How Clovia plans to go after customers in tier 2/3 cities with an omni-channel strategy

Online lingerie retailer Clovia is focusing on tier 2 and 3 cities as it tries to carve out a niche for itself in the Indian lingerie market. Realising that 60% of its sales are coming from tier 2 and 3 cities, the platform is coming out with new products and designs based on customer feedback from these cities, even as it draws up an omni-channel strategy for these under-served markets.

"Tier 2 and 3 cities are where the next wave of internet growth is happening. The aspiration for brands and the unavailability of high fashion products gives a perfect reason for brands with a strong web presence to reach these pockets," Pankaj Vermani, CEO, Clovia, told Techcircle.in.

Some of the tier 2 and tier 3 centres where Clovia, run by Purple Panda Fashions Pvt Ltd, has seen good traction are Panchkula, Udaipur, Vellore, Bareilly, Siliguri, Dibrugarh, Alwar, Bhatinda, Agra and Nagpur among others.

"Teenager wear, lounge wear, nursing wear for new mothers and yoga wear are some of the soon-to-be launched product categories," said Vermani. "Our average order value is almost similar in all the three tiers,so pricing has not really played that big a role so far."

Anil Joshi, managing partner of Mumbai based early stage venture capital firm Unicorn India Ventures, that has investments in the consumer internet space, said a large young population and increasing penetration of mobile internet offers a bigger canvas for lingerie e-tailers and higher consumption for potential customers.

"Typically, most offline stores that sell lingerie wear are restricted in their choice of offerings as well as price range. An online model not only offers several options which otherwise is not available, but also serves a genuine demand," said Joshi.

An omni-channel strategy

Clovia has also set up 'stop and shop' stores at eight major airports in the country, which is also helping it understand customer preferences better, while raising footfall and customer awareness about the brand. These are in Delhi, Mumbai, Chennai, Hyderabad, Kolkata, Lucknow, Guwahati and Goa.

Encouraged by this, the company is also looking at experimenting with more such stores, the first of which is coming up in Bangalore next month.

"Eventually, it will have to be an omni-channel strategy, but internet is currently giving a super thrust to our business," said Vermani. The focus on the online model, will however, continue for at least the next two years, he said. "The Indian lingerie market is a $3 billion opportunity and barely1% of it is online."

TCM Sundaram, founder and managing director, IDG Ventures India said that branded lingerie, which accounts for less than 20% of total lingerie sales in the country is significantly under-penetrated due to unfriendly retail experience. This problem can be solved by online sales and the category can't be handled by any horizontal player due to the depth and width required in the merchandise. IDG Ventures India is also one of the backers of Zivame, a leading player in this segment.

"The online shopping audience is approximately 50 million out of which women account for over 30 million now. We expect online population to reach 600 million by 2017-18 and 125 million by 2019-20, out of which women should account for 50 million. At an average spend of $30 per user per annum, the online lingerie market opportunity can be as big as $1.5-2 billion by 2019-20," Sundaram added.

Building up the inventory

Most of Clovia's product designs are based on consumer feedback. This is done through a tool called requirement simulator where the sales pattern and production is matched against customer feedback. This also helps Clovia stock those SKUs which are more in demand.

Clovia claims its unit economics allows it offers incentives based on the higher gross margins it clocks on its sales, which can be as much as 60%.

"Unlike traditional players, we don't cede 40% margin to channel partners and this gives us the leeway to offer incentives to customers," added Vermani. "The prevailing offline model is always a retailer driven market and customers have no say in it."

Vermani claimed 100-250 new designs are introduced every month and its recently launched swimwear and shapewear sections are some of its fastest growing categories. Clovia currently ships around 2.5 lakh shipments a month and aims to bring the number to 5 lakh within the next 2-3 quarters.

The startup claims to have seen three times growth in terms of dispatch, with 60% of overall sales from its own stores. The lingerie e-tailer, which has an inventory model, also sells its products through online partners that include Flipkart. According to Vermani, large format stores have already expressed interested in stocking its products.

Clovia outsources its manufacturing to third party facilities, but takes care of the raw material procurement and design. This enables it have a lot of SKUS. Likewise, the company owns a 30,000 square feet warehouse in Delhi to store its inventory and hopes to double the space in Delhi by the end of this year. Some of its inventory is also stored at its online channel partners' fulfilment centres.

The company which claims to have achieved operational profitability, may look to raise its next round of funds within the next six months. According to Vermani, board level talks for this may be initiated over the coming weeks.

"We are currently well covered as far as our finances are concerned. However, talks about next stage of funding is due at a board level," said Vermani.

It had raised an undisclosed amount in Series A funding from IvyCap Ventures in June 2015.

According to information available with VCCEdge, the data research platform of VCCircle, for the year ending March 2015, Clovia clocked net sales of Rs 18.6 crore and gross expenditure of Rs 20.3 crore with a net loss of Rs 1.7 crore.

Formerly known as Cloe, the startup was founded by Vermani and his wife Neha Kant along with friends Suman Choudhry and Aditya Chaturvedi in 2013. The company was renamed in order to better align the name with its future strategy and product roadmap.

In the online lingerie shopping space, Clovia competes with startups such as Cilory, HerStyle, PrettySecrets besides Zivame. Zivame is also currently the most funded in this space, having raised $52.44 million.

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