FB Pixel no scriptShopClues proved to be the cheapest route for Singaporean e-tailer Qoo10 to enter India market | KrASIA

ShopClues proved to be the cheapest route for Singaporean e-tailer Qoo10 to enter India market

Written by Moulishree Srivastava Published on   5 mins read

Qoo10 acquired India’s once unicorn e-tailer ShopClues at USD 80 million.

Singapore’s one of the top e-commerce platforms Qoo10 last week acquired eight-year-old Indian online marketplace ShopClues—a beleaguered company once valued at over a billion-dollar—for reportedly USD 80 million to mark its entry into India’s e-commerce industry set to reach USD 200 billion by 2026.

ShopClues’ fall in valuation from USD 1.1 billion in 2016 to around USD 80 million three years later, that too after several failed attempts to find a buyer, indicates to the course correction path Indian e-commerce industry is on.

According to local media reports, the all-stock deal includes purchase of ShopClues’ logistics arm Smartship, mobile payments solution Momoe Enterprise Services, and its social commerce platform EzoNow.

A press statement by the two e-tailers said, ShopClues will be merged with Qoo10, which has already been approved by the board of directors and major shareholders of both the companies.

While ShopClues will be able to “access global markets via Qoo10’s presence in Southeast Asia” the merger will allow, “Qoo10’s merchants and its cross-border logistics business will get access to the large Indian market,” a joint statement said.

Qoo10, which operates localized marketplaces in Singapore, Malaysia, Indonesia, Hong Kong, and China, has been sharpening its focus in Southeast Asia after it sold its Japan business to its former investor eBay mid last year. A TechCrunch report said Qoo10 hopes acquiring ShopClues will help it further expand its business in South Asia.

The nine-year-old Singaporean e-tailer, with over 3 million registered users and 8.5 million daily page views across all its marketplaces, has been fighting for the top spot in its home country in a neck-to-neck competition with Southeast Asian online retailers Lazada and Shopee.

Qoo10’s ShopClues acquisition is in line with its ambition to become profitable by the second half of 2020 and to file for an initial public offering the year after.

“ShopClues has received a very small cash infusion from (Singapore-based) Qoo10 Pte Ltd along with the full stock merger deal, to keep the company (ShopClues) afloat,” local media Livemint said citing an investor source.  “Qoo10 has a strong presence in the Southeast Asia market, and their acquisition of ShopClues in India is also in line with its proposed IPO plans, as it looks to grow its market base, as well as the seller base.”

ShopClues raked in USD 38.3 million in revenues for the year ended March 2018, as compared to USD 26.5 million in a year-ago period. Losses came down to USD 29.4 million in the corresponding period from USD 49 million in FY2017. According to a TechCrunch report, as of earlier this year, the company claimed, with a network of more than 700,000 small and micro-merchants, it was handling more than 60,000 deliveries a day.

A wholly-owned subsidiary of the US-based Clues Network Inc., ShopClues was founded by former Wall Street tech analyst Sandeep Aggarwal and former eBay executive Sanjay Sethi in July 2011. After Aggarwal was indicted for insider trading during his previous stint at a US-based wealth management firm, he left ShopClues in 2013. In turn, Radhika Ghai, his wife at that time, took over as a co-founder.

In eight years of its existence, ShopClues has raised more than USD 250 million from high-profile investors such as Tiger Global, Nexus Venture Partners, and GIC – the Singapore Government-owned sovereign wealth fund as its lead investors.

Since the very beginning, the Gurugram-based e-commerce firm positioned itself as a neighborhood marketplace targeting customers beyond metros. Selling electronics, home decor, kitchen, and lifestyle items to users in small cities in India. The strategy worked well for the company in the initial years as it saw its volumes grow rapidly.

However, by 2017, Flipkart and Amazon India had begun to venture out of their comfort zone of targeting customers from metro cities—home to 100 to 150 million paying internet users—and started to encroach into ShopClues’ stronghold in tier 2 and tier 3 cities where lie the next 200 to 250 million aspiring consumers. As the duo offered deep discounts to outdo each other and build their presence in these smaller towns, ShopClues lost its unique selling proposition—low pricing.

As it couldn’t immediately raise money, it started focusing on controlling cash burn to improve its bottom line rather than going after topline. However, it started to get increasingly difficult to compete with its well-funded competitors. It was also the time when e-commerce sector was inching towards consolidation with Flipkart and Amazon India standing as two clear leaders. No investor was interested in the third contender considering the amount of investor’s money e-commerce companies were burning to acquire customers. The cautionary tale of Snapdeal, once a billion-dollar valued e-commerce firm that fell from the race of being the top two e-tailing firm, didn’t instill much confidence in VCs.

In early 2017, ShopClues decided to take a step back and focus on profitability and walk away from non-core categories, like branded products in smartphones and fashion category, and large appliances, Ghai told local media YourStory in an interview in March 2019.

This impacted its growth and service quality at a time when it was trying to woo new investors.

Things got worse when Aggarwal accused his wife Ghai of stripping him off the voting rights in an ugly public spat in March 2017 following their divorce. That fiscal year ended with a mere 5% revenue jump as compared to 125% hike it has seen a year before.

Later that year, the company was somehow able to raise over USD 7 million in debt from Innoven Capital and USD 15 million from media conglomerate BCCL. It made a comeback when it reported a 44% jump in revenues in FY18 while cutting down losses by about 40%.

Over the last 1.5 years, ShopClues had held discussions with all the major e-commerce players for getting acquired, the latest being its talks with Snapdeal in May this year. However, the merger deal, which valued ShopClues at USD 200 to USD 250 million fell through due to the concerns regarding some of the findings that emerged from the due diligence conducted by advisory firm EY.

Things haven’t improved much for the company in terms of its market share or valuation.

While the company managed to raise small bridge rounds since 2018 including USD 1 million from Ronnie Screwvala’s Unilazer Ventures, USD 16 million from GIC and other existing investors, and USD 1.1 million from its parent company, it couldn’t raise a significant round after its USD 100 million funding in 2016, which eroded its valuation significantly.

According to Forrester Research, in 2018, Walmart-owned Flipkart and Myntra held 36.6% market share, Amazon India grabbed 31.2%, while Paytm Mall had 3.3 %. ShopClues accounted for just 1.6% of India’s e-tailing pie, which has now fallen down to 0.5%, according to a report in Business Today.

Once envisaged by its founders as the “online version of Chandni Chowk, where you can expect to get everything at cheaper rates,” ShopClues ended up becoming a cheap gateway for its Singaporean parent to explore India’s giant e-commerce opportunity.


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