SAIF Partners incubates online clothing store

Private equity (PE) firm AIF Partners has incubated a four-month-old online apparel store and invested $5.5 million (`24.48 crore) in it--an unusually high sum for this early a stage of a start-up.

Mukul Singhal, vice-president at SAIF, says his firm is convinced about Zovi.com's business model of selling clothes online “based on our experience with online clothing retailer Vancl.com in Chi- na“. Investments in the incubation stage typically do not exceed $500,000.

Bangalore- based Zovi.com sells clothing exclusively online, doing away entirely with the regular store model. It will use the money raised from SAIF and other angel investors to expand its supply chain, inventory and product range, and set up warehouses and a logistics team, said founder Satish Mani.

The store now sells shirts and belts for men, and will add trousers, jackets and ties by August. It will introduce a range for women by December.

SAIF invested in Vancl.com three years ago. The store now claims more than a 30% share of China's online clothing market and ranks as the nation's fifth largest online retailer, ac- cording to International Financing Review, a provider of capital markets data.

Vancl.com plans to raise $1 billion by selling its shares in the fourth quarter of 2011, says a Reuters report.

SAIF, which manages $4 bil- lion across funds, hopes Zovi.com will replicate some of that success.

“E-commerce is growing rapidly in India. Increasing Internet penetration, compelling value and convenience are driving urban consumers to- ward online transactions”, Singhal said by phone from Delhi.

Apparel is the third largest category in discretionary spending in India, according to consul- tant Techn- opark's 2010 report India's Consumer and Retail Sectors.

SAIF's only other incuba- tion effort in India was in HomeShop18, which runs a television shop- ping channel that reaches 10 million households as well as an online store. The firm had revenue of `71 crore in fiscal 2011, according to an interview carried by VCCircle.

Shopping websites offer the flexibility to experiment with categories and products, but that does not mean exclusively online stores will find it easy to grab eyeballs, said Debashish Mukherjee, partner and vice- president at consulting firm AT Kearney India. The “viability of attracting footfalls without an offline presence needs to be studied well.

(Source-: mintlive)