So Bajaao no longer just sells musical equipment?
We have gradually evolved and there are now four distinct divisions in the company: play, experience, teach and discover. Apart from that, we will develop the equipment rental activity, launch a maintenance and repair activity, a second-sales activity among others. Play is e-commerce and the more mature part of the business which is primarily selling music equipment to customers. We are now approaching about one million users per month with about 7,000 to 8,000 orders shipped each month. In the last fiscal year we have made over Rs 55 crore in gross goods value (GMV) and this year we are looking to make anywhere between Rs 100 crore and Rs 150 crore in GMV. In our company the GMV / net difference is around 30% and that too because we are not able to fulfill all the orders as our supply chain in the industry is broken and we are trying to solve this problem.
What are the possibilities of having a marketplace model in the future?
Yes, we are launching a marketplace for used equipment. We think the used equipment market could be as big as new ones because no one is throwing 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 that you are buying it. So what to do with the previous one? You can publish it in our marketplace and if anyone buys it, we will just facilitate it. You can ship directly to that person and we’ll be right there in between to make sure it’s right – like you have a broken instrument we’ll make sure the buyer gets the refund.
What kind of income has the company made in recent years?
Being purely e-commerce, the Play vertical is developing rapidly. Last year we increased by 300%. In fact, we’ve gone from around Rs 15 crore to Rs 57 crore, just over the past 12 months. And once we get down to Rs 100-150 crore it becomes a big business where you have economies of scale and all of those things come into play. Other verticals are still small and will take some time to reach. a particular size. Our business is a little different from most other ecommerce companies where our gross margins are positive and not negative. Our gross margins are still above 20% today. In fact, this year we will be a profitable business. We’re not going to be in a situation where we’re burning so much money that we need the next round of funding, or you’re done.
Do you also intend to launch private labels?
We are looking to make Indian instruments that will be a basic quality that the company will defend. You can buy, don’t like it, return it. We are working with a leading Indian artist, very famous all over the world to see if we can do as a joint branding exercise and launch Indian instruments. For us to sell not only to India but to all over the world because the global demand is very high. Our approach will be to get the instrument from the respective manufacturers and put our own brand, so it’s very standardized. That way, we can promise them a consistent enough volume that they can invest in other people. Right now they’re taking the lead and investing, so it’s a very, very tight deal. In fact, we are also planning private labels in the home audio space.
Are you also working on a mobile application?
This is part of our ‘learn’ initiative in which the app will connect students with teachers in their own localities. In fact, these music teachers will be certified by us, so we will guarantee the quality. And if the quality is not good, the students can send us a grade and we give them a full refund or find them a new teacher and help them with this process. We thought the music school model is very slow. We cannot open music schools all over India, but if we can connect teachers with students, they can find where to learn. The app is expected to be released within the next three months. Actually, we also offer certification program because most of the music teachers in India are our customers because they buy the material from us. And their students need equipment so that they can also become our customers. So both are actually part of our ecosystem. Interestingly, the app 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. As part of the “learn” vertical, we will also be making self-study videos online. We will have a license agreement with the content creators and provide access to these videos to our customers on a subscription basis. We’re just trying to expand the market here in India. I was reading this statistic in the United States where the per capita spending on music and related stuff is $ 42-45. In India it is $ 1. So here people are not spending more because the opportunity to spend is not there.
How many distribution centers (CFs) do you currently have?
We currently have one in Mumbai and it is in Bhiwandi. During this fiscal year, we are looking to expand to Chennai and Delhi, in order to be closer to the customer and to be able to ship even faster.
What do you mean by saying the supply chain is broken?
There are products that we import directly from manufacturers and there are others for which we have to deal with distributors. And in most cases distributors don’t have enough inventory, so sometimes we have to cancel orders. We are trying to fix it. This is our number one mission in the supply chain. And now that our volumes are increasing, we will gradually be doing more direct imports than dealing with distributors. In fact, a few have already made us direct importers and there are others with whom we are in discussions. Different brands have different ways of doing business, so soon we will try to resolve the issue either through a distributor or directly or at the best of times. Once done, our GMV and net could be less than 10%. We don’t want to cancel because it’s a bad customer experience more than anything. So we developed this program called Bajaao Express. Products with a Bajaao Express logo indicate that they are stored in our warehouse and can be shipped within hours. So if you order before 4 p.m., it ships the same day. Otherwise within 24 hours the next day.
What share do you currently hold in the company? What is the role of Bajaao founder Ashutosh Pandey in the company?
There are a few other financial investors, but between Ashutosh and me, we hold the majority, more than three quarters. Ashutosh is the CTO and he also helps me with industry contacts. We work closely together in the management of the business.
With the kind of changes in terms of policy guidelines, taxes, etc., is that a concern for you?
This is because if we are looking for investors in the future it limits your options as we are a multi-brand retail business. So far all of our investors are Indian and we have no foreign investment in the company. However, if we exploit them at a later stage, we will have to become a market.
What type of capital expenditure have you allocated to the overall expansion of the business?
It’s going to be a few million dollars for sure. In terms of operating expenses, we will be profitable. Some of the new divisions are more forward looking and I have created businesses that make money from day one. If every trade is profitable, you will make money, that’s the simple rule. In theory, that sounds good, but it’s hard to follow and we’re actually trying to stick to it.
How do you plan to finance it?
I will finance it. We could also consider external financing, we are self-sufficient. We are already very close to being profitable at the P&L level. In the future, if we need more funds, we will prefer strategic partners to financial investors.