Building the next-gen fashion retail giant | Ace Turtle
What does it take to build an organisation that is genuinely omnichannel from the ground up?
That is the question that Nitin Chabra, founder of Ace Turtle answers in this episode!
If you speak to any fashion retailer, you will come away convinced that the future of retail is omnichannel. But what exactly does omnichannel mean?
It means that you build an organisation in which your online sales and offline sales are not working in different silos, but are complementing each other. Customers may visit your store to discover products, and then buy them online.
If you can get the visibility of customers and fulfil their needs seamlessly across channels, then it is a winning strategy for the new normal.
Today, Ace Turtle is a 55 million-dollar fashion retailer behind some of the most loved brands in India and is truly setting a benchmark for retailers to go omnichannel.
Nitin shares his journey from founding Ace Turtle as a SaaS venture, helping brands become omnichannel, to the pivotal aha moment of becoming a retainer themselves!
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Additional readings:-
2.Vertical Commerce: The next chapter of the retail industry
3.Technology implementation critical for omnichannel retailers
4.Lee, Wrangler to transform India biz to omnichannel entities
5.Ace Turtle enables puma, fossil, arrow and ray ban slash omnichannel transformation cost
Read the text version of the episode below:-
Nitin: Hi, I'm Nitin. I'm the co-founder and CEO of Ace Turtle.
So I started off my retail journey with the Arvind and, there, I worked with them for about close to seven odd years. When I left, there was Arrow lead Wrangler. There were the three main brands. Tommy had just been launched. and we, of course they had Flying Machine, Newport and their Mega Mart, what they called, on the value side. That was the, portfolio they had.
Akshay: And some of these were in-house brands and some were franchisees.
Nitin: Yeah, Flying Machine and Newport and Ruff and Tough these three were their own brands. Excalibur as well. Now I remember four brands were their own. of course Lee Wrangler, US Polo was just about signed by when I left. And Tommy they were all either licenses or master franchisees.
Akshay: And in a master franchising agreement, you are essentially doing everything from manufacturing to selling just that under the guidance of the brand. And you are giving a royalty to the brand.
Nitin: In case of master franchise, the general norm is that means you can't, your own product. You have to buy product from there, but you can do retail and marketing in the local market. And then I moved on from Arvind, which where I spent about, close to eight years. Then I moved on to, Reliance, and it was me, my boss at Arvind at that point of time and two of other colleagues. We all, quit Arvind and we joined Reliance to set up Reliance Brands. So we were the four people who started off Reliance Brands and at Reliance, it was like a startup within a corporate. and there I was wearing multiple hats all of us were wearing multiple hats because. It was literally just four of us. Then we started adding the team, etc. so I was, heading over a period of time I was heading, some businesses for them. At the same time, also responsible for international business development, which largely meant negotiated international brands and launched them in India.
Akshay: Reliance brands was doing same as what Arvind was doing?
Nitin: Yeah, Arvind was focused more on the value and that time let's say the premium segment. Whereas reliance Brands focus was largely on premium plus all the way to luxury. So that's how, they were fundamentally different And at that point of time, reliance Brands was because the nature of the brands was such you had to only import the product from the principles or the nominated factory. So, that was a model at that point of time. Reliance was not manufacturing, no. Reliance Brands was not manufacturing.
Akshay: You mentioned these segments, value premium plus just what are the, what's the entire universe of segments?
Nitin: See it varies from category to category, but you have the unorganized sector, which, of course in India, you pick up any category. you will find, 8% penetration, 9% penetration. some categories might even have 10 to 11 penetration, but that's about it 90%, 25% plus is still organized. So that gives you a lot of headroom for growth. But if you look at the pyramid, you have the unorganized sector. And about that, will have, above value, you will have the premium above premium, you will have the high premium, then bris to luxury and then luxury. So if I had to say value would be something like a max the max is value, then when you get into something like premium which will be let's say Lee Wrangler, Levis, so they'll be all premium. And then your high premium would be brands like Gantt that will be high premium. Bristol Luxury will be your Michael Kors and Coach. And of course luxury will be your Gucci, Prada, lb and so on. Cause you had about 10 to 12 relevant malls where you could open, stores for let's say better brands or let's say high premium brands, etc.. And there was no multi-brand channel. Literally like you have in Macy's, for example, in US, you can build a brand with Macy's because you can get that large volume from them.
Cause they have more close to 900,000 doors and the productivity is , very high. And you have so many of them in the US you also have Notto and so on and so forth. Yeah. And then the value side, you have Target and you'll have Walmart. Whereas in India you had you have shopper stop lifestyle, Pantone. But though none of them have that kind of a scale like these American department stores or the big box retailers do. So as a result all the brands are forced to, focus on retail and again, on retail. If you are on the high premium segment, the challenge was where will the open stores, cause again, those 10 12 mall again, you'll go to.
They had come in, you had Myntra had just about pivoted. You had Flipcart has other northern fashion was in that time of the category. And I do remember that one of the platforms met us and they spoke to me to say that they wanted one of our brands at that point of time, and we had Timberland as one of the portfolio brands. So they wanted Timberland and I asked them that, okay, what is your current average selling price? They told me it's about 600 odd rupees was there selling price and the Timberland starting price point that time was about 8,000 rupees. So, the question I had was that, how will this work out?
They were quite convinced about it. We did start business in a small way and and when we launched with them, we saw the orders started coming in from.
