A lot of global clothing brands turn to India these days to manufacture their products. But today comes news of a $9 million funding round for an online clothing brand based in India that has big ambitions to go global. Freecultr — which CEO and co-founder Sujal Shah likens to an “online-only Uniqlo” (read: competitive price points on trendy, casual apparel) — has added Russian VC ru-Net as an investor, with participation also from existing investor Sequoia in this Series B round. Total funding in the company is now $13 million.
Freecultr, which opened its virtual doors for business in December 2011, has been something of a trailblazer in its home market, offering India’s connected middle classes a wide, westernized selection of clothing and accessories online, with a nationwide delivery network that was put in place within a month of launch — no mean feat in a still-developing country. It now gets more than 1 million visitors to its site every month, and is seeing double-digit revenue growth.
The range is wide — some 40 categories covered from different clothing separates to scarves, bags and jewellery — and speaks to changing tastes in India, where people are increasingly on the lookout for non-traditional clothes or to pursue “freedom of expression,” as Shah puts it.
On the international side, the idea, for Shah, was to create a business based in India that used some of the same production and distribution techniques used by Western companies that turn to India’s extensive outsourcing market to cut down on the costs of making it; arguably by beginning the design process from India itself, the costs become even lower.
“One of the goals from the start was to be a brand that does something globally coming out of India rather than just using the country as a way of lowering the unit cost per item in production,” Shah told me. “But since production does exist here, let’s build this from scratch.”
Like Uniqlo, H&M and other high-street brands, Freecultr is based around offering style at affordable prices, with prices 20-30 percent lower than competing brands. In India, that means the average sale at the moment at Freecultr is between 1,300 and 1,700 rupees ($24-30) for an average of 1.5 items per order, but he acknowledges that these prices will like be somewhat higher when the brand expands outside of the country.
Shah wants to see Freecultr eventually end up in the U.S., but before then, we may see Freecultr tap the home market of its newest investor.
“The whole ru-Net team now wears Freecultr and we see big potential for the company outside India and look forward to introducing the product to Russia and other markets where ru-Net operates,” said Maria Krajukhina, Managing Director of ru-Net. (Also: this does not preclude national growth, either. Shah notes that the company will be using the funding to grow its business in India — expanding the team and also looking at offline opportunities; and developing mobile apps.)
As we’ve written before, Russia is a huge market opportunity for online retailers. Not only is it the biggest Internet market in Europe at the moment with 53 million users, but like India it has a fast-growing middle class of consumers. And in Russia, those consumers are crazy for shopping.
What’s interesting is that Freecultr could end up becoming a participant in one of Russia’s emerging lines of business for e-commerce players: wholesale distribution. KupiVIP, one of the bigger fashion ecommerce sites in Russia, has been offering a white-label service for other brands that haven’t been able to crack online sales and distribution in the Russian market. If Freecultr taps into white-label services like that it could represent a quick way for them to enter the market.
Shah notes that other international markets on the list for its next moves include Turkey and Australia.
The backing of ru-Net and Sequoia is partly down to the potential of the business, but it’s also a bet on some people who have already proven themselves to be successes in the world of ecommerce and retail. Shah, who holds an MBA from Columbia Business School, has in the past been the VP & Head of Fashion, India for IMG and has also been a director with American Express. Another co-founder, Rajesh Narkar (who is chief product officer) has been working in business development for major brands for 17 years, as has COO Sandeep Singh. And co-founder and chairman Harish Bahl was the founder of the Smile Group, a privately-held Indian company with a huge range of holdings in digital media, e-commerce and more.