Year-old e-tailer UrDoorstep sees Ebitda breakeven in six months

While most online retailing businesses are burning cash, a little over a year old online hypermarket UrDoorstep.com has set its eyes on Ebitda breakeven in the next five to six months.

The Bengaluru-based start-up, which serves 72 pin codes in the city, will also quadruple its daily orders from 1,000 while increasing distribution reach to all the city's 92 pin codes.

As a result, according to a top company executive, the incremental sales in the next six months will flow to the bottomline, making the start-up break even at Ebitda level.

The Jupiter Capital-backed start-up, which launched operations in October 2015, has raised new funding to the tune of Rs 10 crore ($2 million). And with this round, the company has in all raised $6 million till now. The new investment will help expand business in Bengaluru and help it achieve Ebitda breakeven by the end of fourth quarter this fiscal or first quarter next fiscal, said the executive.

Speaking to DNA Money, Dinesh Malpani, founder and CEO, UrDoorstep eRetail Pvt Ltd, said the money being raised is through a mix of equity and debt. "The long-term debt of Rs 5 crore has come from Laxmi Vilas Bank and Rs 5 crore in equity has been raised from a high net worth individual. Aiming to break even on Ebitda level, we should be reaching monthly revenues of between Rs 8 to Rs 10 crore in another five to six months. We will also be quadrupling the number of orders per day to anywhere between 3,000 to 4,000 daily," he said.

Elaborating on the company's strategy, Malpani said, his consumer acquisition cost is next to nil. "The focus has always been on building a profitable business and not chasing valuations. Accordingly, we have adopted a unique targeting strategy wherein we reach out to the customers directly. As a result, our customer acquisition cost is under Rs 100 and retention rate is over 90%," he said.

The cost of acquiring customers, according to industry experts, tends to be very high, mainly owing to high decibel above-the-line (ATL) spends involving print, television, radio and outdoor. In fact, for players in the online food, grocery and replenishment business, customer acquisition cost is one of the biggest and can go up to Rs 1,000. Besides, there is no retention guarantee.

Logistics is another significant cost that makes or breaks a business. On how UrDoorStep is managing it, Malpani said, "By having complete clarity on how many orders we generate, we ensure all the deliveries are optimised and running in a profitable manner. All the incremental sales that we will be getting in the next six months will flow to the bottomline and that's what will make us reach Ebitda breakeven." He added that the business was planned to reach this milestone in 18 months from inception and will achieve it well within the timeframe.

UrDoorStep plans to cover all the locations in Bengaluru by January 2017. While the average ticket price (ATP) is expected to remain at Rs 1,200, Malpani said that the frequency of buying has increased to three times in a month.

"Demonetisation has had a very good impact on our business and the increase in the frequency of buying (from two times earlier) is certainly a big positive. The average wallet share is showing an increasing trend as a result. Since we are also adding new customers on a daily basis, my sense is that it will take some more time for ATP to increase," said Malpani.

The e-tailer will also be launching its naturals portfolio of organic products. "While we have already launched two private label brands viz. Assure (premium quality) and Super (commercial quality), the zero pesticides (organic) products range will be introduced sometime in December," said Malpani, adding that besides ramping up revenues, the business will also witness margin expansion by a couple of percentage points due to more focus on private labels, better sourcing, etc.