Cities like gem shape, and so on, which were not even in the 15 year business plan of Timberland. So, that was definitely an eye opener that, there is something there. So, there was an issue of reach. There are aspirational customers which are all over but e-commerce could be that way to reach those customers in the pockets. And there was one particular retailer, I remember John Lewis, they were out of UK they were using their stores to fulfill the orders as well for the online orders. Right, so this model seemed very interesting to me. And because I felt that today as consumers, that point of time itself, I mean, Consumers never have been channel bound, today we call it omnichannel or whatever. Those terminologies came on later. But and consumers adoption is always way faster because they don't have any legacy, any processes or, any hindrances to, start to resistance to change. At the same time, reach is what e-commerce was giving you. So thought process, there was that. Why don't we work out model if. Connecting both online and offline to make the user best of both worlds. That is the whole thought process. Then we I spoke to a colleague, my colleague who was very, he was working with me there as well.
Cause very joined us after the four of us joined. Very was the first set of people we hired. And then I spoke to him that this is a thought process I have, and I think this will be important going forward. Where people, I don't know how many people really discovered or were able to mine gold, but the people who were selling the shovels made a lot more money.
Akshay: So instead of building an Amazon, you would build a Shopify basically.
Nitin: Exactly. So we both, quit our, jobs. we served, a longish notice period, and then we started off, we both came from retail background, so we knew where the problems of retail were. But, we, didn't understand technology that well. We of course took, some Angel money and we first, started hiring people from IBM and larger companies. And then we realized that the mistake we made. Because in these larger organization, people work on small pieces. And what you need is you are building something from scratch and you, that's a very different mindset, so that you will not find the corporate world. So, and then we started getting into the founder circles, started meeting some other people, and then we got into those right circles to get the people who love to build things.
So that's where I would say literally we took it about a year to start going on that. And finally we got the right team, and then we started building. And these build mind would come out with the the architecture. And of course then we'll write the software and we launched. In about a year's time.
Akshay: 2013 is when you quit your jobs.
Nitin: Yeah, 2013 we quit our jobs, and 2014 is when we started, the operation or rather, we started full-time working on I We registered the company in 2013. But we started all of us joined in 2014, in fact, January itself, the beginning of the year. Initially where the idea was that we will help the brands to do business with their on their websites.
Akshay: Help the brands do business on the website?
Nitin: We would integrate the brand's website onto our platform and the fulfillment happen from the stores. So that was the model. So fulfillment was happening from the stores where the orders were coming from online. That was the initial thesis we started.
Akshay: So you built a bridge between their offline retail system and their D2C system because typically these systems don't talk to each other in most companies.
Nitin: That's and that's what a platform would do.
Akshay: And this was a subscription model, like a SaaS?
Nitin: Initially, we had different sorts of models. We had five, six models, whatever the client agreed on, we had those models, there was nothing specific. The model eventually evolved into a subscription, which became a minimum and a revenue share as the upside. So we would charge a revenue share. And the revenue share was a tiered model. So the more commerce happens to the platform as a percentage, we would charge less, but we would get paid more from an amount perspective. We focused on the enterprise side of the business.
So we were very clear. We're working with large brands. Let's protect the downside by having a subscription. so we would charge typically about three or odd percent and of the net sales value and of which shows which was going through a platform and as they cross certain thresholds that three would become beyond the threshold too, and then become one and so on and so forth. So that was a a revenue share model we worked on. And then subscription free would be about, depending on what all use cases they were live with because over a period of time in the, they were it evolved and , we made all the channels part of the same platform so that then it truly became omnichannels. So depending on number of channels, what all use case, we would charge anywhere between 1 lakh to 3 lakhs rupees a month as a subscription fee.
Akshay: And what did the software do? Did it own the process, still customer doorstep? Or did it receive the order from the D2C website, figure out which is the store that can fulfill it, pass it on to that store and that's where it ends?
Nitin: Yeah, so quickly we realized that, if we have to do more business, right, we need to have as many channels as possible, so our thought that time was not let's say we were not even thinking omnichannel, whatever. We're just thinking that how do we generate more commerce from the same client through the platform? So then we integrated the marketplaces as well.
We integrated wherever, they had a social commerce piece as well. So whoever had whatever channel we started integrating, we also created endless aisle. For the in-store guys to use to, so that, they didn't have something in the store it could be shipped out from some other store, do the consumer outta of the store.
Akshay: Like a standard industry term.
Nitin: Yeah, it's a standard industry term. Now more or less.
Akshay: I like this first time hearing it..
Nitin: So then we had a lot more channels and then the idea was that, okay, then the whole thing about started how do we make sure that no matter where the consumer is connecting with the brand for commerce we are able to, fulfill their commerce aspirations from that particular brand.
So then their entire inventory was connected through the platform. So all their stores all the fulfillment centers, in some cases they had distributors. Their distributors inventory also was out of the platform. So we literally, what we gave them was a single view of inventory, which was which the platform enabled. And then what we would do is the single view of inventory will publish across all the demand channels. Now, what do you need for Commerce? What do the user need on any of the platforms for commerce? You need to know the inventory, where the product availability is there. Second, you need to know the catalog you need to push the catalog so that user sees the catalog and makes a budget decision.
And then third was the delivery SLA that you will then how much time will deliver to the end customer? So all these things were being published on the platform onto these demand channels. And when an order would come from many of those channels, the algorithm would then figure out that, which is number one the right fulfillment point to allocate the order to. That could be a store, could be a fulfillment center. And then it gets allocated to them. And then over a period of time, all the different edge cases also we developed to take care of, which was what happens. There are multiple products in a single cart and a single order, but those are not available in a single store, how do we split the orders, which all places the orders should need, needs to get split to? Cause you have to, the promise to the customer is already made when the order is placed. So what a platform Rubicon would always was SLA was that now made the promise. So that's what Rubicon would try and do, and that's what the algorithms will then allocate. They, would be having some points, let's say a weightage. There would be some weightage for, other parameters like the cost of fulfillment, time taken to delivery, the cost of fulfillment, and so forth. And then, every time an order would hop, let's say we allocated the order to one fulfillment point, let's say a retail store, but they're not able to fulfill the order for whatever reason, and then the order hops to the next. Stock point, then the parameters, weights would change, because now probability is a far bigger important parameter for you rather than cost because making sure the promises made is far more important to the customer.
