On Demand Hotel Service Startup – Generic analysis & Scope of Improvement

On Demand Hotel Service Startup – Generic analysis & Scope of Improvement

Suppose you are planning to go from location A to location B with your family to enjoy some vacations. The motive of the entire trip is to spend as much time together as possible which is not possible on a hectic day. As an intelligent manager, the first thing you are going to do is to list down all the possible situations that could arise and to find the feasible solution for the same. So the sequence of all the activities is as follow – going from home to airport/ railway station, getting into the flight/train/ bus on time to reach to the desired location, get the spot for stay, enjoy your trip and get back to home.

If you look the same problem from perspective of a potential entrepreneur, you are going to analyze the above mentioned activities and try to pick the pain areas for people and provide the best feasible solution to your customers. The possible pain areas could be ticket booking, hotel booking, transportation medium and other services at destination etc. The better you solve the problem; more are the chances of acceptance by customers. Few entrepreneurs have analyzed the same and developed their startups to provide facility to mass – like Oyo Rooms, Zo Room, Ibibo, Makemytrip, Yatra etc.

On Demand Hotel Service Startup – Targeted Problem

Let’s assume you are planning to solve the pain area of offline hotel search by providing a common portal of all the available hotel options – searching and booking facility.

Travelling from one location to another is itself a pain area for people and the search of suitable stay point in an unknown location further add-on in the same. Offline search of hotels in an area is difficult as well as time consuming. So the probability of acceptance of the concept is quite high for the targeted consumers.

On Demand Hotel Service Startup – Basic Business Model

Based on the stakeholders involved, the basic business model of On Demand Hotel Service startup is as follow –

On Demand Hotel Service Startup - Generic analysis & Scope of Improvement

[A] Aggregator – Aggregator is the player that provides the common portal for hotel room service providers. The role of aggregator is to build a robust platform where the gap between service providers and consumers could be bridged and to ensure the quality standards developed for brand name is by deploying service providers’ improvement programs. The revenue generation for aggregator is the commission from service providers based on the type of model – per service use, monthly registration chargers etc. The benefit for aggregator is that it’s making revenue and brand name for consumers as well as service providers.

[B] Hotel / Room Provider– Service provider is the player that owns hotel / rooms. The role of service provider is to ensure the availability of standard service for consumers that are getting directed through aggregator. The revenue generation for service provider is by the extra traffic that he/she is getting by aggregator. The benefit for service provider is the enhanced reach and hence extra revenue.

[C] Consumer–Consumer is the person who is using the hotel / room service via aggregator portal. The benefit to consumer is the convenience in terms of easy search along with the trust of brand name.

Hotel Service Startup – Business Extension

The simple model of On Demand Hotel Service startups can be enhanced in more dimensions as well –

[A] Integrated Cab Service

The very first requirement when a traveler enters a new city is the transportation requirement to reach from desired points in the city. The business model of On Demand Hotel Service startups can be enhanced by integrating the cab service in it. From pick point to hotel travel and within city transportation of consumer can be simplified by incorporating cab service either by self or by third party to enhance the simple business model.

[B] Integrated Food Delivery Service

Though the food is generally provided by the respective hotels, but for the specific requirements food delivery service can also be implemented in the same business model. If traveler is able to get the solution for travel, food and transportation at one place, the acceptance of startup shall be at exponential rate.

[C] Facility of Communication Medium

The other basic requirement is of communication medium. To facilitate the consumer with communication medium, pre-activated Simcards, internet facility like dongle etc can also be incorporated in the business model. For foreign tourist, such kind of combined arrangement of food, cab, hotel, communication shall be very beneficial via single portal.

[D] Travel Guides

For tourist, travel guide can also be incorporated in the same model. A free directory portal of the famous places in the nearby area would be the source of traction where consumers can rate and review the famous spots in the city. Consumers looking for private travel guide can also be entertained by becoming a coordinator between both the parties.

Other scope of improvement could be incorporating all the related services in the business models as per consumers behavior and demand analysis.

Hotel Service Startup – Generic Analysis

FS brings the first cut planning of On Demand Hotel Service startup – the factors that need to be considered at initial stage itself for long term survival.

[A] Business Analysis – Suitable, Sustainable and Scalable

First requirement for any of the startups is an idea that is suitable for mass, sustainable in terms of revenue generation and scalable in long run.

The idea of On Demand Hotel Service startup is suitable for the mass that has rapid travel in their life. So the targeted marketing to reach those consumers to reach the break-even point will make the concept self-sustainable. The scalability of idea is good in terms of geographical presence as well as related business verticals.

[B] Market Analysis – Potential, Competition and Penetration

The next requirement of On Demand Hotel Service startup is to analyze the market of On Demand Hotel Service startup in terms of potential volume, competition level and the expected penetration in the market.

The potential of concept is in those areas where tourists are visiting more frequently. The competition level of existing direct players and indirect players shall be analyzed in advance so that all the marketing strategies can be aligned in terms of desired penetration level.

[C] Resource Analysis – Scope, Cost, Manpower and Risks

The next requirement of On Demand Hotel Service startup is to check end ensure the availability of required resources to execute the project.

The entire scope of work that needs to be done, the cost associated with the activities and the required manpower for same shall be evaluated to avoid the problems during execution. The risks associated with the business plan along with their mitigation plans need to be estimated.

[D] Survival Analysis – Marketing, Revenue and Long Term Vision

Survival of On Demand Hotel Service startup is based on the revenue that it is generating. So the proper marketing strategies needs to be designed aligned with the long term vision of startup – either to become leader or to get acquired.

Wish you luck for your startup. Stay tuned with FS Labs to know more.

E-commerce Business Model

E-commerce Business Model

2010 was a time when ‘3 Idiots’ was more famous than ‘E commerce’. Out of the Way thinking and following one’s goal type of thinking was getting into limelight. UPA2 was somehow managing the great Indian economic show but opportunities for employment were still scarce.

And then came the Boom! Few Entrepreneurs were betting on the risk taking ability of Indian Consumers and they brought in the E commerce model. With it they brought in a platform which, in a matter of few clicks, was selling all the products one could think of buying only in brick and mortar stores. Nobody had ever imagined that people from all the cities Tier I, II, III would be buying products ranging from 10 rupee key chain to 50k iphone online.

