Niche e-commerce firms find venture capital favour

Dec 26 2013, 10:27 IST
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SummaryMajor deals in online niche category include auto marketplace & eyewear retailer Lenskart.

At a time when the big daddies of India's $2.5-billion e-commerce industry are finding it tough to keep their balance sheets in black, a breed of online niche products and services players have managed to be profitable and keep investors engaged with their less capital intensive business model.

According to data from investment research firm Venture Intelligence, this year so far, niche e-commerce companies have attracted a total funding of $46.55 million across 12 deals, almost double the investments last year.

The major deals in the online niche category include automotive marketplace raising a fund of $15 million from Sequoia Capital India and Lenskart, an online eyewear retailer, attracting an investment of $10 million from IDG Ventures and Unilazer Ventures, a private equity firm promoted by Ronnie Screwvala.

Even early this month, online lingerie portal Zivame raised $6 million from Unilazer Ventures and existing investors, IDG Ventures and Kalaari Capital Partners, while in November, Urban Ladder, an online furniture store, raised $5 million from SAIF Partners and Kalaari Capital. According to reports, last month Google India head Rajan Anandan had invested an undisclosed amount in TravelKhana, an online food delivery company that offers services to the Indian Railways.

Kaamastra, an adult online store, which was launched in February this year and has been growing at 30% per month, said it turned profitable in October and is not even looking at external funding.

“This industry has been very unorganised in India and some of the bedroom need products available in India are of substandard quality being sold at high premiums and still being available in scarce quantities. Moreover, this segment requires an intimate approach,” says Amit Batra, co-founder of Kaamastra, adding that there is always a demand for niche products due to scarcity in the market. For instance, there were 20 lakh Google searches a month only from India for adult products.

“Niche e-commerce is the next big thing in India as customers are growing more and more demanding on personal attention," adds Batra.

According to Rajiv Srivatsa, COO & co-founder of the Bangalore-based online furniture store Urban Ladder, vertical players have a clear value proposition, top-of-the-mind recall and a focused positioning. “Business economics and margins work better for vertical players and they need a smaller scale to get to profitability. Also, solutions can be specifically designed from product to digital experience to marketing for the specific target audience,” says

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