Akshay: Yes. Already been a delay.
Nitin: Yeah. And then we'll also allocate the last mile partner accordingly. Because what would happen is when the order would get fulfilled, let's say from a retail store, then we would, no one else gets invoiced. Then we would know that okay, this is now the stock point where it's finally gonna get shipped out from. Because when we allocate the order, we are not sure it's gonna get fulfilled in the same place or not. It hops based on various reasons. It might be some customers walked into the store and picked the same product. There's only one product line or it's damaged, or is a mismatch in system inventory or physical inventory? There could be various reasons. So, anyways, so what would happen is the moment it gets invoiced from the store, so now we know this is the point where it's gonna get shipped out. Then we'll run one more algorithm to allocate the last mile partner also. Because, not all last Mile partners are efficient in every pin code.
So then from, based on the past data across the platform, across all the transactions, then we would say, okay, now whether this is the last mile partner or the other last mile partner relevant, we'll allocate the manifest to them through the API. They would get the manifest and then they would come and collect the order and deliver to the end customer. And the same process would be followed for returns also. And we kept growing.
Akshay: So you brought the last Mile partners along with you..
Nitin: We integrated because, cause, these brands alone didn't have that much volume. We, as a platform had a lot more volume. So we were able to negotiate better rates, better service, and so on, so forth.
Akshay: Say if it is hyper-local, then maybe a Shadow fax or someone like that would be doing it. If it is intercity, then you would give it to someone who does intercity and accordingly.
Nitin: And, and there were multiple partners because, like I mentioned cause then the platform will decide that, okay, which is the right path you know partner to give it, and again, there were other parameters there, which were considered, like for example, SLA was the most important parameter that in how many times you deliver in the sla, so on and so forth. Cost was of course a matter as well. And then later on, more optimizations were done. So it just kept getting smarter..
Akshay: You handled returns, so, returns would like be a double value for, on the one hand there is that cost of processing the return, and on the other hand, you are getting a revenue share. That revenue's actually coming down.
Nitin: In the initial set of clients, that was a mistake we made in the commercial arrangements. But in the, and as we learned in the, where, the most of the clients start coming in, we then started charging for that as well. But for the logistics cost in the business, we were not wearing it.
Akshay: That was a passthrough.
Nitin: Yeah, that was a passthrough. But yes, the hosting cost, the, it's going through our platform. Those costs were our cost initially.
Akshay: Would he see that unit and would you ship it from Kerala to Jaipur?
Nitin: It did happen. It did happen. And then there were, some clients were okay with it, depending on which category, because we started with fashion. Then we got into, eyewear, we got into watches, footwear, we got into pharma, so depending on the margin. Yeah, yeah. and we also had FMCG, PNG. So there were a lot of different categories. So depending on the category, they were okay with it cause they had the margins. But and then, with each new category, we learned something new. And how each category works, there are different intricacies. For example, we also had consumer durables, and there the after sales part is also important. So we learned from a lot of these different industries. So it was, it was quite fascinating.
Akshay: By the time you hit this plateau, which year are we talking about now?
Nitin: This plateau started happening, I would say around 2019.
Akshay: And how many classes did you have?
Nitin: We had that time about Close to, 80 odd clients.
Akshay: And what kind of revenue were you doing by then?
Nitin: I think about 5 million. 5 million USD era.
Akshay: How much funds have you raised by 2019?
Nitin: By then we had raised about 5 million. So then what happened was that we existing plant in the plateau, so the only way the growth was coming was for the newer clients, and then we got deeper into why the existing clients are hitting a plateau. So few things, which we realized was that one was of course adoption, which was always a challenge because, you're working with large enterprise organization, then fundamentally you are telling them to think consumer, not channel, but they're not built that way. Right. Their entire systems are not built that way.
Akshay: Give me, gimme an example of this.
Nitin: Like, so how retail organization is, or a brand, let's say, let's talk about any, XYZ brand, or let's say the entire organization would be structured would be, on the front end side, on the business side, which they will have a team for retail stores. The retail team, which is for their own retail stores. Then they would've a team for your, distributors which are working with these mom and pop stores, then third, they would have department to store the so-called modern trade data at point of time, then e-commerce had started. Then there was one more channel, one more team for e-commerce. So each of these teams were siloed, working in silos. So each of these teams had their own teams to manage, large teams to manage each of these channels with their own layers, know, at the same time inventory, which was meant for these channels, So, and none of this inventory was fungible between the channels. So we also face some resistance where the retail team would say, oh, if I give this for the online order, what if one hour later or tomorrow an offline customer comes to me, I have only two pieces of this, so let me not give it, let me try and sell it. It's not part of my target.
Akshay: The epitom of what you wanted them to be like would, will say, let's cut. Like probably best in class in terms of that approach of customer or channel.
Nitin: Yeah. So Lenskart is also has, fewer channels, but larger brands typically traditional, larger brands would have multiple channels. Second other issue, which we saw that, we were only providing software that point of time. We were only given the giving technology. And that's what we thought our role was to, just focus on that. But when we deep dived and we saw that why some of the clients waiting and, 200$ per day or 300$ per day, or 500$ per day, that point of time, and not able to scale beyond it because, they did not have the operational capabilities, especially on the logistics and fulfillment side. Their warehouses were meant to service largely B2B. And now e-commerce, which was smaller business at that point of time, has started working. But those warehouses were, not able to fulfill all that scale, the s were built for, do 10 units, 20 units, a particular sq, put them in the cart, and this whole different ballgame, eCommerce, fulfillment, single shipments, all that. So they were not used to that. That was one challenge. Second issue on the store side also, what they realized that, for example, if you want to do fulfillment scale from stores as well, you would need those fulfillment tables, those quality assurance processes.
