IIt was odd: Three male IIT engineers launched a beauty brand aimed only at women.
But Arjun Anand, executive director of the Belgian investment firm Verlinvest, still decided to support Purplle. He felt they had the maturity and the vision to build a team around them that would appeal to their audience.
It was late 2019. Purplle, a beauty ecommerce platform, was raising its Series C funding round from a handful of investors, and Verlinvest decided to invest ₹ 56 crore ($ 8 million). Some things had piqued Anand’s interest. One was that the company founded in 2011 had spent eight years with just $ 10 million in capital. “That capital efficiency in ecommerce is unknown in startups these days,” he says.
Anand recalls that even in the funding stage of Series C, the Purplle founders had the maturity and clarity to know exactly what they wanted and what they didn’t want. “They asked me to look beyond the top 10 subways and they were clear about building for women in smaller cities.” At the time, he explains, that was an under-served and neglected segment, but it was a large enough consumer group that would evolve over time.
Sure enough, in recent years, the growing digital penetration in India has enabled and propelled internet businesses. According to the Economic Survey of India 2021-22, India crossed 800 million internet subscribers in 2020-21, growing by more than 337 million from 2017-18. And India’s online beauty and personal care market is projected to reach $ 29.3 billion in 2022 and $ 37.2 billion by 2025, according to a report on D2C India beauty and personal care by Inc42 Plus.
Purplle, led by co-founders Manish Taneja and Rahul Dash and chief technology officer Suyash Katyayani, has so far managed to raise around ₹ 1,366 crore ($ 180 million) in capital, with the latest fundraiser being an extended D series. in December 2021 of ₹ 416 crore (close to $ 55 million) with a valuation of over ₹ 5,400 crore ($ 725 million).
Its cap-table is enviable and includes investment firms Sequoia, Goldman Sachs, Blume Ventures, Verlinvest, Kedaara Capital and Premji Invest. It competes directly with Nykaa, led by Falguni Nayar, which had a phenomenal stock market debut last year.
The operating revenue of Manash Lifestyle (the entity that runs Purplle.com) in fiscal year 21, according to data from intelligence platform Tofler, is approximately ₹ 128 crore, compared to ₹ 91 crore in fiscal 2020. ” My feeling is that in the next two to three years, you will see us grow a lot more than the industry average, ”says Taneja, who is also CEO, adding that the run-rate of gross merchandise value (GMV) is expected. be around ₹ 1,500 crore ($ 200 million).
“Both Purplle and Nykaa offer a good point of reference that there are two players who have managed to create a space for themselves and upset the incumbents. [like Hindustan Unilever, Procter & Gamble etc]”Says Ankur Bisen, senior vice president, retail and consumer at consulting firm Technopak.
It speaks volumes about the growing beauty market that creates a lot of opportunities and interest among consumers, she explains, which means Purplle doesn’t need to grow at Nykaa’s expense alone. “It’s a long journey for Purplle, but it has been a fair journey and the company has definitely made a mark.”
Building the business
The founders of the Mumbai-based company are first generation entrepreneurs. While Taneja was a private equity analyst at Fidelity Growth Partners India, Dash was in charge of strategy and business development at Tata Power. Along with CTO Katyayani, Dash is a former student of the Indian Institute of Technology (IIT) -Kharagpur and Taneja is an engineer from IIT-Delhi.
When they started in late 2011 with their personal savings of ₹ 50 lakh as capital, “it was a primitive time from an e-commerce standpoint,” says Taneja.
Manufacturers and brands, such as large FMCG companies, didn’t believe in e-commerce for beauty, but Taneja believed the industry was ripe for disruption.
Reasons included the fact that beauty was a diverse and long-tailed category, coming of age of internet and smartphone usage, and the digital space breaking existing barriers to entry and helping people become more aware of personalizing their products. your beauty needs. Gross margins in the beauty category are also high, says Taneja, ranging from 60% to 70%.
Purplle started with around 1,800 pin codes, which has now grown to sell more than 1,000 brands and 25,000 odd unique products in 18,000 pin codes across India. Last year, it also acquired a minority stake in the beauty brand Juicy Chemistry.
