See huge market potential for handicraft in small cities, says X5 Retail CEO Pradeep Shekhawat

X5 Retail, in the business of bridging the gap between emerging entrepreneurs, retailers and craftsmen and malls across the country, has a concept of organizing Themed Weekend Bazaars. It is now expanding to cities like Pune, Chennai, Ahmedabad, Surat, Delhi, Chandigarh, Bhopal, Raipur, Bhubaneswar, Kochi and many more. The company has recently launched its online model in the name of IndiaExhibitionCentre.com. IEC is first virtual online exhibition with an objective to offer customers a range of lifestyle products with a consistent shopping experience. There will be different themes from time to time which will be promoted and marketed through different style icons mascots. It will provide a pan India market to all entrepreneurs / artisans from all across.

The company is now setting up six new retail stores under its brand name Masakali in various cities during the first quarter of  2016. Pradeep Singh Shekawat, Founder & CEO, shares plans for the company:

Excerpts from a conversation:

How did you come up with this idea?

It all began with an idea to develop a retail concept to bring all the traditional artifacts of the country, fusing with current trends and designs onto one single platform in the modern retail environment. We found this concept as an untapped business opportunity and we started with i first of its kind flea market which brings all the small scale merchants, retailers, manufacturers to a bigger platform in the best of high traffic shopping space. There was no other player operating in this space and we also felt a latent need gap in the malls of the country. The malls had everything to offer – right from branded products in various categories but what was lacking was unbranded merchandise at an affordable cost. Thus, seeing this gap, we sold our concept to suburban Mumbai’s high traffic mall Infiniti Mall, Malad, and thus the company started its first Exhibition ‘Crafts of India’ in Infiniti Mall, Malad in, 2013 with 10 exhibitors displaying a variety of products relating to the arts and crafts of the country.

What is the business model?

Our business model is a market place arrangement both offline (since the last 27 months) and online. We waived off things such as high rentals, costs of fit outs and lock-in periods. The retailers don’t have to deal with the mall neither the fit out costs. We provide the entrepreneur a least risky business model. It is a solution for malls who want to give an additional offering to existing customers. We are in talks for raising funds  this year. On the online space, we already have 200+ merchants showcasing more than 15,000+ products. On the offline space, there are 500 to 600 exhibitors showcasing 5000+ products and we have 1000+products since January 2016.

Where is the demand more for ethnic producs – offline or online?

According to Indian Handicrafts Industry, the sector is economically important from the point of low capital investment, high ratio of value addition, and high potential for export and foreign exchange earnings for the country. The export earnings from Indian handicrafts industry for the period 1998-99 amounted to $1.2 billion. The demand for ethnic product is large even within Tier I, II and III cities and this demand frequently drives small town consumers to big cities for their shopping requirements. The onset of the e-commerce revolution is also changing the game. Consumers are able to purchase many, if not all, popular ethnic product brands from the comfort of their homes. With many physical brands setting up online stores and others selling through online portals, customers who do not have access to physical stores can purchase the brands online. And we’ve experienced it real-time through our presence in various malls across different tier cities with even different regions in India. The demand on the offline and online space is equally increasing where some consumers still prefer to touch and look at the product. Online marketplace is already booming with big players like Flipkart, Amazon have become major giants.

We are planning to expand to other cities in Pune, Surat and Ahmedabad. We have also been invited by other malls in cities like Cochin, Bangalore, Hyderabad, Vishakapatnam. Currently, we are looking at Tier I, Tier II and Tier III cities. But the market exists in much smaller cities. There is huge potential for growth in these markets.

With FDI approved in the offline retail impact, how is it affecting online ethnic product space?

With the onset of FDI, there has been a mixed reaction from people. As long as it is concerned with ethnic products, I think it will be a good opportunity with investment coming in for Indian handicrafts which have a high demand in the overseas market. India’s handicrafts have shown enormous exports and with the investment coming in, the demand is likely to increase. With respect to the online space, I think it will be a too cluttered market since, brands like Amazon, Flipkart are already working on aggregator - based model and receiving funds from global and private equity firms. Since, we are in both spaces it gives an upper hand to us. And historically it’s been observed in developed markets that both spaces (offline as well as online) are thriving, growing (a country’s political, social, economical situations are different impacts).

What is the turnover and target for the coming fiscal?

The gross merchandize value (GMV) sold through our offline market platform in a year is about 36-40 crore with gross profitability of minimum 20 percent. This year our target is Rs 60 crore. The total investment so far is around Rs two crore with a yearly turnover of Rs 36.30 crore. For the online arrangement, we are looking for investment and talks have just been initiated with a couple of PE funds.

A lot of startups are venturing into the ethnic product category.

According to IIM-A report by Diptesh Nandi, the export market for the handicrafts segment is Rs 13,400 crore annually. Around eight out of 10 Indians do not know of a credible place to shop for authentic ethnic goods. A lot of startups such as Craftsvilla, C-Bazaar, etc have entered this ethnic product category space. The motto is to tap the potential of the ethnic goods market, to create a sustainable business proposition and the same time act as a medium to create awareness and interest about different cultures.