An E-commerce Success Story, the RollerCoaster Journey of Craftsvilla

Friday, 10 July 2015

Child and Youth Finance International
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The Success Story of a Venture Capitalist turned Entrepreneur, who made his E-Commerce
Company Profitable
Mr.Manoj Gupta is the Founder/CEO of Craftsvilla.com and was previously Principal at Nexus
Venture Partners an India focused $600 million fund. Mr.Gupta was also a former board
member of multiple companies including Yebhi.com and Sohanlal Commodities in India before
founding Craftsvilla. Craftsvilla is a great example for companies to make their business
model more sustainable, inclusive and aligned with the societal needs in the post-2015 world,
and is an even greater example for young people who are working to start their own business.
The question Why did Craftsvilla.com become profitable? may sound nave, with the most
obvious answer being Of course you should become profitable. However, many components
that contribute to that answer are not always so clear to see. Here is the story of the roller coaster
journey of Craftsvilla, and how today Craftsvilla stands tall in e-commerce because their
approach to profit focused on looking for long-term success rather than mere survival, without
relying on the Venture Capital. Here is the success story of Mr. Guptas E-Commerce business
start-up.
Today, Craftsvilla is a stand-alone profitable entity without significant funding from VCs. Given
Mr. Guptas previous VC position, he was already familiar with how quickly a VC and fluctuate
between the challenges faced during low periods and the many achievements during a high
period.
Sensing the exhaustion of VCs passion for e-commerce, the team started preparing for the worst
no-money scenario before other companies did, formulating a strategy focusing on three basic
action points:
1. Reduction of Cost
2. Reduction of Complexity
3. Expansion of Revenue
Approximately six months ago, the team had 80 people working in five offices across India.
Today, there are eight people centralized in one office doing more business than when the team
was 10 times that size. One thing I have learned from studying Craftsvilla is that the efficiency
drastically boosts when you keep things simple. It is amazing to see how the efficiency increases

when you have an optimally-sized team, and how remarkably simplified the work becomes when
the employees seated next to each other have specific roles, solving the related issues faster. In
addition to a larger staff and multiple offices six months ago, Craftsvilla also had multiple
business models with multiple commission structures. Today, Craftsvilla has reduced to one
simple business model with one single commission structure. Craftsvilla decided to discontinue
their business model called "iManage", through which they managed logistics of their sellers.
The program consumed 80% of their resources but contributed to only 20% of the total revenue.
As a result "We need lesser space, we need lesser coordination and we have more time to think
what else we can do quantumly different to take us to the next level", says Mr.Gupta. By making
such structural and organizational changes, today Craftsvilla is profitable with a steady growth of
15-20% month on month, with Zero discount (a bond bought at a price lower than its face value
and the face value paid later on) and COD (cash on delivery) , with double the conversion on
traffic and average order value. Their customer acquisition cost is below 250 Rupees and they
are recovering the marketing dollars on the customers first purchase. All this was done not just
to become profitable, but also to make the business capital efficient, scalable and sustainable.
Craftsvilla became profitable to mold their business and organization for next level growth,
which is going to be largest India has witnessed in the E-Commerce sector so far. Craftsvilla
became profitable to be less dependent on fluctuating VC passion, gaining more flexibility and
control over the company.
Over the described period of time, Craftsvilla is bringing about a positive change in the
livelihoods of base-level customers, artisans and designers. This is aligned with the 8th and 16th
goal of United Nations Post-2015 Sustainable Development Goals (SDGs) which focus on
promoting sustained and inclusive economic growth, ensuring productive employment and
decent work for all and promoting peaceful and inclusive societies for sustainable development.
In addition to its successful return, the firms business model also stands out in its approach to
society and societal needs. While Craftsvillas experience proved that it is possible to become
profitable in the E-commerce sector, it also showed that becoming customer-facing, as opposed
to investor-facing leads to more sustainable and inclusive growth. Craftsvilla uses a
marketplace model to capture the regional variations of India. They connect local artisans and
designers directly to global customers and thereby increase their livelihoods, remove middlemen,
help promote their brand and hence preserve Indian culture, traditions and values.
Craftsvillas social engagement also extends to the customers, since the companys work helps
bring goods and services to underserved populations. This journey will help customers match
their needs by discovering and buying products they would otherwise not have access to. The
companys strong commitment towards the local communities progressively leads to a greater
inclusion and economic empowerment, which will ultimately contribute to the sustainable
development of the countrys economy.
Craftsvillas experiences while on their path to profitability gave them glimpses of success. They
are now more confident than they were six months ago that they will become successful.
Furthermore, in doing so, Craftsvilla is contributing to the improvement of society and to the
achievement of the Sustainable Development Goals. Mr. Gupta's exemplary profitable E-

commerce set-up, may be of great help and a strong inspiration for other entrepreneurs to shape a
future billion-dollar society-friendly organization for generations to come.
Monica & Manoj Gupta, Craftsvilla: E-commerce platform for Indian
handicrafts

