So Bajaao is not just about selling music gear anymore?
We have evolved gradually and there are four distinct divisions in the business now – play, experience, teach and discover. This apart, we will be ramping up equipment rental business, launch a servicing and repairs business, seconds sale business among others. Play is the e-commerce and the more mature part of the business that's mainly about selling music gear to customers. We are approaching about a million users a month now with about 7,000 to 8,000 orders being shipped every month. In just the last financial year trailing we did over Rs 55 crore in gross merchandise value (GMV) and this year we are looking do anywhere between Rs 100 crore and Rs 150 crore of GMV. In our business the GMV to net difference is about 30% and that too because we are unable to fulfil all the orders as our supply chain in the industry is broken and we're trying to fix that.
What are the possibilities of having a marketplace model in the future?
Yes, we're launching a marketplace for used gear. We believe the used gear market could be as big as the new, because no one throws their stuff away. They just want to upgrade and if you are a musician you know the moment you have the money to buy the next model you are buying it. So what to do with the previous one? You can post it on our marketplace and if someone buys it we will just facilitate. You can ship directly to that person and we will just be there in between to make sure that it's fair – as in if you've got a broken instrument we will make sure that the buyer gets the refund.
What kind of revenues has the company done in the last few years?
Being purely e-commerce, the Play vertical is growing rapidly. Last year we grew 300%. In fact we grew from about Rs 15 crore to Rs 57 crore, just in the last 12 months. And once we go to Rs 100-150 crore, then it becomes a sizeable business where you have economies of scale and all those things kick in. Other verticals are still small and will take some time to reach a particular size. Our business is a little different than most other e-commerce companies wherein our gross margins are positive not negative. Our gross margins are even today upwards of 20%. In fact this year we will be a profitable company. We are not going to be in a situation where we are burning so much money that we need next round of funding else you are done.
Do you also have plans to launch private labels?
We're looking to actually manufacture Indian instruments which will be a baseline quality that the company will stand behind. You can buy, don't like it, return it. We are working with very top Indian artist, very well regarded world over to see if we can do like a joint branding exercise and launch Indian instruments. So that we will not only sell in India but worldwide because the worldwide demand is very high. Our approach will be to source the instrument from the respective manufacturers and put our own branding, so it's very standardised. That way we can promise them a consistent enough volume so that they can invest in other people. Right now they take the order and they invest so it's a very, very tight operation. In fact, we are also planning private labels in the home audio space.
You are also working on a mobile app?
It is part of our 'learn' initiative wherein the app will connect students with teachers in their own localities. In fact, these music teachers will be certified by us so we will stand behind the quality. And if the quality is not good, students can send us a note and we give them a full refund or find them a new teacher and help them with that process. We've figured that the music school model is very slow. We can't open music schools all over India but if we can connect teachers to students, they can figure out where to learn. The app should be out in the next three months. In fact, we are also coming up with a certification program because most music teachers in India are our customers, because they buy the gear from us. And their students need gear so they become our customers too. So both are actually part of our ecosystem. Interestingly, the application will also help musicians discover other musicians in the area. So you can find a teacher or you can find musicians or music lovers of a certain genre. Under the 'learn' vertical we will also be doing online self-teaching videos. We will have a licensing agreement with content creators and give access to those videos to our customers on a subscription basis. We are just trying to expand the market here in India. I was reading this statistic in the US wherein the per capita spend on music and related stuff is $42-45. In India it is $1. So here people don't spend more because the opportunity to spend is not there.
How many fulfilment centres (FC) do you currently have?
We currently have one in Mumbai right now and it's in Bhiwandi. In this financial year we are looking to expand to Chennai and Delhi, so that it will be closer to the customer and we can ship even faster.
What do you mean by saying supply chain is broken?
There are some products that we import directly from the manufacturers and there are others for which we have to deal with distributors. And in most cases the distributors do not have enough stocks so at times we are forced to cancel orders.We're trying to fix that. That's our number one mission in supply chain. And now that our volumes are getting higher we will gradually be doing more of direct imports than dealing with distributors. In fact, a few have already made us direct importers and there are others we are in talks with. Different brands have different ways of doing business so soon we will try and fix it either through distributor or direct or whichever is the best case scenario. Once that's done, our GMV and net could be within 10%. We don't want to cancel because it's a bad customer experience more than anything else. So we have come up with this program called Bajaao Express. Products with a Bajaao Express logo indicates that it is stocked in our warehouse and can be shipped within hours. So if you place order by 4 pm it's shipped the same day. Otherwise within 24 hours the next day.
How much stake do you currently own in the company? What is Bajaao founder Ashutosh Pandey's role in the business?
There are a few other financial investors but between Ashutosh and myself, we own the majority i.e. more than three quarters. Ashutosh is the chief technology officer and he also helps me with the industry contacts. We work very closely in running the business.
With the kind of changes in terms of policy guidelines, taxes etc, is that a concern for you?
It is because if we do seek investors in the future, it limits your options because we are a multi-brand retail. So far all our investors are Indian and we don't have foreign investment in the company. However, if we were tap them at a later stage we will have to become a marketplace.
What kind of capital expenditure have you earmarked for overall expansion of the business?
It's going to be a few million dollars for sure. On an operating expenditure level we will be profitable. Some of the new divisions are more future looking and I have built businesses that make money from day one. If every transaction is profitable you will make money that's the simple rule. In theory it sounds great but it's hard to follow and we are actually trying to stick to it.
How are you planning to fund it?
I am going to be funding it. We might look at external funding too we are self-sustaining. We are already very close to being profitable on P&L level. In the future if require more funds then we will prefer a strategic partners over financial investors.