Boom Persisted. Now it’s almost half a decade. Some of these entrepreneurs are more famous than 3 Idiots. Companies running on these platforms are valued in billions. Success of e-commerce business model was driven by the genuine problem faced by people – availability of products in Tier II and II cities and alternative of time constraint in Tier I cities.

E-Commerce Business Model

FS brings a pictorial analysis of “E-Commerce Business Model” – Basic Concept, Cash Flow, Break Even, Benefits etc.

E-commerce Business Model - Inventory Based

E-commerce Business Model - Market Based

E-commerce Business Model - Mixed Model

How to manage the show - Vendors, E-commerce Player, Logistics Player

E-commerce Business Model - Cash Flow of Mixed Model

E-commerce - How to Decide the Running Profit level

E-commerce Business Model - Benefits to Stake Holders

With enhanced verticals of e-commerce business, better customer relationship management to gain their trust and targeted marketing to relevant consumers, the success probability of e-commerce business model is quite high.

Read here about the betterment of two e-commerce giant – Flipkart – e-commerce giant of electronics, home appliances, books, apparel etc and Myntra – leading e-commerce player of fashion and apparel (though both merged together)

Wish you luck for your startup. Stay tuned with FS to know more.

 

 

Cashback Websites Business Model

Cashback Websites Business Model

Generally in startup ecosystem, founders talk about ways to make money. They try to find new and innovative ways to cut expenditures and maximize saving. But then there are deals and discount based startups – They give customers a freebie – Cashback ! And this makes Startups, which deal in deals and discounts, an eye candy for Junta. Cashback offers do wonders. Paytm and freecharge have benefited from Cashback and now their loyal customer base runs into millions.

Cashback websites are getting popularity at an exponential rate. CashKaro, Lafalafa, Gopaisa are some of the well-known portals that are generating revenues in crores.

But one thing is for sure. These Dealers of deals do generate revenue and somehow they earn big bucks even though for normal public they are only burning money. This makes us, FS Labs Guys, to write down about the business model of these deal n discount startup model.

Cashback portals work on market based commission model. The retailers are happy to give some portion of their sale profit to cashback player for the additional business that otherwise could not have been generated otherwise and cashback player is happy to give some portion of earning to consumers for acquisition and retention. Thus cashback portals are win-win situation for all the involved stakeholders. Consumers are getting benefits like saving, deals etc, retailers are getting benefits in terms of increased sales and cashback player is making money and brand name.

Cashback Websites Business Model

FS brings a pictorial analysis of “Cashback Websites Business Model” – basic concept, business model and cash flow –

Cashback Websites - How it Works

Cashback Websites - Business Model

usiness Model - Benefits to Stake Holders

Cashback Portals - Cash Flow

Wish you luck for your startup. Stay tuned with FS Labs to know more.

Directory Portal Business Model

Directory Portal Business Model

Are you facing any problem to find a house for rent/purchase? Go to Housing, Common Floor etc and get the list of all available properties nearby. Are you not feeling well and need to find a doctor in your area? Check Practo and it will direct you to the doctor as per your need. Directory portals are increasing day by day as it solves the problem of locating the relevant need just few clicks away. Hence these portals are able to get traction at very high rates. The founders are also to monetize their portals by converting it from directory to communication tool by incorporating the related services into it.

Directory portal business model is generally a combination of free and paid services. The listing is made available at free of cost to get traction and paid service are included to generate revenue. Paid service might vary from online booking to consumer management system based on the domain of directory portal.

Directory Portal Business Model

FS brings a pictorial analysis of “Directory Portal Business Model” – basic concept, examples and development approach –

Directory Portals - Cash Flow Overview

Example 1 - Real State Portal

Example 2 - Doctor Search Portal

Example 3 - Restaurant Discovery Portal

Directory Portals - Approach to Develop Business Model

Directory portal alone is difficult to monetize but the probability of getting revenue through it by incorporating the related services is quite high. The time span that is required to develop business model around directory portal may vary depending on the traction that you are able to fascinate.

User interface is the key attraction for consumers of directory portal, so it should be designed in the most attractive and convenient way. The feedback of consumer is also of equal importance to understand the consumer need and scope of improvement in existing setup. So CRM channel shall be incorporated to understand the consumers.

Are you planning to startup a directory portal and hit the market? Here is the first cut planning for you – “Generic Analysis of Directory Portals”

Stay tuned with FS Labs to know more. Wish you luck for your startup.

Zomato Shut Down Operations in 4 Cities – Market Limitation or Unplanned Expansion

Zomato Shut Down Operations in 4 Cities – Market Limitation or Unplanned Expansion

There are two basic parameters that determines the chances of startup concept to become successful along with its execution excellence –

  1. The concept is about solving some problem that is being faced by mass so that people could easily get shifted to the new concept being provided over conventional solutions.
  2. The concept is strong enough itself to convince consumers to get addicted to it.

For example – a startup targeting the problem of commute has more probability of success while a startup providing customizable mobile designs has limited market volume. A computer game is its strong enough to get users addicted to it.

Hyper local delivery of food, grocery, consumer service etc are becoming center point of attraction for entrepreneurs, investors and consumers as they are solving one of the biggest problem of every household – Time Saving. Zomato, Food Panda, Tiny Owl, HouseJoy etc are common name of on-demand delivery services. Though these business models are being appreciated and getting loyal consumer base every day, the problem with these hyper local delivery startups is that they are having limited acceptance in terms of targeted cities, consumers and scalability.

Just after “Grofers shut down operations in 9 cities” its Zomato that announced to shut down their delivery operations in 4 cities stating that small cities are still not ready to accept the concept of delivery. According to Zomato “Business in small cities failed to take off despite aggressive marketing and accounted for less than 2% of the total orders placed on Zomato. Overall online orders are growing at a pace of 40% every month.”

FS analyzed the major learning from Zomato Shutdown –

FS Labs - Zomato Shut Down Operations in 4 Cities - Lessons for Others

[A] Consumer Analysis – Priorities, Problem and Perimeters

Consumers should be analyzed based on the following considerations – priorities of targeted consumer that determines their willingness to accept the model, problems that the targeted consumers are facing and the limits that they have while accepting the concept. FS analyzed the concept of Zomato- on demand delivery of food, and the major problems in its acceptance in small cities –

  • The problem that on demand delivery of food concept solves is time saving. So the targeted consumers are those that are having hectic schedules and willing for a provider to deliver food to them. The consumers of such need are majorly in metro cities as small cities people have relatively relaxed lifestyle.
  • The acceptance of on demand delivery of food is limited to those people that give priority to time over money. So the reach of Zomato concept is limited to people with minimum money constraint. People in small cities where 200-300 bucks per person for one time food is considers costly are definitely not the potential market for consumers.
  • People that prefer to go to restaurants for their food requirements from outside can’t be considered as potential market for Zomato concept. Hence the acceptance in small city is not as much as in metro cities.