We routinely hear of entrepreneurs turning investor. But in the case of

Craftsvilla, an e-commerce startup in the handicrafts space, its the other way round. Co-founded
by ex-investor Manoj Gupta, who was a Principal at Nexus Venture Partners before setting out to
startup, Craftsvilla is one of the fastest growing e-commerce platforms in the handcrafted goods
space.Prior to Nexus, Manoj co-founded a semiconductor technology company, WIT, in US
which was later acquired by Chrontel. In this exclusive interview with YourStory, Manoj talks
about the business idea, the advantages of having been an investor while starting up, co-founding
a company with his wife and the road ahead for Craftsvilla.
Manoj, how did the business idea for Craftsvilla come about?
Well, it was conceptualized a year ago by my co-founder Monica Gupta, who also happens to be
my wife. I was with Nexus Venture Partners then and I was very familiar with the e-commerce
space. I was on the board of Bigshoebazaar (which runs Yebhi, a fashion and lifestyle ecommerce portal) and Snapdeal (click here to read YourStorys interview with founder Kunal
Bahl). So, I swiftly understood the power of the e-commerce and handicrafts combination.
Also, its a long-tail category. Theres scope to build a global platform, with lots and lots of
products. So, bearing that in mind, we launched Craftsvilla and today, its the largest online
handicrafts portal inIndia, in terms of inventory.
What are the challenges of building an e-commerce company in the handicrafts space?
Its a virgin category. Theres high defensibility and the lead time weve got is solid. The
challenge, as it is with other e-commerce ventures, is the backend. The sourcing and supply
chain system in handicrafts is disintegrated and it is in need of aggregation. And finally, since its
all handmade, maintaining consistency in terms of quality is the key factor. We need to filter out
vendors constantly. By vendors, we mean artisans from small villages acrossIndia.
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But then, this is a category thats unique toIndia. Handicrafts have

always been our strength. Its a $7 billion market inIndia and globally, its even bigger. Margins
are also higher.
So, being a VC helped you figure out the size of the opportunity that you were looking at.
Yes, the VC background has helped. I know about the size of the market, the market demand, etc.
And were very clearly looking at global scale. Its not as if Im relying entirely on the ecommerce and internet venture hype right now. Were a unique e-commerce story with a social
angle and thatll set us apart.
Can you take us through some numbers that quickly capture the strength of the platform?
We ship globally and its free for goods worth more than $250. We have more than 2500 product
on the site and within the next three months, we should have more than 10,000 products. We
work closely with more than 100 vendors and over 1000 artisans acrossIndia. Were also setting
up an NGO for artisans. But we, ourselves, are not an NGO. I strongly believe that having a
commercial mindset is important to build things of scale. The truth of e-commerce is that you
cant be sustainable with, lets say, a margin of 20-25%. Scaling up quickly is the name of the
game.
Tell us about your positioning. Are you looking to build Craftsvilla as a private label
brand?
The positioning is clearly handcrafted luxury. Unlike our other competitors inIndia, ours is not
a marketplace model. I mean, its hard to pull off that sort of model inIndia. And anyway, in ecommerce, theres no room for second and third place. Either you lead or you drop out. And yes,
were trying to build the Craftsvilla brand. A vast majority of our products are unbranded and
theyre all sold under the Craftsvilla brand. If you notice, there isnt a big brand in this category
apart from FabIndia. So, we see that as an opportunity.
What are the consumer trends that youre noticing on Craftsvilla?
About 80% of the buyers are women. The push has been to revive handicrafts and make it
conveniently accessible. We try to keep things colourful and lively and that attracts the 18-35 age
group buyers. More than 50% of the orders come from Tier 2 cities. And as it is with ecommerce portals inIndia, 50% of sales are Cash On Delivery (COD).
Its not every day that we see a VC turning entrepreneur. Tell us about the experience and
how the startup ecosystem has been reacting to that move.

Even at Nexus, it was almost as if I was starting from scratch. I was the first non-partner to join
Nexus here inIndia. And today, theyre one of the leading early stage funds. In my head, I was
never a VC. And anyway, as an early stage VC, youre almost like an entrepreneur. I guess Im
drawn by the idea of building something from scratch and seeing it o somewhere.
Most of my VC friends have been surprised by the move. Some of them wish that they could do
this as well. But they also realise that its not an easy journey. When I left Nexus, I stepped out of
a bunch of board seats. If you look at the rewards of staying in Nexus versus the risks of starting
up, it was a painful decision. I mean, at the end of the day, theres still some amount of glamour
associated with being a VC. The truth is that I can always go back to being a VC. But Ive
always wanted to create a big company inIndiaand thats what were trying to do with
Craftsvilla.