Sanjay Sethi, co-founder and chief executive of ShopClues.com, had two options before him after graduating from the Indian Institute of Technology (Banaras Hindu University), Varanasi, in 1993 – either join as a Ph D student for astrophysics, which he was passionate about, or take up a job that would help fulfil his ultimate ambition of becoming an entrepreneur.
He opted for the second choice even though he had a Ph D offer from the Inter-University Centre for Astronomy and Astrophysics. The reason was simple: Sethi, 43, wasn’t sure whether he would be able to do commercial justice to a subject that was so close to his heart.
His choice, however, was spot on as he heads a firm that is now India’s second largest online marketplace and raised $ 100 million from Tiger Global on Monday – a deal that valued ShopClues at $ 500 million.
The road has been a long one, which saw Sethi first work for Rourkela Steel Plant for three years before enrolling himself at the Foundation for Innovation and Technology Transfer at the Indian Institute of Technology, Delhi, where he got introduced to the internet and technology. That was just the first step towards his career in e-commerce. Over the next 13 years, he honed his skills by working in start-ups and later eBay, where he rose to the position of global product head for shipping, logistics, and billing & payments.
The experience at eBay, Sethi said, was an eye-opener, as he got to watch closely how the e-commerce market evolved globally, especially in China. In 2003, eBay acquired EachNet.com, then China’s larget e-commerce firm, and Sethi also got exposure to the growth of Taobao.com, owned by Alibaba, as the largest online marketplace in China.
He spotted an opportunity in his home country soon enough. “In 2011, all e-commerce firms were inventory-based models. It was clear to me that if you want to build a large business in India, you need to shift to marketplace business,” Sethi said.
That’s the model ShopClues has followed since its inception in June 2011 in the US – a firm Sethi set up with the Aggarwal couple, Sandeep and Radhika. “Our daughters were classmates in the school in the US and their bind brought us together. We were all excited about the India growth story and wanted to come back,” Sethi said. So by September 2011 the entire team of ShopClues landed in India and started operations from Gurgaon, where it is now based.
Sethi’s business model works like this: ShopClues, which works on a zero-inventory marketplace model like Snapdeal’s, wants to target the crowd that shops in mid-tier shopping zones such as Karol Bagh in Delhi or Lamington Road in Mumbai. “India shops in those markets. For Rs 100, you will get shirts anywhere in India. But if you come to Janpath or Karol Bagh, you will get a wider choice. We at ShopClues target those buyers and want to be a virtual marketplace for them. Compared with other sites which sell high-end brands, ShopClues is about regional brands as 70 per cent of our business comes from tier-II and -III cities,” Sethi said. ShopClues does 1.5 million transactions a month and claims to have 40 million monthly visitors.
“When you buy local brands, quality is established by the marketplace. It’s a difficult business to replicate. Both investors and consumers know that,” he adds, giving a clue about his firm’s high valuation. ShopClues had raised about $ 16 million from Helion Venture Partners and Nexus Venture Partners in the first round of funding.
Sethi had, however, become chief executive by replacing Aggarwal under trying circumstances. The latter, a former Wall Street technology analyst, was found to have indulged in insider trading in the US in his past job and had to disassociate himself from an executive job at Shopclues. His wife Radhika is listed as a co-founder now.
In 2013-14, ShopClues generated gross merchandise volume (GMV) of Rs 350 crore and hopes to cross Rs 2,000 crore by 2014-15. Clues Network, the parent company, is likely to be listed on Nasdaq in 2017, by when he hopes GMV to cross $ 1 billion (about Rs 6,200 crore at Monday’s exchange rate of 61.70) and the company’s valuation at three times that.
His investors, of course, need to agree to that.
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