Pankaj Chaddah, co-founder of Zomato quantified “We are shutting down the ordering business in Lucknow, Kochi, Indore, and Coimbatore. The size of the market is in these cities is small right now and is growing with time. We will re-launch when the time is right.” But FS believes that Zomato must have analyzed the behavior of consumer prior to their execution in small cities.

Here are the key learnings from Zomato Shut down Operations in Small Cities –

  • The problems and priorities of consumers must be analysed – the acceptance of consumers shall be evaluated in both ways – the people that you think will accept your concept and the mind-set of people to accept that concept.
  • The limitations of startup concept shall be decided beforehand – the positive and negative both side of your concept helps in choosing the right direction for movement.

[B] Expansion as per Need – Business Verticals, Geo Graphical and Related Services

Expansion of business shall be done in a pre-planned way. Started in 2008 as restaurant discovery and review platform, Zomato introduced its food delivery service in 2015. Though the expansion of delivery service was done after getting excellence in their core area, FS believes that Zomato shall have considered following while into moving other segment –

  • Business vertical of delivery service was already being covered by players like FoodPanda. So the expansion into the delivery segment was a risky game with consideration that the loyal consumer base would also remain stick to the same player.
  • Geo graphical acceptance of concept worldwide made Zomato believe that the other related services will also get accepted by consumers in any of the location.

Business shall be expended to other verticals, geo graphical and related services based on the available demand in the market. Acceptance and excellence in one vertical doesn’t decide the same in others. So founders must understand the need of market and expand their business accordingly.

[C] Marketing Approaches – Convincing, Comparing and Converting

Marketing strategies of any of the startups must qualify on following – power to convince consumers to use the product / service, benefits of startup concept as compared with existing solutions and finally converting them from visitors to consumers.

Zomato stated that their recent marketing strategies including television advertisements couldn’t make any significant increase in these cities. FS is surprised why Zomato couldn’t think of any other convincing market campaign like they did “pornographic marketing” previously based on the user pattern of surfing.

Here are the learnings from it –

  • Marketing campaign should be able to convince people to become addicted to the concept. For example – targeted marketing to household ladies could be a potential driver of traction to the on demand delivery of food as they are the major decision maker of food requirement.
  • Marketing should include the benefit of new concept over existing directly or indirectly so that consumers could decide to switch easily.

Comparison of Zomato vs Flipkart Acceptance in Tier II and III Cities

Zomato and Grofers business model was shut down in small cities because the acceptance was low while e-commerce players like Snapdeal, Flipkart claim that half of their sale is driven by Tier II and III cities. Here is FS Analysis of Hyper Local Delivery Vs E-commerce (electronics, apparel, fashion products, home appliances etc) acceptance in Tier II and III Cities –

FS Labs - Comparison of Zomato Vs Flipkart Acceptance in Tier II and III Cities

Stay tuned with FS Labs to know more.

Aggregator Business Model

Aggregator Business Model

Aggregator Business Model is getting increased day by day because of its ease of execution and large acceptance. For aggregator, it gives benefit of execution based on “Just in Time” while for individuals it gives benefit of large scale recognition.  Food, Grocery, Cabs, Daily Bus Commute every sector is getting aggregated by entrepreneurs under one roof of their business models. Ola, Shuttl, Grofers, FoodPanda, TinyOwl, Swiggy etc are some of the examples of aggregator business model.

In aggregator business model, the individuals of same domain are accumulated under one roof by some player and the commission per sale / use basis gets into the pocket of aggregator. Though the profit margin is limited to small percentage per sale/use but due to large volume the total revenue goes to higher limits. Other ways to monetize/ generate revenue are by registration fees, paid advertisements etc.

Aggregator Business Model 

FS brings a pictorial analysis of “Aggregator Business Model” – basic concept, revenue model, scope of improvement along with examples.

Aggregator Business Model - Cash Flow Overview

Aggregator Business Model - Break Even Analysis

Aggregator Business Model - Scope of Improvement

Cab Aggregator - Business Model & Scope of Improvement

Hyper Local Delivery Aggregator - Business Model & Scope of Improvement

Though aggregator model alone will give return on investment in long run as the break even volume is generally high, combined with other business verticals, alternative sources of revenue generation and operational excellence would definitely make the aggregator model profitable in shorter span.

If the funds are sufficient enough to spend and take hit, initial cash burn marketing tactics should be used to attract consumers and make your presence visible. Otherwise, the focus should remain on getting loyal consumer base by incorporating CRM tricks and achieving operational excellence. The long term vision of aggregator startup – to become market leader or to get consolidated by big player, shall also be kept in mind to align the activities and strategies of startup as per the target need.

Stay tuned with FS Labs to know more. Wish you luck for your startup.

Quikr Acquired Common Floor – Start of Sector Consolidation

Quikr Acquired Common Floor – Start of Sector Consolidation

Quikr and Common Floor both came to the Indian startup landscape in last quarter of last decade. Quikr focused on being an online classified portal and Common Floor tried its luck in solving the great “where can I get a home?” problem. Down the line after 7 years Quikr enjoys a healthy 30 million satisfied customer base and huge support of investors whereas Common Floor has been fighting a battle of survival as its fresh fund raising campaign was shown a black flag by investors led by Tiger global.

Over the past six months, Quikr has been diversifying into new businesses to boost its revenue model. The company is pushing into five new business segments—automobiles, real estate, jobs, services and customer-to-customer sales. Just after the four month of launch of Quikr Homes, Quikr announced to acquire the real e-state property portal Common Floor. Though no official disclosure was made to confirm the deal amount, the expected amount of deal is approx 120-160M $USD. After the deal of Quikr and Common Floor, Quikr is expected to be valued at around US$ 1.5 Billion based on the share-swap ratio.

Revenue Generation and Valuation – It’s Tricky!