You need some space at the backend. And this was not planned. Yeah, this was not all planned at all. So the last Mile Logistics, because we had left it to them, they were not able to, manage it because their orders were less. So they were not getting enough let's say love from the logistics companies as well, not they were able to get the right prices, etc.. So we said, if we have to scale, we have to start offering. Some of these operational services as a value added service. So to the clients who were using our platform, we started off offering optional value added services. You want fulfillment centers, you take fulfillment centers from us, you want last mile logistics, we'll offer that service to you. You want customer support, we'll offer customer support to you, so you want cataloging, because that is one big challenge, the goods will be in the, fulfillment centers and stores, but the catalog will take you three months to get created because again, there was no ecosystem and they were not so then we also built started doing cataloging for them and charging them on, paper use for those value added services. And then we started in the scale again.
Akshay: You would almost be like Amazon has that fulfilled by Amazon service where they take the inventory and keep it with them and do everything there. So this would be something on similar lines that.
Nitin: Something similar for the warehouse, bit for the fulfillment center bit, but the store bit will always happen from the store. But they were, we were offering last mile logistics, and then and then the training, then we also started the training way with the customer success team. We train the store teams every time a new store would open at stores, have a lot of churn also. So they were continuous training and all of that. So all that started happening, how to fulfill the orders and all that. And then the scale has just started about hitting again. And then what happened was the pandemic struck. So, when you plan your runway, you always plan that, okay, that's my revenue. This is my, expenses. That's my net bond. You never plan for a scenario where revenue will become zero. And your burn is a hundred percent so that dust that would happen too soon too fast.
Akshay: What percentage of revenue was your burn that point of time?
Nitin: We were about 10 to 12% debit negative, so that's where we were, So, not that bad, but again, when suddenly became zero, then it was hundred percent not only did our revenue became nil, right, a lot of the clients refused to pay us for our outstanding amounts with them as well, you would raise the revenue share, so you would raise invoices end of the month. It's for them to pay us another 30 days.
Akshay: So did you have exposure to future group also?
Nitin: That point of time discussions were going on, but we didn't have fortunately for us.
Akshay: Payment terms were like 30 days after invoice. You get paid like..
Nitin: After invoice and the invoice was raised end of the month with only, we'll know how much they sold. So literally it was about close to 60 days and clients would pay anywhere between 65 to 75 days. So that was our time period. Our, investors, actually helped us out, a lot of credit to them. They told us that we have some amount of money which we have kept for you. So, of course it all comes at a cost. We without thinking twice, the very next day we drew down the first tranche. Cause we dunno how long it's gonna last..
Akshay: What do you mean when you say it comes at a cost?
Nitin: So there was a convertible note, so it would discount to the next announced valuation, so that's how it was. And at that point of time, you don't wanna negotiate anything because you're trying to survive, so we did and I would give a lot of credit to our investors at that point of time.
And especially I think Vertex played a lead role there to get us through that point of time. So a lot of credit to them. And then, the first lockdown opened up, then the platform at a very different scale, not only the existing client start scaling very fast, a lot of new brands wanted to come on board the platform. So to a different problem we had right at that point of time. But a good problem to have. And we became EBITDA positive as well.
Akshay: This was cause of increased revenues.
Nitin: A lot of scale because costs were same the revenue surge happened. So, then with that scale, the profitability was a net result. But that was first time in the company. It was great. Then we also saw that on the platform some clients were scaling more than the others. And the submission was very similar to what we discussed earlier. It was largely because of adoption, because it's a solid approach, multiple channels as a channel wise approach. Culturally it's difficult for them to change the processes, etc..
Cause they've been following those four decades and decades, and, and that's the reason why, disruption always happens from outside. It's never from the industry itself so we then start pitching to the global headquarters of those brands and to, take over the entire business from end to end.
Akshay: When was this?
Nitin: This was after the first lockdown opened up, we're just coming outta a lockdown. And second lockdown. Nobody knew it was gonna happen or not, but it did happen. And then when the lockdown opened up, as I mentioned, a lot of the existing clients also at a very different scale. So almost all of them came back to renegotiate with us, saying we never expected the business, will be, growing much faster. Like it did. So they want to renegotiate the commercials, the revenue share largely, because we were another revenue share with almost everybody at a, the good scale. and it also got us thinking that today a hundred percent of our business model is dependent on third parties.. So there has to be some amount of business which is captive to us. So that we do not have situation like this again, so, that was the whole idea. So when we presented to the board, we presented to them that, this is a SaaS, vertical we want to launch by using the same tag, same platform, everything was same, a new vertical called the captive vertical. Cause it's a captive business. Cause this is, there will be long term contracts, 15 years, 20 years.
Akshay: The expectation was that instead of 3% of revenue I guess in retail.
Nitin: We'll get a better margin, but more importantly, a captive business. So we are not dependent to survive on only third parties. So, and our thought percent was that, over a period of time, this will become 25, 30% of our business SaaS will be 70, 75%, and this is 30. So that's how we all started off.
Akshay: In a typical retail business, what is the margin there?
Nitin: Like, it depends from category to category, if you talk about, fashion, classic fashion, it would be about around six or 65%.
Akshay: The EBITDA?
Nitin: And, and how much would be the EBITDA?
The EBITDA would be, typically anywhere between 10 to 12% would be of let's say most of the good companies some outstanding companies like Page Industries, et cetera, would be around, closer to percent as well, so we then started the business. In the first six months itself, the business took off like a rocket, which was the first deal. You correct? Actually, we were negotiating with Toys R first, but what closed first was Lee and Wrangler.
Akshay: Wrangler already had a franchisee or a licensee in India.
