According to Grant Thornton India, the Indian fashion retail industry has evolved rapidly over the past decade propelled by investments to the tune of $13 billion flowing into the sector. Of this, $10 billion were PE/VC investments. Indian fashion retail industry is worth about $70 billion and online fashion e-commerce, according to Google India, is expected to grow to $35 billion by 2020 or around 35% of e-commerce. LimeRoad is an Indian online fashion retailer with a unique social discovery platform that is trying to make it big.

LimeRoad’s Journey

Gurgaon-based AM Marketplaces Pvt. Ltd., which owns and operates LimeRoad, was founded by CEO Suchi Mukherjee, Prashant Malik, and Ankush Mehra in 2012 as a social fashion discovery platform that would have the look and feel of a fashion magazine.

The platform runs on a proprietary technology that automatically picks up what is viewed and bought more. It weeds out styles and products that don’t sell, keeping the site fresh.

It also offers a Scrapbook feature that allows users to mix and match clothes and accessories, create their own fashionable looks, and share them. Over 5 million scrapbooks have been created so far. The company claims that its platform showcases nearly 4000 new fashion styles every day and has over 30 million user visits per month. It boasts of a strong community of 50,000 women and an app conversion rate of 15%.

It gets smaller manufacturers, boutiques, and designers to list and sell their products on the platform. Its products range from affordable, trendy clothes to high fashion apparel and accessories. It features over 750 big and small brands. It has over 600 vendors, of which 50% is exclusive to LimeRoad. In its designer section, it has over 21,000 products from nearly 40 brands and 50 designers.

LimeRoad recently forayed into men’s fashion and claims it is already about 25% to 30% of its sales.

LimeRoad’s main differentiation is that it is a social fashion network and offers engagement features like Scrapbook. It depends on the network and engagement rather than on just discounts to increase sales. What is also interesting about LimeRoad is that it sells merchandise from small garment manufacturers and has a zero inventory. It would be interesting to see how its uniqueness plays out in this crowded, yet lucrative market.

LimeRoad’s Financials

Limeroad follows a capital efficient supply side model with zero inventory and a tightly managed marketplace. They charge a commission when the listed vendors make a sale.

During fiscal 2016, sales grew 173% to Rs42.6 crore ($6.6 million) from Rs15.61 crore ($2.43 million) a year earlier. Net loss ballooned 227% to Rs106.32 crore ($16.6 million) from Rs32.54 crore ($5 million) a year ago driven by a surge in investments in marketing and technology. It reported expenses of Rs148.9 crore ($23 million) for the year from Rs48.15 crore ($7.5 million) in fiscal 2015.

LimeRoad achieved a monthly growth rate of 25% in FY17, against an industry average of 10% and the company is confident of achieving profitability within two years. Over the past 12 months, marketing expenditure has remained flat while improving efficiency by 70%. Headcount has also remained stable at 450 for the past two years, in spite of rising sales.

Myntra and Jabong, which have been acquired by Flipkart, are the leaders in this online fashion retail space followed by LimeRoad as per Kalagato competitive intelligence company. Other competitors include Voonik, Aditya Birla Group’s ABOF, Ajio, Jaypore, StalkBuyLove, Zivame, and Koovs.

Founded in 2007, Myntra had raised $158.7 million before Flipkart bought them for an estimated $300 million in 2012. Jabong, founded in 2001, had raised $47.5 million and was bought for $70 million in January 2016.

Limeroad, on the other hand, has raised about $50 million in funding so far. It raised $5 million in October 2012 from Lightspeed Venture Partners, and Matrix Partners. It raised $15 million in May 2014 from Tiger Global Management, Lightspeed Venture Partners, and Matrix Partners India. Its last round of funding was in March 2015 for $30 million from the existing investors.

I find the revenue to funding ratios in these companies quite uncomfortable.