Excl: Fashionandyou trying to reboot with $50M new funding from existing investors, others

Smile Group is trying to make a comeback in the lucrative and fast growing lifestyle apparel and accessories e-com space after losing its early mover advantage when markets consolidated around the top two players—Myntra and late entrant Jabong.

Fashionandyou, arguably the biggest e-commerce venture of the Smile Group which had incubated a string of internet businesses, had raked in around $45 million from Sequoia Capital, Norwest Venture Partners, Nokia Growth Partners and Intel Capital during 2010-11. This made it the most funded player among its peers at that time.

However, Myntra later raised more and sped away along with Rocket Internet-backed Jabong and the two became the top two players in the space.

Goldsquare Sales India Pvt Ltd, which is behind Fashionandyou.com (the front end e-commerce site is run by a separate firm), is now raising a fresh and its largest round to date which could once again help it expand its business.

It is raising $50 million in a new round from existing as well as new investors and has already secured $20 million as the initial tranche for the same. The rest of the money will pour in before March 2015, top group executives told Techcircle.in.

"We have secured 40 per cent of the total funding so far and plan to close the entire round latest by the first quarter of the next calendar year," Harish Bahl, founder and CEO, Smile Group, said.

This comes within months of the company raising $10 million in its Series D round. The fresh funding would take the total funds raised by the money to around $105 million.

As reported first by Techcircle.in, the firm had also roped in an investment arm of NYSE-listed Chinese discount retail specialist VIPshop. It is also known to have participated in the fresh funding. Bahl declined to comment on whether VIPshop is involved in the transaction but said that some new investors are joining in including a few Asian and US-based investors. An email query sent to VIPshop did not elicit any response.

The money being raised will be invested in customer acquisition by increasing in brand visibility and improving technology.

Fashionandyou is also coming out with advertising on television which it hopes will help it increase presence in tier I and further reach out to tier-II and III cities.

It would also be spending in sourcing and distribution and had recently opened procurement hubs close to vendors in Surat and Mumbai to improve delivery timelines. The firm is planning to open more hubs in Bangalore.

In addition, it is revamping the website to optimise it for mobile phone viewing and is coming with an Android app.

"Fashionandyou remains the leading flash sale company in India. The team has the advantage of a well-established brand and a loyal customer base and we are very supportive of their efforts to build a long lasting business," said Shailesh Lakhani of Sequoia Capital.

Another funded flash sales lifestyle e-com venture is 99labels.com, which had previously raised funding from Info Edge (India). Although the site is still active, Info Edge had last year written off its investments.

Reboot time

The company, which got left out as Myntra and Jabong emerged market leaders, is trying to redo its business model.

While earlier it was largely a flash sales and deep discount site for premium and luxury labels, it is now pivoting to a wider platform where it will also offer fresh labels by collaborating with designers.

"If you have to build a billion dollar, that's (only luxury labels) not the market to be in," said Aasheesh Mediratta, CEO, Fashionandyou.

"Seventy to 80 per cent of sales are coming from curated designs now," he claims.

The firm says it is doing monthly gross merchandise value of around Rs 27 crore ($4.5 million) but has set an ambitious target of becoming a billion dollar company firm by 2018.

"We are looking at 15 to 20 per cent growth month on month," Mediratta added.

The company currently has tie-ups with 100 exclusive brands and labels including international and domestic players, apart from 300 privileged brand tie-ups.

Currently one-sixth of the company's revenues are coming from exclusive sales including for products for which it holds first-right-of-refusal for sourcing. The e-commerce player expects it to grow to 33 per cent or one-third of total mix by March 2015.

The overall revenue coming from apparel stands at 62 per cent, home and living generates 12 per cent of revenues and the rest comes from accessories including cosmetics and others.

Fashionandyou says it has a total vendor base of 1,630.

Challenges

The firm will still face tough competition from its two larger peers as well as Koovs, which is associated with London Stock Exchange's AIM market listed Koovs Plc.

In fact,  Myntra, now owned by Flipkart, which itself is ramping up its apparel sales vertical, also owns Exclusively.in, which specialises in designer wear e-tailing.

With Amazon and Snapdeal adding to the mix, the top horizontal e-com firms are also pumping up action to push up sales of apparel in their portfolios.

There are also several other apparel sellers online, many being backed by VCs who are trying to get a piece of the market.

Indeed, the high margins in apparel e-tailing make it a lucrative market to be in if the execution is done right.

Fashionandyou, which was co-founded by Bahl and former Yahoo India sales director Pearl Uppal in early 2010, had seen through a tough period where its chief Pearl quit the company two years ago to start her own incubator 5ideas Startup Superfuel along with husband Gaurav Kachru.

It also saw through what was seen as an unsuccessful inorganic expansion move by acquiring Urbantouch.com but later shut the site.

If the firm's plans materialise, this may turn out to be its second coming.

(Edited by Joby Puthuparampil Johnson)