Nitin: No, they had their own subsidiary in there, so we took over the business from their subsidiary, and then of course, then they shut down the subsidy when we took over the business. So in the first six months itself, the business hitter different scale, which neither the Leanne Wrangler owners, the global owners, which the companies called Contour, they had thought about nor had we thought about and but for us a few things were clear. One thing was that, okay, this scales much faster, because we have complete control over adoption, over product, and we knew what more we could do to even scale it much more faster. Cause we could see so many inefficiencies. Which tech could solve through our kind of a model.
Akshay: How much did it scale by, like when you acquired what was the top line then?
Nitin: See in the first year itself, it did more than what these two brands had done ever in the history of India. And they've been here more than 25 years. And I'm not comparing the pandemic number because they were much low. So, and of course, it grew profitably, it was a EBITDA positive in the first year itself.
Akshay: You acquired their, manufacturing plants or they were working with third party manufacturers?
Nitin: No, they were working with third party approved factories. So we then we moved, we started working those factories, but we added more factories as we went along and all.
Akshay: What about like so far you have the supply chain shops. What about the design shops?
Nitin: Very good question actually. So what we did was from contour, we took on board from the India subsidiary. We took on board the design and merchandising teams. Cause that's the skillset which company which shuttle did not have. so that's what got migrated. So then it became very profitable. And then on the other side we started discovering two sets of problems. One was, the more we got deeper, we realized that retail had not evolved at all. So, for example, how it would work is apart from the whole omni channel commerce piece, even the retail operations was very operational heavy. Very person to person interaction dependent, which essentially made us not at least scalable and not very transparent. So what would happen is, for example, to manage the store for this done for each channel. So to manage those stores, what would happen is that you would have, in a territory, you would have an area sales executive who reports to an area manager, area manager, reports to a regional manager, regional manager, reports to a national manager, and the national manager, will then work with the functions in the head office, which are actually gonna solve the problem. So now we don't see a need for, to have all these layers, because now through tech, you can connect the stores to, to you, more importantly, what happens is that, when all of these entire all these layers in the retail, when they visit these stores, the interaction that happens it's not captured as a data point. Somebody would make a report, that, and report gets marked by perception. Something has got missed out and it's, and you can't make much sense outta it, so, so we said, okay, the first step is how do we decipher this black box? So one, we have to start deciphering the black box first. Let's try and convert everything into a data point.
So that's the first step we started off with. Then we started to then we launched very quickly. I remember, if I might say, a dirty product, literally in about three odd sprints an app to handle operations, which we call connect. In fact, we just released. A couple of days back. The second version of that but anyway, so we we launched Connect..
Akshay: So, this is like a point of sale with some added features.
Nitin: No, it had everything which rail guy needs. Because see today, earlier the requirements or the of the consumer from the stores and the expectation were different. Also, similarly, the skillsets and the operation work for the stores was different. But today, in a omnichannel environment, a store is not just fulfilling the requirements of the customer of the old world who just coming and buying because is, doesn't happen that way anymore. When you and I go to buy something where search online what you want to buy, when we go to the store, we often sometimes find we know more about the product than the poor guy who's selling us stores knows. And you can't blame him cause he is got thousand products in the stores. And you are searching for what you want and he has to, you can't expect him to remember and go deeper on those houses. So first step was it, how do we enable them to give them information on the, palm of the hand. So mobile was, the natural device to use that. That's why I built that mobile app called Connect, which had all the product information, and also to make it easier for them, they don't have to search, with a customer. Somebody's searching. It's not a good experience. So we said, okay, you take them app, scan the barcode immediately, it'll give you everything about the product, where it's made, what it goes where, even suggestions for the customer. So it's like a cheat sheet also, for the store guy to tell the customer. And then you could use it as a post as well.
Akshay: How did you feed the content in it?
Nitin: We already had the content of the catalog management system of Rubicon because, it was just an extension of that.
Akshay: Rubicon is the catalog management product.
Nitin: No, rubicon is the omnichannel commerce platform. So it has four modules, or now it has more, but that time it had four core modules. One was catalog management system, second was inventory management system, third was auto management system, and the fourth was logistics management system.
So the catalog management system , will have images, content, and publish, catalog and transform depending on, cause each platforms are done built differently. So all that will happen on that. Second was inventory, which takes care of single view inventory and so on and so forth, and reduction of inventory and cause when you are doing a single view inventory, you are ingesting inventory of multiple applications, not all of them might be realtime, lot of them are legacy obligations. So all those problems we had solved over a period of time for inventory management system would take care of all of that. But we need realtime information for inventory, for commerce. And then third system where all the. Heavy duty algorithms to figure out where to fulfill the order from, how the order hops, where it goes, how do you split, and all of that. And then the logic management system will be to say, okay, which, whom do you allocate the order to? Has it got reached, has not reached? Then again, that hops there, all those systems are built on the logic management. We were four core modules of Rubicon. So the catalog manage system was feeding into the on the connect. And then they would were able to see about every product. They could scan the product. They would know everything about the product. They would also know if they want to know. They would also tell them in how much time. The, if somebody wants some other size, whether it's lying in the back stock or lying in the store, that information, they would also get there.
So they know that, okay, if it's lying in the back stock, so I have so many pieces, I can go and get it to the customer. They don't have to set up, wait for a while, go and check. But for us it was a data point. What are they searching for? . So all these things, we, what is not available in the store, so we start giving the data points the training with the second point.
Akshay: Otherwise, this information never goes back.
Nitin: Yeah, they go to the pause, and Pause has its own corruption, because inventory is not matching, system is not matching. They don't know visibility across, not real time. All those things. Were all legacy systems. You have those problems.
Akshay: Even like the window shopping behavior is never captured. But through this now you're also capturing the window shopping behavior.
