COO | 24 Aug 2005
“With the intensive penetration of the Internet, computers, credit cards, drop in broadband rates, online shopping has moved from being restricted to a certain section of the society to the larger population. Now, even middle class people can think of shopping online because people have come to trust it, they find it convenient and secure… We started out with the mindset that we are in the business of e-commerce and then realised that we are actually in the business of changing people’s habits.”
A pioneer in e-commerce, a survivor of the dotcom bust, a perfect example of reliable and safe online shopping, Fabmall sure has come a long way. Founded with a mission to leverage the advantages of the Internet as a medium to create an unrivalled shopping experience for consumers, Fabmall is one place where it’s not only the urbanites who shop, but even 2-tier town consumers are addicted to it.
In conversation with Priyadarshini Nandy, Fabmall CEO Vaitheeswaran shares his journey and experiences with the exclusive online retailer.
Q. Give us a brief background of Fabmall.
Fabmall was conceived in 1999 when Citibank started discussing an online payment gateway in India and Sudhakar, who was then the CEO of Planet Asia, saw an opportunity there to do something different and we all left our jobs and began Fabmall.
We knew that it would be a long haul for us as it’s not easy to change people’s habits, but we were sure that the Internet as a medium would become all pervasive and activities that arise out of it will also grow.
We began with the sole intention of e-commerce. At first, we sold music and then moved on to books, grocery, jewellery, and today we carry 25 different categories of products. We have the largest online catalogue with at least 2.5 million products on sale.
Q. Isn’t it true that even till a few years ago only a certain section of the society would think of shopping online?
You know, I would say it’s true if I didn’t know otherwise. Things have changed quite a bit. With the intensive penetration of the Internet, computers, credit cards, drop in broadband rates, online shopping has moved from being restricted to a certain section of the society to the larger population. Now, even middle class people can think of shopping online because people have come to trust it, they find it convenient and secure.
Q. What kind of hurdles did you face when you started Fabmall?
The primary challenge we faced was to convince companies to give us their products to sell them. Getting customers has been a challenge as well, a challenge that exists till date. We started out with the mindset that we are in the business of e-commerce and then realised that we are actually in the business of changing people’s habits.
Q. At what point did you realise that it wasn’t just the rich and Internet savvy people who shopped online?
This realisation dawned on me a couple of years back. We keep testing various data points to check our activities. We try to understand our business better. At that time, we wanted to know how many independent towns and cities have we delivered goods to and we saw that we have physically delivered products to over 1,400 towns. Then we took a list to track business contribution by the top eight cities, then the next 50 cities and then the rest. And that’s when it was revealed that the number from the rest of the small 2-tier towns had moved from less than 15 per cent five years back to almost 60 per cent today, and there has been a good rise in repeat orders.
Q. What kind of products do you see moving into these 2-tier towns?
Well, mostly books and CDs. In recent times, we see a lot of jewellery and appliances as well.
Q. Why do you think these people are buying online?
To my knowledge, these people primarily shop online because the local shops don’t have the kind of range and variety we offer. Books and music are a stunning example. The largest bookstore in India will typically have 100,000 books, whereas small town bookstores will probably have 10,000-15,000 books and that too, most of the time these are text books.
On Fabmall, one can find up to 2.5 million books. I can proudly say that we are the largest online library in India today. Also, when it comes to the purchase of electronic products, people prefer to buy them online. This is because not only do they get a wider variety from many companies, there aren’t any sales people pushing their favoured products. Therefore, the buyers can shop in peace.
Q. Do you think these buyers from 2-tier towns ever make purchases on impulse?
Honestly, quite a few of them do. As a retailer, it’s bad news for us as we cannot build or sustain a business based on that. If we have to depend on the impulse of the customer, then we can never predict a business. And that is one of the reasons why we moved to groceries. We wanted to have at least one line of product that was not impulse but need driven. We know that whether you like it or not you have to buy groceries.
Q. What kind of payment options do you offer? Do you have cash on delivery?
No. We don’t encourage cash of delivery. I think we are one of the only websites that discourage it. It is too much of an effort. It opens the option for misuse.
Q. But how do these 2-tier towns purchase products? Do they all buy on debit and credit cards?
Absolutely. Believe it or not, the credit card penetration remains higher than Internet penetration today. And Fabmall is one of the safest sites to shop on. And being the pioneers of online shopping, we cannot really offer cash of delivery and take the meaning of e-commerce away. The only cash on delivery options we have are in Bangalore and that too only for groceries. This is because we send our own people to deliver and don’t have to depend on others for courier, etc.
Q. What kind of advertising strategy do you use in these towns to market Fabmall? Do you have any special budget to target these 2-tier towns?
We used to do a lot of offline, print, television and outdoor advertising before. But we stopped all that. Now, we only do online promotions. The reason being, when we started out, we wanted people to be aware of us and it was more of a brand building effort. Then we moved to products testing with discounts, free gifts, and crazy offers to attract customers.
Today we have a big base of customers, which is growing on its own, word of mouth is definitely working. There are vendors who approach us and want to put their products on our site and, therefore, we do online promotions only by being on other sites, using banner ads, mailers, etc. But a strategy like that might require a change if one has to do a rebranding all over again.
As for our advertising budget, we don’t work with anything specific. But to give you a ballpark, we spent about only Rs 40-50 lakh on advertising last year. And this is common for all audiences. We don’t have to do anything separate for the 2-tier towns.
Q. What kind of turnover did you generate in 2004-05? What are your predictions for the next fiscal year?
We had a turnover of approximately Rs 12 crore in 2004-05. And for this year, we plan to exceed Rs 20 crore. This is from pure e-commerce as we don’t allow any kind of advertising on our website. I think using advertising on an e-commerce site can be a huge distraction for shoppers.