During financial year 2015, Quikr generated a revenue around 25 Cr INR while Commonfloor’ revenue stood at 46 Cr INR. Despite generating almost 80% more revenue, commonfloor’s valuation was almost 80% lower than Quikr valuation. Quikr was near $1 Billion valuation and Commonfloor was valued at $200 Mn. Isn’t this fact hard to digest?

Actually the way investors put valuation to a company is not solely governed by the revenue generation. Companies with larger active customer base are given higher valuation because of the monetizing potential associated with this base which could be utilized in future through more aggressive marketing and winner takes all nature of business.

More than this the penetration of Quikr goes deeper than Commonfloor. Tier 1 & 2 city public has also got associated with the Quikr due to the opportunity of sale which Quikr provides. Its business model is just perfect for customer acquisition.

This generous valuation of Quikr has helped it in getting a funding of $346 Mn till date whereas commonfloor’s net funding stats are around $ 60 Mn only.

Quikr acquired Common Floor – A Win-Win Deal for Both

Since the inception of Quikr homes, Quikr group has been trying hard to build a solid base for its housing vertical. Investment of $10 Mn in Wonobo, a portal offering street view, and other acqui-hiring of IRX, an aggregator of real estate agents, are all part of Quikr’s strategy to strengthen its real state vertical.

FS comprehended the major drivers of this deal and analysed that the deal was a win-win situation for both the players –

FS Labs Quikr Acquired Common Floor - A Win-Win Deal for Both

Benefits to Common Floor – CommerFloor was facing problems of getting further rounds of funds due to its inability to monetize the portal. Tiger Global which is common investor in both of the players was not in alignment of further funds requirements of Common Floor. If one of the existing investors stops supporting, it would become difficult for any startup to get further funds as other investors see something amiss. Fund crunch and non-supporting Tiger Global could have given no better alternate than a merger with some other player. So merging was a good option for common floor to keep its operations running.

Quikr has an active customer base of 30 million and Common Floor also got access to this large base. Common floor and Quikr home together would be able to monetize the potential of this base by some agressive marketing.

Benefits to Quikr – With this acquisition, Quikr entered in the club of more than 1 Billion $ valuation companies. Quikr would get the benefit like technical support, experience through Common Floor for its business vertical of real state, Quikr Homes.

Pranay Chulet, CEO of Quikr, stated “We see great synergies between us and CommonFloor. We both believe in creating businesses that are strong on growth as well as monetization and have a tremendous cultural fit. With a highly successful recent campaign, launch of industry defining Street Vision, and now QuikrHomes is off to a great start in 2016. We expect this transaction to not only accelerate the growth of QuikrHomes, but also our other verticals.”

Together they would now be, hopefully, able to raise funds from investors who otherwise have started giving a cold shoulder to Indian real estate startups. Commonfloor’s domain expertise plus structured data and Quikr’s large customer base would anyway serve as the best assets for the combined entity.

Sector Consolidation – An Inevitable Phenomenon

At the initial stage of startup, the major focus of founders’ remains on getting loyal consumer base, improvements in services and standing against market competition. But once it get stabilized in its initial business vertical, the focus gets shifted to expansion in terms of market volume, geo graphical presence and business verticals. So, the phenomenon of sector consolidation comes into picture. Investors’ sentiment lies with the group which is gaining popularity and they try to pull out of the business where they are not able to visualize a profitable future. Association of two such players obviously creates a win-win situation for both the stakeholders –

  • Market leaders become more powerful by acquisitions of small players as the valuation of the joint venture increases. They share the positive points of each other and try to capitalise on the strength of each other.
  • Small players become stronger by getting support of biggies’ technology, experience, and brand name.

So, market consolidation is a phenomenon that is going to take one day and market would be leaded by big giants in their domain.

FS Labs Sector Consolidation – An Inevitable Phenomenon

Sector Consolidation – Major Events

Though “Quikr and Common Floor Deal” is not the first event of sector consolidation, it’s one of the remarkable events of the same with the aggregate and intentions tangled in it. FS compiled the list of major consolidation events of startup eco-system.

E-commerce Sector– The biggest event of sector consolidation in 2014 was by Flipkart by acquisition of Myntra with purpose of sector consolidation of fashion and life style products sector. Previously, Myntra had also consolidated the market of apparel by acquisition of SherSingh and Exclusively in 2013. Snapdeal also tried to consolidate the market of e-commerce by acquiring Esportsbuy in 2012, Shopo in 2013, Doozton and Wishpicker in 2014 and Exclusively and Freecharge in 2015.

FoodTech and On-Demand Delivery Domain – Foodtech and on-demand delivery services have proved their acceptance in hectic life style of Metro cities and hence the entry of large number of players in same domain has also started the consolidation. Foodpanda acquired Just Eat India and TastyKhana, hyper – local grocery delivery platform Grofers acquired SpoonJoy.

Transportation Sector – Gigantic and Unorganized sector of transportation has attracted a lot of players to develop their business model in this sector. Air, Train, Bus, Cabs, Auto, Carpooling all of the verticals are waiting to get consolidated by big players. The consolidation has already been started by the acquisition of TaxiForSure by Ola, Redbus and Yourbus by Ibibo.

Sector Consolidation – Consumer Benefits

Sector consolidation gives a lot of benefits to consumers –

  • Reliable Services – Entry of biggies in the all the related verticals of their business model are helpful for mass to get the reliable services. Technical backend, CRM strategies, Experience of these giants provide a trustworthy platform for consumers.
  • Cost Benefits – With sector consolidation players are able to share their services, consumers etc and hence the final cost of product/service get reduced for end consumer without cash burn and hence ensure the long term survival and availability in market.
  • Time Saving – With consolidation of services, consumer need not to keep searching for the best available option and hence saves the time of consumer.

Sector Consolidation – Organizational Benefits

Sector consolidation gives a lot of benefits to organizations –

  • Business Expansion – Sector consolidation helps in expanding the business portfolio of the companies of both the stakeholders. Instead of struggling with the new business vertical, its good to get an established market base and then expand it.
  • Combined Services – Combining the services, manpower, resources etc of the players helps in producing better consumer service and hence more trust of consumer.
  • Consumer Exchange – Exchange of loyal consumer base helps in making a strong market base and hence the more probability of revenue generation.
  • Enhanced Profitability – The combined services, technologies, manpower, resources etc helps in reducing the operational costs of the companies and hence enhancing the probability in long term survival.