Nitin: And we are going deeper. I might share with you whatever I can today. So, then what we did was we said, okay, next piece is training. Training is very important, so how do we make sure training is done? and you're not capturing so we said how do we get the data point, whether the course is also right or not, whether, so we said, okay, the way best way to do it is again, thanks to the pandemic. Take taken off. Consumption of content was very high. We said, okay, again, we'll push content through our connect app itself. We said, okay. Now training modules were there at the end of every training module, there was a quiz.
Akshay: The training is product training or like behavior training.
Nitin: It was product training, customer training. There were lots of these things, so this was second thing, third thing we said, okay, visual merchandising. Cause you were told you can't do visual merchandising because it's how you make the product look beautiful inside the store. How you put it together, there you need to have hands. So, but again, we said, there are other ways to do it. And what we did was, it was very simple actually in the end that again the guidelines will get published cause we would know what merchandise is getting pushed out to the stores. Guidelines will get published to the stores. Stores will have a necessary to follow the guidelines, set it up take the photograph from the app itself. And, but there's something interesting also which happened. So initially we didn't we suggested take the photograph from your phone and upload it.
And then we started realizing that some of them were gaming it by, uploading old photographs. so we have to, interesting. So we then said, okay, you can only, you can't upload only from the app. You can take the photograph. So we said, okay, then you take the photograph from the app publish. And we will our visual merchandising team sitting in the corporate office, we'll get it. They will put pins on it to say, okay, this work collection needs to be done. And again, we gamified it based on who was doing it faster and better. They were being rewarded as well.
Akshay: The central team would decide, for example, that these five genes models should be put on the mannequins.
Nitin: Yes. So in the office, we create a mock of a store. So in that mock, they'll put it all together, take photographs and put guidelines, step one, step two, step three, step four, have videos and also, guidelines text and images, and push it through, the VM module on connect, then we also started looking at other things as well. I mean, typically attendance, so attendance we also made on connect. Cause attendance was again, like a manual thing. So we geofested all the stores. So the moment you are in, we know you are in. But more importantly now we are getting data points. So now we know the footfalls, which are coming in, at what point of time the footfalls are higher. We installed smart cameras in the stores.
Akshay: The old world footfall counter? What is that?
Nitin: So essentially what you do is, if you walk past it, it'll count you as a footfall.
Akshay: These cameras had like there was a machine vision algorithm running.
Nitin: No. The cameras said just smart vision, nothing else. And every cloud today, gives you that. So, and we're open source guys for us to, so anyway we got the hardware from somebody else, and then we put in our applications on the back of it to get it going. But largely then, what does the smart cameras started doing? We knew that when you were coming in, how many people were coming in. We, when the, every time a new store guy would join in, we would take the image of the store guy. So we know the camera would recognize the store. So it will not. At the same time, when, let's say we will know that, okay how many people walked in and then, we will not say, okay, Akshay has walked in. Cause we'll not take your PI data, even if you buy from us in the store but we'll assign you a number so we know that X, Y, Z three, four x walked in and, and second time when they walked in, how many months is Akshay coming back again, which means how many times we need to refresh the store, refresh the store as well, then we started seeing that how many people means that how many girls start coming in, how many women are coming in, how many, kids are coming into the stores, how many are coming together? How many are coming alone? So we started dissecting what is, what is approximate age group. Yes. The demographics. We, we start getting all this, data as well.
Akshay: Stores are all company operated.
Nitin: No, we do all franchise stores but is controlled by us, , so we control the assortment. So how the model works is when we took over the business of Fleet Wrangler, we shut down all the wholesale business. Why? Because on wholesale, you don't get the consumer data back because we wanna know what the consumer is buying or not buying. We at as soon as possible. We wanted to know what's the price sensitivity. So we, and all this data we feed back into our supply chain, and then that's how the new products are designed and manufactured as well. So that's like a full loop.
Akshay: For sale would be providing to the Bob and Pop stores would be getting..
Nitin: We got rid of all the mom and pop stores. We shut down all the distributor business, which was there. We went to all department stores and spoke to them that you share the data with us.
We don't buy the, we don't want the PI data. But we definitely want the sales data as soon as you can. If you can give us real time we'll take it. If your systems are not aligned, we'll work with you to get the data. And wherever we got the data, only there, we worked Wherever the data was not there, we just discontinued that channel. We were very clear because that would just break the whole model, so that's how the whole, model started. We started discovering new problems. We said, okay, now even in the genes, we saw a lot of genes were getting altered. so one, you are, from a cost perspective, which means, your consumption of fabric is higher, you can save some money there.
Second, from a consumer perspective, the consumer has to get altered, then wait to, a good consumer experience. Yeah. And the third was, the whole model is that they will give you some sort of a voucher. That alteration is done and then you'll call, or he'll call, so it's, the whole journey was quite broken.
So what we are just making live now is to capture data point on the alteration also, what fits are getting altered. What lens are getting altered, how much is getting altered? So everything is now happening on connect and the consumer gets to know and connect itself that yes your has been submitted, it has been altered. Consumer can select, you want home delivery or you want to come and collect, you want home delivery, then paid delivery charge, which a lot of customers don't mind paying. Or if you wanna carry it, you can come to the store, they'll know. So, but more importantly, now we got that journey is quite seamless.
We're getting a data point outta that, and multiple data points, consumer data point, we're getting the product data point as well. So I think these are some things we start getting added. Then we looked at the factory side. We thought we saw that, in the beginning we will come to know a week before, factory was supposed to deliver some products to say, It's getting delayed by another two weeks. We said, but how can you come to know a week before it's getting delayed by two weeks? So, because again, it was like a black box. So then now the next phase is we are now start deciphering the black box on the factory side as well. So that's what, the new tech, which we're building on that side to say, how can we get, clear visibility there as well, and how can this whole system become more and more agile? It's been a good journey. So whatever we're building now, the same tech is now being used by the newer brands as you put into the funnel. So the next test, toys RS, babies RS, we're going to announce one more brand next week. And there are some more in the pipeline.
