With India’s annual GDP growth of about 5 to 6 percent per year, a new wave of affluent consumers is coming. While there have been e-commerce successes like Flipkart, a handful of local startups are targeting the upper-end of the market.
Squarekey is a startup that brings high-end fashion brands to India for the same prices as ones that a consumer would pay in the West.
“Retail is stagnating the Western world,” said founder Avantika Daing. “The growth story is now in markets in India. We’re really addressing a big unmet consumer need. Our core base will include about 300 million users by 2015. Those are the potential users — the aspirational class that spans from the middle class to the upper-middle class.”
The site offers clothes from about 65 brands including Nanette Lepore, Nicole Miller, BCBG Max Azria and Ben Sherman. While the site only opened last fall and Daing declined to share volume numbers, she did say that sales were growing by 30 percent month-over-month. Their average price point is around $175.
India has strict regulations about allowing in “multi-brand” stores, or ones that offer multiple clothing brands. At the same time, individual clothing brands may not be at the point where they’re willing take the financial risk of entering the Indian market.
“A Bloomingdale’s or a Barney’s cannot enter india with the current regulatory environment,” she said. “Single brands are permitted in India. There are some foreign direct investment nuances around minority and majority shareholders, but you do need a local partner.”
She said brands give Squarekey access to their current season inventory, and they take care of everything from fulfillment to the last-mile delivery. They can drop ship to the first-tier cities in India within a few days for most of their goods, but other pieces that are flown in from the U.S. may take 10 business days.
Over the last few years, a slightly older generation of e=commerce companies has figured out the logistical hurdles of delivering goods to consumers in the major cities. Plus, credit card penetration is improving.
“Things like credit card usage are issues of yesterday,” Daing said. “The marketplace has evolved and an ecosystem of small and large e-commerce players have helped make barriers disappear.”
She adds that Squarekey doesn’t take on inventory risk by buying merchandise upfront.
“For the first six months, we did take inventory risk just to prove ourselves out,” she said. “It was just a kind of good faith move to prove to brands that we were creating this compliant and trustworthy platform.”
But now, Squarekey pre-stocks from clothing in India after taking products on consignment from the brands. They also let Indian shoppers buy pre-season clothing if they’re willing to wait six to eight weeks.
With Squarekey’s model, Daing says she’s not playing the discount game that has made other Indian e-commerce startups less profitable. Local investors have rationalized a bit over the last year, according to a survey from one of Squarekey’s backers, the Indian startup accelerator GSF India.
“What happened last year was that we had a lot of your Amazon-like business models come up in India, then a lot of me-too Gilt Groupe-like business models. One questions the sustainability of the latter model.”