Sector Consolidation – Lessons for Entrepreneurs

With this sector consolidation phenomenon by gigantic players, more acquisitions are going to take place in future. So the entrepreneurs who are targeting for their startup to get acquired in recent future must develop their business model in the following direction –

  • Business verticals enhancement for biggies
  • Supporting services of big players’ domain
  • Customer acquisition platforms for biggies
  • Service betterment portals for biggies

Wish you luck for your startup. Stay tuned with FS Labs to know more.

Myntra Merger with Flipkart – A Successful Exit or Strategic Acquisition

Myntra Merger with Flipkart – A Successful Exit or Strategic Acquisition

Myntra and Flipkart are two most common names of Indian e-commerce. Both started their journey in 2007, grew exponentially in terms of products, business verticals, fund, consumers, market share by changing their model continuously as per market demand and finally both merged together in 2014. The market exit of Myntra in 2014 is one of the successful and remarkable exits in Indian startup eco system.

Why the online fashion industry has gained so much weight? Flow of money and rising per capita income (middle class) has fueled Improving standard of living. Easy access to internet and explosive progression in the number of  smart phones users, availability of much wider range of product – domestic and imports, competitive prices, development of million dollar startups have increased the acceptance of e-commerce in India since last decade. Myntra, Jabong, Snapdeal, Flipkart, Paytm etc are shining due to acceptance for solving the cost, time, quality and delivery concerns of people.

How Online Fashion and Apparel Industry Evolved with Myntra

Entry of Ecommerce and its acceptability to customers paved a way for boom in online fashion market. Number of players emerged and competitive pricing ensured that middle class consumer would now be presented with fashion related products which were earlier out of their reach. General public of metro cities, which was riding on the wave of better standard of living, was now able to think beyond brick n mortar stores and was ready to experiment by buying cloths and beauty items from virtual stores.

Once word of mouth pick the pace and it swept the tier 2 and tier 3 cities. Myntra brought the branded products in the reach of common people and their inventory based model ensured lesser failure in meeting delivery demands. By exploring private labeling they altogether presented customers with quality products on 30-40% lesser price than branded products. It ensured Myntra became darling of Indian Fashion and apparel industry.

Myntra’s customer service was fabulous and its “champions” ensured they never left any customer’s problem unattended. Serving customers as they ask, before time delivery and giving benefit of doubt to customers was the methodology which set the tone to bring Myntra to the top of Fashion and apparel online sale.

FS Labs Myntra - Typical Timeline

Myntra – Typical Timeline

2007 – Myntra was founded by MukeshBansal, AshutoshLawania and VineetSaxena with a focus on on-demand personalization of products, gifts and merchandise. In the time span of 3 years, Myntra claimed to offer personalized products like T-Shirt, Mugs, Mouse pads, Calendars, Watches etc across 33 categories and ship to 900 locations across 40 countries worldwide.

2011 – Myntra changed its business model from personalized gift items to fashion and lifestyle products. Myntra offered products from 350 Indian and International Brands by 2012.

2012–Myntra acquired SherSingh, the private label online brand specializing in sports-inspired lifestyle apparel for man and women and Exclusively, a boutique ethnic wear portal and also the parent company of SherSingh.

2013 – Myntra acquired Fitiquette, San Francisco based technology solution which is a virtual fitting room to expand its technology platform and drive transformational change in the online shopping space in India by providing world-class experience to its customers.

2014 – Myntra was acquired by Flipkart with the deal value being approx US$ 300 million, though no official data was disclosed by any of the companies. Myntra still continued to operate independently. In 2014, Myntra’s portfolio included about 1,50,000 products of over 1000 brands ranging from international brands to designer brands and distribution area of around 9000 pincodes in India.

2015 – In May 2015, Myntra shut down the transactions via its website and moved to App-Only business model. Myntra claimed to have 95% internet traffic and 70% sale by mobiles users. Also, in May 2015, Myntra acquired Native5, Bangalore based mobile app development platform to strengthen its mobile technology.

Myntra Merger with Flipkart – A Win-Win Deal for Both

FS analyzed and comprehended the major factors that forced Myntra and Flipkart to merge their ventures –

[A] Flipkart and Myntra Merge – Business Expansion and Market Consolidation

Flipkart has already acquired a large consumer base in e-commerce of Books, Electronics Goods etc. So instead of struggling with its rudimentary vertical of Fashion and Lifestyle Products,  the acquisition of well trusted player of same domain, Myntra, was upright choice for Flipkart. More than 150k product catalogue of Myntra helped Flipkart in enhancing its business vertical of Apparel.

Flipkart co-founder and CEO Sachin Bansal stated about this acquisition that they, at Flipkart, believed that they wanted to be leaders in every segment and fashion was a category of the future, this acquisition would help us become leaders in this category.

Mukesh Bansal, Founder of Myntra, stated that they wanted to exploit their mutual synergies (like the technology at Flipkart and market leadership of Myntra) in order to accelerate their growth.

Flipkart also ensured the sector consolidation of e-commerce by acquisition of Myntra. It’s like becoming one single known name when online shopping comes into mind. So the best strategy for market consolidation of e-commerce is by incorporating all possible verticals into one single business model.

FS Labs Myntra Merger with Flipkart - A win win deal for both

[B] Consumer Base – Loyalty, Sharing and Acquisition

Before the Deal though e-commerce had made a remarkable presence in startup eco-system ,  loyalty of consumers was still in doubt. The availability of large number of players of same domain, cash burn tactics for attracting customers, discount oriented mindset of public etc were some of the reasons that were creating large turbulence in penetration and loyalty. Also, since the acquisition cost of consumers was high for e-commerce players and switching cost was non-existing so they both needed a large pool of loyal customers. Through the deal Myntra and Flipkart were able to combine their loyal consumer base into a common pool.

Myntra claimed to have 8million registers and loyal user base while Flipkart has 18 million. So the deal developed a large loyal market volume for both of the players.

Addressing the consumer behavior and acquisition, Sachin Bansal stated that Cost synergies were not their priority for this deal, it was about scaling the two businesses in much faster to expand market share in fashion.

[C] Market Competition – Biggies, FDI and Future

Market competition that both of the players, Myntra and Flipkart were facing was huge. All the marketing capturing strategies could easily be replicated by biggies like Snapdeal, Amazon, E-bay – strong enough in terms of funds, technology and manpower.

