Indiaplaza: The quest for capturing mindshare

Matters of the heart are difficult to ignore. K Vaitheeswaran, who set up India’s first e-commerce company—Indiaplaza.com—in 1999, couldn’t agree more. After all, way back in late 1990s, how many of us were familiar with the internet, let alone shop online?

“If I was thinking with my mind or had applied any business logic, I would have never started the company. But fortunately, I was thinking with the heart. Something in my heart told me that there is a huge opportunity for e-commerce in the country, and in the future it will grow into a large business as it is today,” recollects Vaitheeswaran.

Today, Vaitheeswaran is happy that he listened to what his heart said. The rise of e-commerce business in the country has been nothing short of a fairytale. At present, there are a modest seven million customers shopping online. The number is expected to well to 75 million in the next five years.

Vaitheeswaran founded the company—originally known as Fabmart.com—along with five friends. In 2002, the name of the company was changed to Fabmall, which had two business formats—an online platform and an offline chain of grocery stores.

In 2006, the Aditya Birla Group acquired the Fabmall chain of grocery stores, the company’s offline arm; today, it is popularly known as the More chain of stores. After this, Vaitheeswaran, the only founder remaining on the board, changed the name of his online store to Indiaplaza.com.

How did he manage to convince investors to put in their money in a business model that was little known in late 1990s? “Honestly, getting funds was never a problem. Amazon was doing great abroad. It was also a boom time for the dotcom business. Venture capitalists were keen on investing in the software businesses. The real challenge for us was to convince vendors to sell their products on our website, getting employees, and later our first customer,” he says, adding that though his friends would visit the site and appreciate it, none of them would actually buy anything online.

Today, the company has serviced over 1.5 million customers and is doing more than one lakh shipments a month. “If all goes well, we aim to do more than 1.5 million shipments in the country in the next one year.”

Competitors racing ahead
Despite starting way ahead of time, many believe Indiaplaza lost its plot somewhere. In fact, newbies on the block such as Flipkart and Snapdeal have stormed past.

“That’s only in the brand quotient,” Vaitheeswaran maintains. “I agree they occupy a larger mindshare. If I could go back and change one thing, I would probably have started investing more in brand building a couple of years earlier.”

Industry experts term Indiaplaza as a company which does most of the things right but fails miserably in a few areas. “Indiaplaza’s business model is good, considering that most e-commerce companies in the country are yet to be profitable. However, it needs to understand that right marketing is critical to any business. Companies like Flipkart have caught the attention of the youth through smart advertisements. Indiaplaza needs to loosen its purse strings to win the battle ahead,” argues an expert on the condition of anonymity.

Some opine that the company was too early to enter the e-commerce space in the country. “The time it started, there were less than three million internet users in the country. Of them how many would have shopped online is anybody’s guess,” says another expert.

The company, however, is unfazed by criticism. “We certainly accelerated the growth in the industry. It requires somebody to go off the beaten path, make mistakes, fall down, get bruised, walk again and lay a path for others to follow. Therefore, I believe we played a role in building the industry; we helped others learn from our mistakes,” Vaitheeswaran says, adding that ‘mindless’ spending is something the company does not believe in. “We can’t spend mindlessly without worrying about our balance sheet. I feel ours is the only company that is likely to make money in the future.”

The e-commerce portal plans to introduce more categories in addition to its books and electronics sections. In the next 12 months, Indiaplaza wants to focus on lifestyle and gifting segments, where there is a huge growth potential. In the technology category, it wants to move in to the mobile space.

“We will start with men’s apparel. Buying readymade shirts for men is not too tough if you know the size and the brand. Footwear too is gaining traction. The same is true about perfumes.”

Confident of capturing market share
Currently, Indiaplaza has a market share of 2-2.5% and is confident of increasing it to 10% in the next five years. Vaitheeswaran is not bothered by competition. “In terms of sales, we will probably be behind other companies, but we are fine with it. We want to scale up and make money. We believe the return on investment on a massive spend for a e-commerce company is very poor. I agree that other companies occupy more mindshare than us; but consumers are not worried about the company’s profitability. We have to think about our profits.”

The company has two paths ahead - the first one is to become the largest e-commerce portal but remain the biggest loss-making company. The second is to be among the top five e-commerce companies in the country while also being the only money-making company in the industry. “We have chosen the second path. This is not to say that our path is right or the other path is wrong. Time will tell who is right. May be both are right or both are wrong and there is a third path that we have not figured out yet. But we certainly do not want to stray from our path and get distracted by short-term benefits,” promises Vaitheeswaran.