First, a look at the annual filings of Shopclues. In April 2016, Radhika Ghai (earlier Agarwal) resigned from the company board. “She has resigned from the directorship of the Indian entity. She is still our chief business officer,” explains Sethi.
Shopclues is a wholly-owned subsidiary of Clues Network and Radhika continues to hold her board position there. This was done, Sethi says, to protect her from potential harassment.
Tedious last few months
As cosmetic as that seems, there has been real attrition over the last few months. There has been a slew of top and mid-level departures. And Shopclues is still struggling to keep up with it. Some names:
Harmeet Singh, chief marketing officer
Vidit Jain, associate director, marketing
Harshvardhan Chauhan, director, and head of the merchant strategy
Mohammad Shakir, category manager
There were others but let’s stick to the highlights. This churn is the first sign of Shopclues’ inability to find an equilibrium within its leadership team, multiple former employees The Ken spoke to have said.
“This is not the first time this is happening. The first churn happened around May when a few more from middle management resigned,” says a former employee who was part of the second churn. He asked not to be identified for fear of retribution from Shopclues’ founders.
He explains that Shopclues has been trying to control its cash burn and whenever someone leaves, it replaces them with “cheaper talent who is not good enough”. But if you probe further, the unrest within Shopclues started about 18 months ago, when the company decided to change how it operated.
Sethi argues back. He says that some employees burnt out, some of them decided to start up on their own and others just hated his guts. “I say this in my leadership meeting every time, if someone is scared, show them the door because only believers will sit on this table. We want only those people who are pathologically optimistic,” he shares.
Let’s take a step back. How does Shopclues work? Let Sethi himself explain it. In a conversation with India Today in 2014 he described it such:
“We will bring a large number of merchants online, and when these large numbers of merchants come online, the consumer will get a large selection of products. It will be possible for us to have a large number of products as we are not holding inventory. ShopClues is like an e-commerce operating system in the cloud.”
An e-commerce operating system in the cloud. The objective was to bring a large seller base from across the country onto Shopclues, maintaining quality, and then selling it to the customer. And for its trouble, the company wets its beak just a little. But while Flipkart and Amazon focus on big-ticket purchases and metros, Shopclues will be the flea bazaar of India. It will cater to those who can’t afford Flipkart and Amazon.
This model worked perfectly until mid-2016. Until 2016, Shopclues sold what every other e-commerce company in the country sold: phones. The company had split its organizational structure into various verticals: apparel, home, phones, large appliances, and the works. But in August 2016, it changed.
Heavy loss as per the report suggests
The company was split into two: wired and non-wired. Wired means electronics, phones, SD cards, phone covers, chargers, TV, toasters, etc. Non-wired equals apparel, home furnishings, and baskets. Then Shopclues looked at these two verticals closely. The average selling price, according to multiple former employees, for the wired category was Rs 2,500. And the margin was 1-2%.
It was not acceptable. It was reportedly making a loss of $1 million a month on these categories. The burn was too high and there was not enough money being made, so Shopclues changed focus. It would now focus on its non-wired category. The margins there were higher, about 10-15%. The marketing spends on this particular vertical was also lower. But apparel is difficult to acquire.
“They went to retailers who had stock, which dated back three-four years and was ready to dump it,” says another former employee. He, too, requested not to be named. He explains that most of these are very cheap apparel which doesn’t last too long. “This is not fashion, it is just clothes,” he says.