Also, the regulation of FDI was a big concern for both of the player. As the government was planning to allow 100% FDI in retail, players like Amazon, Ebay, Walmart could have introduced their own products and shifted to an inventory based model. Earlier model of Flipkart was also inventory based before they faced capital issues and shifted to market based model.

The combined market share of both the players was already 50% which was expected to increase up to 70% after this apparel concentrated acquisition. So the deal was a win-win situation for both to stand against the market competition in long run.

[E] Loss Reduction by Combining the Services – Technology, Consumers, Logistics

So far, none of the e-commerce player had reported to achieve profitability in their business model. High cash burn, forward and reverse logistics cost in poor infrastructure, technical backend cost etc were the factors contributing to this continuous loss of money for these Ecommerce firms.

In 2013, Flipkart lost Rs 281 Crore (US$47 million) on revenues of Rs 1,180 Crore (US$197 million) while Myntra lost Rs 134 Crore (US$22 million) on revenues of Rs 212 Crore (US$35 million).

Combined services of both the players, shared logistics, technical backend, consumers would help them in reducing this loss over revenue. So the deal was a win-win situation for Myntra and Flipkart.

[F] Investors Long Term Vision – IPO

Fashion is the business which is most profitable amongst the all products which are being currently sold in online market places. And all other verticals introduced by Flipkart were nowhere near the margins which fashion vertical was generating.

According to Indian stock exchange, a company that is losing money can’t come in picture for Initial Public Offering. So Myntra as well as Flipkart were not able to go for IPO listing due to their money loss and also have threat of running out of cash in near future.

IPO being the ultimate goal of VCs and the investors of both the companies Myntra and Flipkart are same, Tiger Global, Accel Partners etc, the combined entity would be able to run longer with their available funds and reduce their loss and become profitable in coming future.

So the deal would help investors to offer IPO sooner than running separately and make return on their investments earlier.

[G] Rise of private label players – High profit margins

One major advantage to the retailers in India, and which works in favor of private labels, comes from the fact that Indian consumers are less brand conscious and more quality and freshness conscious. Retailers have increased their profits by offering private label products since there are huge margins to be achieved from private label products, which are 30-40% higher margins than branded products. Retailers are not any more offering low quality products for a lesser price, but they are creating new level of differentiation, better pricing for a good quality product and new merchandising and promotion strategies.

Flipkart which was earlier into branded product selling saw a better option through Myntra’s private labeling strategy. Myntra’s association with numerous private label players was another added advantage.

Stay tuned with FS Labs to know more.

Grofers Shut down Operations in 9 Cities – Lessons for Small Startups

Grofers Shut down Operations in 9 Cities – Lessons for Small Startups

On demand delivery services came on Horizon two years ago when startups like Zopnow, Grofers, PepperTap, BigBasket etc started attracting consumers, investors and job seekers. With estimation of US$ 400 billion worth, unorganized grocery market has become one of the center points of attraction for entrepreneurs to develop their business model.

These on online shops tried solving the grocery delivery problem in two different ways –

  1. Some considered that grocery delivery is more of a logistics based problem because of the time bound nature of the service.
  2. Others took it as procurement based problem and worked on creating inventory and managing it properly to serve customers on time.

Hyper local model came into picture as it was time efficient and it worked with minimum inventory.

Since last couple of month, Grofers – Gurgaon based hyper local delivery startup, remained in news. In November’15, Grofers came in news because of US$120 million in funding from Japan’s SoftBank Corp., Russian entrepreneur and venture capitalist Yuri Milner and existing investors Tiger Global and Sequoia Capital. In December’15, Grofers was in news because of resignation of its CTO Varun Khurana. In January’16, Grofers came in news because of its sudden decision of shut down of operations in 9 cities.

FS brings an exclusive analysis of the major learning from Grofers shut down operations in small cities-

FS Labs -Grofers Shut down Operations in 9 Cities – Lessons for Small Startups

[A] Develop the Business Model – Acceptable, Scalable and Sustainable

Business Model of startup must contain following qualities in it – acceptable to people whom it is targeting, scalable in long run – geographically as well as other verticals and sustainable in terms of revenue generation. FS comprehended the problem with Grofers business model that caused it to shut down its operation in 9 cities–

  • Hyperlocal delivery model would be acceptable by those consumers only who either want to save time or don’t have time in their busy schedule to go out for buying items needed for daily chores and obviously have no constraint in terms of cost. So the acceptability of model is limited to the cost and time based consumers.
  • Scalability of hyper local delivery is limited to metro cities only as the targeted consumers are more in those areas only.Small cities like Ludhiana, Coimbatore, Kochi, Mysuru, Nasik, Rajkot etc are not good choice for hyper local delivery business model as people have ample time to get the grocery stuff by themselves and are more cost concerned.
  • Since the revenue is limited to commission per order, so the model seems less sustainable after calculating the other expenses like delivery cost, technical and managerial manpower cost and other operational expenses.
  • Tier 1 or tier 2 cities have their daily consumable’s supplies routed through local vegetable/ fruit/ consumable sellers who already work for wafer thin margin. Most of the customers, who are less tech savvy, are loyal to the vendors and do not out rightly accept the sudden discount sale offered by the new startups.

Grofers co-founder Albinder Dhindsa said that they ran a series of marketing campaigns including television ads in those cities to test the markets and see if the volume picks up but smaller cities were not ready for hyperlocal business yet, once they are, Grofers would reconsider the strategies. But FS believes that all such campaigns/ feedbacks surveys must be conducted prior to the execution.

Following are the learning for startups / founders from this incident –

  • Thoroughly understand the acceptance of your concept prior to execution of your business model. Feedback surveys, prototype run, consumer behavior analysis are few of the techniques to check the acceptance of new concept by mass.
  • Analyze the scalability of your business model. Scalability of business model is a combination of consumer acceptance, convincing marketing strategies and consumer constraints. So scalability of the model shall be analyzed to avoid the issues on expansion.
  • Check for the Sustainability of business model. The ultimate aim of any of the business models is to ensure the profit generation in long run. Business model with limited revenue faces problems in operations.
  • Reliability of survey results are sometimes ambiguous. Sometimes the chosen few do not represent the actual consumer behavior. And this happens more often in those cases where the player is altogether a new face/ new venture. Acceptability of new business idea is quite low in tier 1/ tier 2 cities.

