Purplle, India's Newest Unicorn, Charts A Plan To Turn Profitable In 30 Months

Having crossed the $1-billion valuation mark, Purplle, the cosmetics and personal care products e-commerce platform, has drawn up a three-pronged strategy to achieve break-even at net level in 30 months.

"We now have more than $100 million (approx Rs 800 crore) in the bank, and the plan is to invest it in three areas—to strengthen data and technology, acquire more brands, and ramp up marketing as we seek to become a household company," Manish Taneja, co-founder and chief executive officer of Purplle, told BQ Prime in an exclusive interaction.

Founded in 2012, the company recently raised $33 million (Rs 250 crore) as part of its Series E funding round, led by South Korea's Paramark Ventures, taking the total funding to over $215 million at a valuation of $1.1 billion. The newly minted unicorn also counts Sequoia Capital India, Goldman Sachs, Blume Ventures, Verlinvest, Kedaara Capital, and billionaire Azim Premji's Premji Invest as backers.

The etailer of beauty products has 70 lakh monthly active users, over 1,000 brands, 60,000 products, and five private label brands.

Unlike traditional fast-moving consumer goods companies, Purplle thrives on personalisation, said Taneja. "And for this, we need a lot of data. So, we would continue to invest immensely in this space."

Acquisition Strategy

The company is looking to acquire smaller beauty and wellness brands with a "unique voice", "passionate" founders, and ranking high on corporate governance, Taneja said.

Hair colour, hair appliances, "differentiated" skincare and beauty products are some of the segments which the company is looking to invest in.

Taneja said they are looking to “take risks with a limited amount of capital”. “So, we would restrict ourselves to up to $100-120 million, which is 10% of our value.”

“We aren't the right partners for businesses if they are not here for the long term,” he said. “So, we don't buy such brands. We will engage carefully."

Purplle has also set aside Rs 200 crore, as part of its marketing spend for FY23–a growth of 50% over last year.

"We have signed regional brand ambassadors like Sara Ali Khan for the Hindi speaking belt, Yami Gautam for Good Vibes, and OTT star Mithila Palkar for our feminine hygiene brand Carmesi," Taneja said. "So, we have enough in our fold. Now, the idea is to make good content and spend on promoting them."

Purplle plans to double down on onboarding influencers as well to promote the brand. It typically works with over a thousand influencers every year.

Cost Cuts

Taneja said efforts are under way to reduce costs and improve gross margins in order to be profitable at a net level.

However, the IIT Delhi alumnus banks on "persistence and patience" to achieve sustainable growth. "It took six to seven for us to find our mojo. We started with just Rs 50 lakh in our bank account in 2017, and today that number is around Rs 800 crore. Once it starts to do well, it snowballs, so one has to wait for that inflection point. Don't expect to become an overnight success."

Taneja expects gross margins to improve as the company scales. And Purplle’s price point also offers an advantage, he said. "Our private labels have high margins, so we expect to see improvement in our gross margins as demand revives further."

The company is working towards lowering other direct costs as well. "As we get more orders, we would open more local fulfilment centres, which would help us to reduce cost." Currently, it has five fulfilment centres in Mumbai, Bengaluru, Kolkata, Guwahati and Gurugram.

Despite higher costs and pressure on gross margins, the company still makes money, said Taneja. "We make money on every order, meaning we are profitable at CM2 level or post-marketing. It's just that we don't make enough money to pay for our team costs."

The company became profitable at an Ebitda level in FY19. "Following which, we raised a lot of capital and started using that for our growth. The only place where we burn cash is in our people cost." It currently has 2,400 employees, and the annual expenditure on the team is Rs 15-20 crore.

According to Taneja, the Purplle team no longer requires to grow in size. "We have an apt-sized team who can run a business that is 2.5-3 times our current business, which is growing at 70% year-on-year."

Taneja expects people costs, as a percentage of net merchandise value, to reduce over a period of time. "That's because the same team which ran a $225 million GMV business is capable of running a $700 million GMV business. Our team cost as a percentage of revenue will reduce and we will start getting operating leverage on our team significantly."

Competition Heats Up

Purplle competes with the Falguni Nayar-led Nykaa (FSN E-Commerce Ventures Ltd.), and the market is heating up with new competition emerging from players like MyGlamm—backed by Amazon.com Inc.—and MamaEarth, who have also raised funds to expand.

Purplle’s annualised gross merchandise value stood at $180 million (Rs 1,350-1,400 crore) in FY22 compared to Nykaa’s beauty and personal care GMV of Rs 5,000 crore, and a total of Rs 6,930 crore including its fashion and B2B businesses. Like Purplle, Nykaa, too, started its operations in 2012.

Expand Offline

Demand has taken some beating because of inflation but is largely "buoyant", Taneja said.

"Tier 2 markets are doing better than metros, actually. Our products and price range also make sense for the mass market.”

According to him, 75% of the sales on Purplle.com come from outside metros. The company also plans to set up at least 10 more physical stores as it helped Purplle cushion sales at a time when online growth had slowed.