The Next Battle for India’s Online Retailers is Just Starting

E-commerce site Kraftly helps entrepreneurs and small businesses create websites, sell, ship and get paid.

E-Commerce firms are back with end of season sales. 

(Photo: iStockphoto)

Nitin Dikshit, 30, set up a website to sell everything from earrings to scarfs and knick-knacks. When that didn’t work, he tried selling through online retailers but felt lost in a crowd of merchants like him.

“I didn’t want to be one of the many. I wanted to create a brand,” said the fashion designer from Bhiwani, Haryana in northern India. So, he chose Kraftly.

The two-year-old e-commerce site helps entrepreneurs and small businesses create websites, sell, ship and get paid. Just like Canada’s Shopify, which has built a nearly $10-billion company doing exactly that. Kraftly even offers an online flea market, growing quietly as online retail giants Flipkart and Amazon burn billions of dollars in their fight for supremacy. Half of its 100,000-plus merchants either sell from home or smaller cities.

Online retailers have only begun to scratch the surface in Asia’s third largest economy. More than two-thirds of India’s 5.1 crore (51 million) small businesses—contributing a third of its $2.2-trillion GDP—are offline, according to a KPMG India and Google study. Rising internet penetration could push up their share to nearly half the total output in three years, it said. That’s where Kraftly, run by Big Foot Retail Pvt Ltd, steps in.

“There aren’t easy e-commerce tools available for a small entrepreneurs,” co-founder Saahil Goel told BloombergQuint over the phone. Kraftly lets them set up an online store in minutes for free. In exchange, it charges a fee on every product sold. The bigger they get, the more money it makes.

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Jignesh Kothari, a dealer of accessories like sunglasses and mobile covers in Surat, Gujarat, sells 20 percent of his unsold stock through the site. He gets 4,000 orders every month on Kraftly compared to 100 on bigger online retail sites.

It’s not easy to become a merchant on Flipkart and Amazon especially if you are a small seller. It takes at least a week to get your listing active. Plus, their commission is 17-21 percent. On Kraftly, I can customise based on my requirement. Right now, I have a 10 percent plan, so I get a better margin on my sales.

Jignesh Kothari, Merchant

Kraftly offices in New Delhi(Photo Courtesy: Company Website)

The e-commerce site’s initial success spawned rivals like Martjack, BuildaBazaar and Shopnix in the last two years. Shopify is already in India since 2013. And then there are larger online retailers like Alibaba-backed Paytm or InnoVen Capital-funded Shopclues that also target small businesses.

Kraftly has raised around $9 million from investors like Germany’s Bertelsmann, Nirvana Ventures, 500 StartUps, Singapore’s Beenext and Japan-based Beenos. It has a yearly revenue run rate of $3.5 million (nearly Rs 23 crore) and 5 million listings, said Goel. Just a year ago, the site had 20,000 sellers and a run rate of $1 million.

Survival amid the battle of giants will be a challenge. Last year, Snapdeal pulled the plug on Shopo.in., a Kraftly-like site for small businesses, after failing to raise funds.

Even Shopify’s model is being questioned. Activist investor Andrew Edward Left called it a “get-rich-quick-scheme” and said his Citron Research was shorting the stock as the website’s user growth was rising on unsustainable businesses. Kraftly faces similar risks, if not more.

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(Photo Courtesy: Bloomberg Quint)Workers at their desk at Shopify office in Toronto, Canada

It is still early days for such platforms to explode, said Mrigank Gutgutia, engagement manager at emerging market researcher Redseer.

As the e-commerce market is yet to mature in India, these models have a chance to succeed but will find it difficult to achieve double-or triple-digit growth.

Mrigank Gutgutia, Engagement Manager, Redseer

For now, Dikshit’s online store Banawat (Hindi for shape) is making anywhere between Rs 15,000 and Rs 20,000 ($300) a month. Demand’s rising and he has upgraded to a higher plan. “The next task is to get the stock in order and scale up.”

(This article was originally published on BloombergQuint)

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