What is the most common question asked during board meetings at e-commerce companies? Nope, not about the next funding round or profit. It actually is: How do you plan to make more money from the consumer?
Answer: beard trimmers.
Let us explain. A few months ago, Flipkart looked at its hot selling products and found something curious. “What none of these retailers will tell you is that after phones and accessories, the hottest selling item during the big sale days is beard trimmers,” says a Flipkart group executive.
Setting the trend
He is not allowed to talk to the media and asked not to be identified. Flipkart had seen the trend develop over the past few years and ordered a bigger batch of beard trimmers during the last Big Billion Day, the company’s annual sales event. Thanks to this insight, it saved a bunch of cash, got a better deal and managed to make money in the category. What Flipkart also did was use its private brand, SmartBuy, and plonked it in the category, leaned back and saw the product sell itself.
Flipkart has been replicating this private brand strategy across categories. It attempted this in-home product, that didn’t work. It tried power banks, it bombed. It tried mobile chargers, nada. Scratch guards and earphones. Nothing. But the company hasn’t stopped trying, next is microwaves and backpacks.
Yes, backpacks. This is where Wildcraft comes in.
Flipkart is in the final stages of sewing a deal with Wildcraft, Bengaluru-based outdoor and sportswear company, according to three unrelated people associated with the two companies. Wildcraft, backed by venture capital (VC) firm Sequoia, has been in the market to raise funds for almost four months. It had the option between two very popular American hedge funds and Flipkart.
It seems to have picked the latter. The pre-funding valuation of Wildcraft, according to two people involved in the deal, is around Rs 800 crore ($125 million). If everything checks out, Flipkart will invest about $10 million in the company. There are riders to this deal though. It mandates that Flipkart will be Wildcraft’s only online partner and acquires a significant minority stake in it. The duo will be launching their own private brand in outdoor wear and bags soon.
Wildcraft’s co-founder Gaurav Dublish did not confirm or deny that there was an investment coming but did admit that he has been in discussion with the unicorn and other investors as well. In an email, Flipkart wrote that it had no update on “any special tie-up with Wildcraft”.
How big is Wildcraft?
The pre-funding valuation of Wildcraft, according to two people involved in the deal, is around Rs 800 crore ($125 million)
On the deal, let’s tread with caution though. Because Flipkart is infamous for coming close to pulling the trigger and then backing off. No, really, it is. There are BookMyShow, PepperFry, and Swiggy. Look closer, and a pattern will start to emerge. All these companies exist in a parallel ecosystem. There is overlap with Flipkart but it is notional. These three companies are huge as well. Almost all of them are valued at more than $500 million (Rs 3,000 crore). Not cheap for a strategic investment.
Wildcraft is different. This is not a big company, just $125 million (Rs 800 crore) in valuation, according to its last funding round in September 2017. It has been around for 20 years and has barely raised money. The pressure to exit is not high but it needs money to grow.
In a way, access to moneybags. Someone like Flipkart. Likewise, Flipkart needs Wildcraft. Customers of outdoor and sports brands are loyal and the ticket sizes (about Rs 1,500) are comparatively big. These products are all about durability and trust. Once the customer knows that the products won’t give up on them on a hike, they are loyal.