Akshay: So, do you collect the customer's information when he actually buys? That is like standard practice..
Nitin: yes. Because yeah, standard practice, we take consent there, so, we take consent and we collect that data. You're so we also, have a single view of customer, but for customers who have given us consent to, use their data and connect with them..
Akshay: How are you able to leverage that?
Nitin: Let's say in the fashion business, the repeat purchase are not that high. So that, you can reward like an airline or a hotel, the loyalty points. But yes, after a certain point of time when we have a large portfolio brand, which I think we should have by end of next year, then you could, we could do, cross across brands. So, but today is more on the CRM side. Right? On the relationship and engagement. So we, on the, we study the behavior as well because the behavior is very interesting..
Akshay: How does it help you?
Nitin: You're able to build cohorts, so you now know that how, and we are seeing there are some channel specific behaviors also, which we're building cohorts on to try and figure it out. And we have seen in a lot of times now, people want deals they're trying to go to online, and the new product they always want to try in the stores. I would not say always, but that's large cohort wants to do that. So I think we're understanding a lot of things and we're actually now building a few more things on to, take care of that.
Akshay: What have you understood, gimme some more insights. Like this is an interesting insight that for new launches.
Nitin: So one thing one thing is also very clear that the online ASPs right are higher in the smaller towns than the metros and tier one towns.
Akshay: Asp. Average selling price.
Nitin: Average selling price, yeah. So they are buying better products. During the sale events the discount events as compared to what your metro tier one guys are buying, so, and our relations are also higher. There, and like I mentioned to you there are sort of customers who are going online only for deals and coming for new products from stores. But one thing is very clear, we launched Women's Way, because what the data also showed us that there were a lot of women customers walking into the stores and we didn't have women's merchandise. So we launched women's merchandise and we did, make small quantities into, a fewer channels because we were just worried that whatever doesn't sell because we know the footfall is there, but will we adopt, and we launch with the Wrangler, andr does have that biker image and all of that. We were just kind of, concerned and, but to a surprise. It sold off very well. And now we are doing a much larger piece around women's wear for both Wrangler and Lee, where we signed to big celebrities to promote them as well.
Akshay: But how do you know the same customer is buying online?
Nitin: No, but we have websites, so we know we get the data from the websites.
Akshay: What are the brands now besides Lee and wrangler..
Nitin: We have Lee Wrangler, we have Toys RS, we have Babies RS and the next brand we are announcing next week which is gonna be launched in December. So that's the fifth brand, and we'll be announcing it's in the fashion space. We don't make the announcement. It's happening next week, by the time we release, it's gonna be we typically release about six, eight weeks after recording, so on the woman's side. The two big celebrities we have signed for Wrangler, we have signed Smriti Mandhana right to and on Lee we have signed Sara Ali Khan.
Akshay: Lee and Wrangler have women's wear across the globe, or this is like a India innovation?
Nitin: Internationally they have India also they had earlier, but few years back, they had stopped doing it because the sales were low.
Akshay: The fifth brand which you're signing up is also in the fashion space.
Nitin: In the fashion space. So we focus brands, largely on, in the space where the trends don't change fast. For example genes you own, the trends don't change as fast, so that's why we are staying away from, let's say women's fast fashion and some of those categories which are very trendy. So that's not part of a business model. Cause we prefer businesses because there you have, where the risk is higher, margins are lower. We prefer business which have good margins and and we can go deeper. Cause the deeper you go in your production cycles, there's your margin also increases. We are focused on certain set of brands from that perspective. And then also we are also focused on brands which are focused on the middle class, because that's a very, we are not going for luxury. We are not going for value. Because the moment you go beyond that pricing segment, right, the drops, the market size drops dramatically. And the moment you go below that it's a large market, but the unit economics drop dramatically. So, we wanna stay in this middle class segment. So we're focused on brands which are more on the I would not call them classics, but maybe classics, but which, where the trends don't change rapidly.
And third, which have a salience in the Indian market and in with Indian consumers. So, there brands which we partner. So what we do is when a new brand approaches are, or we look at approaching, we plan our go to market for new brands, we look at the organic searches to how many organic searches are happening.
Akshay: Okay. For Lee and Wrangler what is the offline to online split? How much of the sales is?
Nitin: It's 50:50.
Akshay: Cause Lee and Wrangler are very like legacy brands, well established in the offline world.
Nitin: 135 year old brands. I mean these are iconic brands, literally Heritage brands as they call them.
Akshay: Even in India, they've been around for decades.
Nitin: That's what we're working on now because see, the consumers keep evolving, consumer are moving on too. So the way our whole model is also structured is because what Rubicon does is because since it's not, it's channel agnostic, all our assets, whether it's inventory digital assets, they're all connected to Rubicon. So they're being transformed. So we have to launch a new channel. We don't have to create new assets. We have to just create a transformation layer. Or largely some integrations happen and, we can go live on new channel. So for us, cost of adding a new channel is very, very low. So also, the remote channel is also very low and the speed is very fast.
Akshay: For, Toys RS. Like with Lee and Wrangler, you already got the retail stores when you took over.
Nitin: Actually, we got the retail stores. We shut down 85% of those. Because why we shut them down was because we evaluated, because we knew how the importance of adoption, so we evaluated all the franchisees and the locations and everything, but more importantly, it was also about the franchisee, apart from the location, whether the franchisee adaptable to our kind of a model because, we are trying to do new things, which trying to challenge everything. So in a quarter we might be doing 10 new things, but only three might work. Four work, brilliant, but that's normally the, hit ratio. So if the franchisee also need to be adaptable to that kinda a model, that was very important for us. So we met almost everybody and the teams met and then we decided to, take that call, which are the ones we wanna partner with, which ones we wanna, might not be fitting into our kinda a model. So we reduced at about 15 odd percent, but we opened about 40 odd stores last year. This year we're opening about 50 stores each in Lean Wrangler. So we about hundred stores coming up this year. And then of course toys.
