in the forefront of this sector?
Today our size is our strength. We had multiple rounds of investments and have raised about $70 million in funding so far. After Flipkart, we are the second-best-funded company in the space and the second-largest. We have a very strong team in place at both the management and the mid-management levels. The brand is fairly well established, as people know Myntra and what it stands for. We have invested heavily in a number of areas like call centres, supply chains and product experience. We have built a very strong technology team. Myntra has about 60 engineers; most of them are IIT graduates and from leading product companies like Google, Yahoo and Amazon. Barring 2-3 e-commerce companies, not many are investing in technology. I think a lot of the players aren’t approaching technology in the right way.
We are seeing a lot of e-commerce players enter the high-margin apparel space. How is Myntra handling the online apparel business, which is your core business?
Apparel as a category offers about 30-40% margin depending on the brand and price point. It is one of the higher margin categories. There is a lot of interest among start-ups in the fashion and lifestyle business, to enter the apparel space. Even other horizontal players are getting into this. The market for apparel is very big and overall it is a very healthy business model compared to other categories in the e-commerce business. We are doing close to 8,000 transactions per day in the apparel segment. And this segment has been growing steadily month on month. On an average, we are growing 50% every quarter. For us, apparel is half of our business, and the rest includes footwear and accessories. I feel other players may not be able to do justice in retailing fashion, as the market is already crowded.
You were into apparel, accessories and shoes, but recently you have forayed into cosmetics. Are you looking at expanding into newer segments?
Our overall focus is fashion and everything that people use and need in order to look good, which basically covers apparel, footwear, jewellery, accessories and cosmetics. We will never get into categories like books, electronics and toys. Myntra is only focused on fashion and lifestyle. We will continue to expand our existing segments and keep adding more brands. We are now focused on bringing some international brands, which are not available in India. The cosmetics category was recently launched and we are already doing 300 transactions per day.
Which are the global brands you are looking to tie up with?
I’m hopeful of launching at least 4-5 new brands this year. These brands will be mostly from the US. However, like Fabindia and New Balance, we are not looking at any exclusive tie-ups right now as most brands are reluctant. We are positioned as a current-season full price player and do very little discounting other than with the end-of-season sale. Brands certainly feel very good about that. Myntra deals with brands directly and this has helped establish strong relationships with the brands. They give us a preview of the latest collections before going into the market. Recently, Puma did an exclusive launch with us 4 weeks before it introduced the same collection in their own stores.
How do you see businesses in the tier II and III markets where penetration is still low?
About 50% of our sales come from outside the top 10 cities, from around 400 cities. We reach out to these markets through TV campaigns. We have also done targeted campaigns in cities like Lucknow, Pune and Chandigarh, through billboards and local newspapers. Facebook has a huge penetration in tier II and III cities, and we have utilised this platform to reach out to young consumers. The cash-on-delivery model helps. And the aspiration for brands is very high as people are willing to spend money to buy branded fashion items.
How did you hit upon this idea of online fashion retailing?
I was in the US for 10 years. I have worked with four different start-ups in the Silicon Valley. I’m from IIT-Kanpur. After IIT, I worked with Deloitte for two years and then moved to the US. I was very clear that I wanted to work with start-ups. I had this idea of starting something of my own. In 2006-07 this ‘personalisation’ business (personalising coffee cups, t-shirts etc) was getting very big in the US. The initial inspiration for Myntra came from there. But I realised that was a very niche category for India and too ahead of its time. That’s when we decided to move to fashion and lifestyle.
Now, we aspire to have an IPO, hopefully in the next 2-2.5 years. It is important for investors to get an exit. An IPO also gives you a reasonable amount of funds for future growth. It is a good thing for all the stakeholders. We are looking for a listing in the US. Meanwhile, we are very well funded for the next two years.
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