[B] Analyze the Market – Market Volume, Targeted Consumers and Competitors

To understand the market for your startup concept and targeted consumers at the initial stage is essential to align the long term strategies of the startup. Market volume and targeted consumers estimation helps in determining the right marketing strategies to capture the market. Competitor’s analysis helps in determining the correct expansion strategies. FS comprehended the problem with Grofers market analysis that caused it to shut down its operation in 9 cities –

  • Though everybody needs Grocery in daily life, hyperlocal delivery models are limited to tech savvy population. In metros, the population of bachelors and office personnel are more as compared to tier 2 and 3 cities. So the market volume for hyper local delivery has more potential is metro cities.
  • The competitors for Grofers might be players of same domain, e.g. PepperTap, BigBasket in metro cities but in small city every single shop of Grocery becomes competitor as generally they provide home delivery service on call.

Grofers blamed small cities for its shut down of operations in 9 cities stating that small cities are not ready to accept the hyper local delivery yet. But FS believes that potential market volume and competitors must be analyzed prior to execution to mitigate the expected risks.

Following are the learning for startups / founders from this incident-

  • Estimate the market volume based on the targeted mass of your startup concept. It helps in determining the expected sales and hence marketing strategies and expansion plan.
  • Analyze the market competition very well, big or small, direct or indirect. Market competition of other players should be handled tactfully. Small competitors could easily be handled by achieving operational excellence, customer relationship management and cash burn. Biggies should be handled with more strategically like consumer attraction through discounts, introducing more verticals, or changing the model in right direction of acquisition.

[C] Expansion of Business Model as per Market Need

“Growth for the sake of growth is the ideology of the cancer cell.”- Edward Abbey, American Author and Environmental Advocate

Expansion of business model should be done as per the need of market. General trend of startups is to start their concept with one city and expending it to other cities soon after funds flow. The problem with unplanned expansion is that the loopholes in the system don’t become clear, business model do not become self sustainable and on a large scale it becomes difficult to handle it simultaneously once encountered.

Grofers stated after shut down in 9 cities, “Our focus is to ensure that processes, systems and operations in the current 17 cities are fully efficient. For the next few months we are not looking to grow to any new city.” FS believes that all such expansion must be fully planned in advance and should be done only after troubleshooting all loopholes and problems faced during small scale execution.

Following are the learning for startups / founders from this incident-

  • First target should be to capture all the potential market of your business vertical or geographical location as it determines the potential failures of large scale system.
  • Once the excellence is achieved in one vertical, other verticals/ new geographical location shall be introduced to keep the smooth run of business.
  • Maturity of the business and its acceptability to the customers are the major check points.

[D] Pre-plan the Activities – On each of the Vertical prior to Execution

Every single activity that you are going to do requires at least some planning. For example, if you want to prepare a cup of tea, it requires planning in terms of checking the availability of all the raw material, heating element, pot etc. Tasks like executing a business model shall be pre-planned on each of the vertical – scope of work that needs to be done, schedule for each of the activities, cost associated or assigned to each activity, quality parameters, resource management, risk and opportunities, communication flow, integration of all the verticals etc.

Grofers stated “We have most of our hiring done, particularly those that require heavy manpower during May and June. We are more focused on stabilizing our businesses. We are now concentrating on expanding our categories. We want to achieve few of our internal targets before we think of increasing our capacities. This would take about two to three months.”

It’s good news though that Grofers doesn’t enter the list of startup- hiring and firing rapidly like Housing, TinyOwl, Grabhouse etc. They have offered their work force to switch the bases to the more successful cities.

Lesson for startups is that move ahead with proper planning – execution plan as well as risk mitigation plan.

Read here about the learning from major events of startups in year 2015.

Wish you luck for your startup. Stay tuned with FS labs to know more.

Indian Startup Year 2015 – Major Events and Learning

Indian Startup Year 2015 – Major Events and Learning

2015 remained an incredible year in Indian Startup Eco – System. With young, talented and dynamic entrepreneurs entering into startup culture, people found the effective solutions for the daily life problems. Food, Clothing, Shelter and all the basic necessities like transportation, healthcare, education, communication etc were being addressed by entrepreneurs via their ventures. Cash burn tactics of biggies attracted large mass to become tech savvy rather than remaining dependent on conventional solutions. Total amount of $9 billion was invested in Indian startups over 1000+ treaties.

Success and failures of startups in 2015 developed a lot of lessons for entrepreneurs that should be taken care in 2016. For example – acquisition patterns of biggies revealed a guide map for entrepreneurs if they wish to get their startup acquired by them, failures/shutdown of small players revealed that the unplanned movement would bring not fruits.

All the major events and news being covered on startup news portals, FS brings an exclusive analysis of the learning from 2015 that are important for startups in 2016.

FS Labs Indian Startup Year 2015 - Major Events and Learnings 1

[A] Event – Acquisition Pattern was Fairly Strategic

Description – The year 2015 remained a remarkable year in startup eco system in terms of acquisition of startup. Flipkart acquired Adiquity and Appiterate to enhance its technical back end to ensure the better customer relationship management. Housing acquired Indian Real Estate Forum, Reality Business Intelligence, Home buy 360, Plat and BigBHK to enhance its relationship with its stakeholders – consumers, agents, owners, tenant. Snapdeal acquired Freecharge, Reduce Data, Letsgomo and MartMobi to enhance its business verticals. Ibibio group acquired a stake in Djubo to enhance its CRM. Ola acquired Taxi For Sure in March 2015.

Learning – Following are the key learning from “Startup Acquisition Pattern – 2015”, that need to be taken care in 2016 by entrepreneurs for their startup to get acquired by some big player –

  • Same Model with Same Product has very limited probability of acquisition as the big player can easily overtake the model with its name, trust and tactics.
  • Same Model with Different Product also has very limited probability of acquisition as biggies can easily incorporate that business vertical in their existing setup.
  • Different Model with Same Product can easily be replicated by biggies with their huge resources. So the probability of acquisition is very less.
  • Business Models that acts as further support for biggies in terms of traction, CRM, business verticals etc have more probability of getting it acquired.