Akshay: Okay. You now also have a franchisee onboarding team Yes to set up.
Nitin: And then when every time we do, as we go deeper, we discover there a new problem is tech can solve, so we just go deeper there and there. So we took a decision, it was a tough decision for us last September to exit the SaaS business because we cause the most premium resource for us is the bandwidth of our tech team. So we wanted to spend that bandwidth to build the tech to solve the new problems which we were facing, and we were discovering, and there are enough problems to solve here. So we decided to start solving termination notice on our SaaS clients from September last year, onwards. Target was by March, we'll get out of all the SaaS businesses.
Akshay: And what's your are currently? Or do you have a target?
Nitin: So we crossed 55 million last year. USD, This year we are going to cross hundred.
Akshay: Amazing. So the SaaS business would really have been like a very small.
Nitin: Yeah. It is not even a million dollars Now.
Akshay: Insignificant percentage of this.
Nitin: Makes sense to shut that down. At peak before we decided to take the call, we were at 10 million. So we had let go of the $10 million business.
Akshay: Okay. Amazing. So, you have raised a fair amount of funds more than $40 million till date, I believe. So, what's been the journey there? what are some of the lessons you learned with respect to fundraise?
Nitin: I think see the so we raised first, money in the initial grounds was for the SaaS business.
Akshay: You're like a new age reliance brands, basically today.
Nitin: So we're like a new age retail business where the, fundamentalist technology, for example, we don't have a sales team in the company.
Akshay: The franchisee onboarding team is somewhat like a sales team.
Nitin: But they're not selling to the franchisee. They're just appoint the franchisee, finalize the location, and then they move on. That's their role.
Akshay: You have enough inbound leads for appoint franchisee appointments or like how do?
Nitin: So that team works on that funnel as well, and then what happens is then the system takes over based on the data, what we get, what's selling we optimize and then we decide on the pricing. We change the assortment, keep on moving because no franchisee is, can select. What they want for the store. It's done through the system itself it's a, lean model because we've with much fewer people, you build this, but it's more scalable as well. Because the same is, same tech is not getting used for multiple people. You can open multiple stores, you can open multiple online channels as they keep evolving. So all that, can start happening from the same base. So in a good space. Yeah. So it's yeah. I would say it's more like a new age page, that's how would describe it, because Page also like Us is taking long term licenses or brands.
They have Jockey and they have Speedo, so they have two brands, so, so it's similar. So we have long term licenses of brands where they also do design manufacturing. We also do it. The difference is that Pete has built a very good business sound business on operation Efficiency. And our business is being built on tech efficiency.
Akshay: Okay. Help me understand the manufacturing piece here.
Nitin: So, you want to have like a asset light approach on manufacturing, like work with third party vendors and Yeah. So at both the ends we are asset light. So, we don't like CapEx, it goes from the SaaS space. So neither do we invest in CapEx on the factory side, nor we invest in the CapEx on the store side. So the franchisees invest cap, demand, assortment, inventory, all that we take care of. And on the factory side we work with third party manufacturers. We started off with manufacturers who were working with other brands as well because these are large brands, so they need to work with compliant factories. We're not just terms of product quality, but also in terms of compliance and so on. So, which reduces the pool to work with, X number of factories. But now we start adding more factories. But we also now start adding captive factories factory, which are only doing business for us. Cause now we have scale.
Akshay: So that transformation would lead to say a purchase order getting released faster.
Nitin: So those are already there. So we're not so worried about the purchase orders, but we are worried about the visibility. The visibility of what on the production line how much time it can it be delivered. So we wanna optimize on that.
Akshay: How will you get this visibility?
Nitin: By deploying tech on on the factories as well, so on their systems as well. There's a combination of both. So today, for example, our quality assurance already happening through smart cameras. In our model it is we just see the smart cameras and we identify the problem. There is, and approvals happen digitally but we're also working on further improving it. So there are lots of these areas where we're going deeper. But on the factory side, everything is being literally built from scratch. Products based on what we require market.
Akshay: Okay, so like a factory management system where you punch in the order, then it'll generate.
Nitin: See they already have some system or the other one. These are large factories. What would draw the data that you know, where exactly it is in there? Cause their factories are meant for their own purpose, for different purpose. We need to have complete visibility because if data is telling us, that this particular style has slowed down, this wash has slowed down, can we change the wash midway? So once we have the visibility, we can change all of that, because far more nimble, far more agile. And then even to the lead time between the design to factory is a few days. Can it be literally just a few hours, so we're just trying to work on all of these pieces as well.
Akshay: Amazing. My last question to to you how have you evolved as a person in this entrepreneurial journey?
Nitin: I think one thing is and I would say that and I know pandemic played a big role in it. So you need to have an ecosystem of people whom you can have an open discussion with about anything, it may not be just on the business or something, which is some business relationships or something. You want to sound up with somebody, because what happens is that boards tend to become more formal. Right. And then that's how they are supposed to be. So whether you call it advisory board or equality or ecosystem of some people who are who understand a founder's journey, preferably other entrepreneurs, whether it's how to which investors to go to, which things they would've done, you learned from them.
Few things you wanna sound off, sometimes you have doubt. You talk to them and you realize that you're not alone. Others have also gone through it. And I think that ecosystem, both in terms of the emotional support and the learnings, both on the business side as well, and the network, I think that is very critical. I think that's very important, and I think second is what I would say is that go deeper into the problem. But don't fall in love with the idea, so and like it has evolved for us. But if you see that's how I started off, this is how it needs to be, then that's where you'll start having problems. Cause our markets evolving, at a very rapid pace. Consumers evolving, and third is what I would say, that there is no better time in India than to, than now to be an entrepreneur.
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