In addition to aggregating third-party products, Purplle also has private brands such as Good Vibes in skincare, NYBae in makeup, and Carmesi in feminine hygiene. In December 2021, it acquired the cosmetics and skincare brand Faces Canada. Private labels contribute around 40-42% of the annual turnover and around 25% of the GMV, says Taneja. About 80 percent of its revenue comes from outside the subways.
Over the past year, as revenue has increased, losses have also increased. Purplle, according to Tofler data, recorded a loss of around ₹ 52 crore in FY21, compared to ₹ 24.39 crore in FY20. Being structured like a market, what they recognize as revenue is commissions, explains Taneja. “When our brand sells products, we earn 25-30% commission. If you look at the overall top line we generated, it will be 4 times the numbers you are seeing [refer to box ‘Report Card’]. And if you then compare the losses, they’re pretty tiny, “according to him.” Our burn is six or five percent negative, which is nothing to worry about. “
Then there is also the adjustment of the employee share ownership plan (ESOP), says Taneja, adding that Purplle has built a “high quality management team”. Through referrals, she explains, they have recruited about seven people from FMCG companies into leading companies for Purplle, in roles including directing finance, supply chain, leading private brands etc.
According to Tofler data, Purplle’s employee benefit expenses increased from ₹ 18.99 crore in fiscal 2020 to ₹ 36.92 crore in fiscal 21.
According to Taneja, the losses at Purplle peaked in FY22 and will start tapering from next year. “We mainly invested our capital in fixed assets and people.”
In addition to hiring talent, the company is writing its story of growth and differentiating itself by leveraging data and being positive at the unit economy, says Taneja. She explains that Purplle’s proprietary beauty intelligence suite helps to meaningfully analyze millions of data points on the Internet.
“Using artificial intelligence and machine learning, we have trained our computers to understand hundreds of thousands of keywords involving brands, ingredients, skin types, benefits, categories and special attributes,” he says. This allows you to understand supply and demand gaps and to launch relevant products.
One of Purplle’s USPs is the founders’ ability to use data intelligently to understand which products are relevant, says Ashish Fafadia, partner at Blume Ventures. “They also have their sights set on much broader growth, which is evident in how the unitary economy is a key part of their decision-making, how they’ve added smarter people to lead specific functions, and how they’ve managed their capital in. a principled and frugal way “.
Path to profitability
Verlinvest’s Anand points out that Purplle has a monthly active user base of around seven million in a target group of around 400 million people it is chasing. So it’s important, he says, to build scale, awareness and relevance. “When that happens, you’ll automatically see more people using it and the numbers reflected in app downloads,” he says. “Secondly, you’ll have people who will become repeat customers and say positive things about the brand through word of mouth and social media.”
Fafadia adds that the growing acceptance among customers will also come from offering a wider and more diversified range of products.
Technopak’s Bisen says breaking the stock market can be difficult due to high price sensitivity. “We are also facing an environment of high inflation and economic uncertainty, which is far more negative in the segment that Purplle is targeting,” he says. “Therefore, product-price relationships and products made available at the right cost become an important factor.” Purplle will also need a multi-channel approach to targeting the value-sensitive consumer, he adds.
Taneja says 10 percent of their top line comes from offline distribution channels and over the course of this year Purplle will open at least 10 stores, experimenting with different sizes and formats.
There are three focus areas on the path to profitability, he says. The first is to build and sustain the brand through content and marketing, the second is to gain more customers and get repeat customers, and the third is to increase 3-4 times the size. Purplle’s monthly active user base “grows about 50-60% year-on-year,” says Taneja, adding that customer acquisition cost has remained constant between ₹ 200 and ₹ 250 per customer.
Purplle also keeps an eye on an initial public offering, once profitable. For the first eight years of its existence, the company has focused on building a differentiated business model and over the past three years it has grown “about 25-30 times,” says Taneja.
According to him, unlike many Western countries, India does not bypass the disturbance, but evolves into it. “Things happen slowly, but the changes are sustainable,” he says. “It takes time, but patience is our greatest virtue”.
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(This story appears in the April 22, 2022, issue of Forbes India. To visit our archives, click here.)