[B] Event Unplanned Hiring by Startups caused Massive Firing

Description – Throughout the year startups remained in news for their massive firing of employees. Housing managed to remain in news more because of its founder and CEO – Rahul Yadav firing and then for massive firing of employees – 600 employees in August and 200 in November, rather than its new features and market capturing strategies. In September, TinyOwl came in news for firing its 160 manpower. PepperTap laid off its 40 employees in 2015. Grabhouse also entered into this gradient by firing more than 150 employees in year end.

Learning – Following are the key learning from “Startup Hiring and Firing – 2015” that needs to be taken care by entrepreneurs in 2016 –

  • At initial stage, when entrepreneurs have limited funds, the selection of cofounders should be done on the basis of skillsets required, personal relationship etc so that the friction on startup progress trajectory could be reduced beforehand.
  • At the funding and expansion stage, the manpower should be planned more strategically – combination of contract employees, permanent employees and inters. Interns should be included to meet the targets in short run, contract employees should be recruited aligned with the expansion plan and permanent employees should be recruited aligned with the long run targets of the startup.
  • For stability stage, the manpower planning should be aligned in a way so that the contract employees get reduced by their terms of contract period and the required permanent manpower remains there to run the smooth operations.

[C] EventSimilar Business Models were not able to stand against Big Players

Description – The big players became aggressive enough to adapt their business model as per market need or to introduce new verticals to kick the small players out of the market. Trevo, who tried to become Ola/Uber of Intra-City Bus Travel, was shut down within couple of month of its operations as Ola and Shuttl were strong enough to be given any competition. Taxi For Sure was not able to stand against big giants like Ola and Uber so it was sold to Ola.

Learning – Following are the key learning from “Big Players Strategies – 2015” to be taken care in 2016 –

  • Biggies are strong and aggressive enough to introduce new verticals into their business model. Apart from this there cash burn market capturing tricks are sufficient enough to beat small players. So if the direct competition is of some big player, it is advised to move ahead in a strategic way to make your presence remarkable against biggies.
  • Small players or recently funded players can easily be trampled by achieving better operational excellence and customer relationship management.

[D] Event – Unplanned Movements of Startups caused Organizational Issues

Description – Every activity of startup should be aligned with its long term vision, so the movement in each of the business vertical should be pre planned and aligned with the resources availability and long term vision. RoadRunnr remained in news because of its sudden changes in policies that caused organizational issues. Ola Shuttle and Shuttl were suspended because of not following the government rules and regulations guidelines.

Learning – Following are the leanings from “Unplanned Movements of Startup – 2015” that are important for 2016 –

  • Planning on each of the verticals should be done before hand – scope of work that needs to be done, schedule for each of the activities, cost associated or assigned to each activity, quality parameters, resource management, risk and opportunities, communication flow, integration of all the verticals etc.
  • Revenue Model and Scalability Model shall be planned beforehand as it helps in funds and other resources tracking – availability vs requirements.
  • Legal Requirement and other verticals – shall also be pre planned to avoid issues in long run.

FS Labs Indian Startup Year 2015 - Major Events and Learnings 2

[E] Event – Market Based Models became Centre Point of Attraction than Inventory/ Self Models

Description – Taxi, Bus aggregators like Ola, Uber, Shuttl were successful business models of year 2015. Grofers, Peppertap also proved their acceptance by mass in Grocery aggregators. FoodPanda, TinyOwl, Swiggy etc were the common name of food delivery aggregators. Urbanclap, Housejoy brought home service providers on one single platform.

Learning – Following are the key learning for entrepreneurs –

  • Aggregators platforms have high rate of scalability in terms of geo graphical presence, more business verticals etc.
  • Inventory/ Self platforms have limitation on scalability depending on funds availability but profitable as the number of stake holders reduces in it.

So, entrepreneurs should carefully plan their business models so that stake holders, profitability and scalability could produce the best results combined.

[F] Event – “Housing Spectacle – Rahul Yadav Saga” Companies don’t run by single person

Description – Housing remained in news since the start of 2015 because of its founder and VC drama. Eventually after reciprocals of a lot of events, Rahul yadav was fired from Housing. VCs as well as Rahul Yadav both tried to prove their point correct, but ultimate result was both suffered in absence of each other. Housing lost its evaluation while Rahul Yadav made his image as bad boy of Indian startup.

Learning – Following are the key learning for entrepreneurs –

  • Companies need to take care of all the concerned stake holders, so founders should remain open enough to listen to other people and maintain the balance between ego and brain.
  • Founders might be technically sound but it doesn’t make them good business expert. So they should also be ready to seek advice from the experts.
  • Investors should also understand the point of view of young entrepreneurs and support them in marking employee friendly work culture.

[G] Event – Sector consolidation started

Description – Sector consolidation started by biggies. Snapdeal acquired Freecharge to consolidate the user base of e-commerce and mobile platform addicts. Ola acquired Taxi For Sure to consolidate the market volume of Cab Aggregator. Paytm tried to consolidate the market volume of Mobile Recharge Transactions of E-commerce with the funds of Alibaba.

Learning – Following are the key learning for entrepreneurs –

  • Sector consolidation target of biggies shows that more acquisitions of same or similar domain are going to take place in 2016.
  • Small models addressing the further verticals/ services of biggies will get acquired soon.

[H] Event – App only phenomenon remained in highlights

Description“App –Only” phenomenon was introduced by biggies like Flipkart, Amazon, Mynta by giving offers only on App to drive traffic to enhance App based market volume. Myntra take the biggest move by going “App-Only” by shutting down its web portal in May. Flipkart, Snapdeal also focused on their light version of website. Makkhichoose came in picture when it tried to beat myntra App Only strategy by fetching data from App and offering it on Myntrality, though it was shut down within couple of days.

Learning – Following are the key learning for entrepreneurs –

  • Web as well as App should be developed in parallel to target the large market base.
  • As the data of biggies revealed that the mobile based transactions are more than 80%, App consolidation may be a good focus area for entrepreneurs.

These were the major learning from Indian Startup Year 2015 that FS believes would be helpful for entrepreneurs. Wish you luck. Stay tuned to know more.

Fuckedup is a phrase that captures all the emotions associated with the startup journey.

If no concept clicks in your mind, you feel frustrated. If you are not able to manage a proper team for your startup, you feel irritated. If funds, revenue, expansion etc don’t take place as per planning and expectation, you feel infuriated.

To keep you away from all these feeling, FS is continuously providing you to the best guidelines, practices and market trends. Please share your feedback at contact@fuckedupstartups.com