The company has gone through three different iterations in the last six years. But the story of chaos starts in 2015 when Zivame managed to raise Rs 250 crore ($38 million). Those were heady days; e-commerce was hot and investors were willing to pour lots of money into it. And when you have lots of money, you need to think harder about what to do with it. Fair to say, Richa Kar and Zivame were in that phase in 2015.
Let’s take you through what happened.
What are the different phases?
Phase 1: Zivame gets cash and uses it to scale up operations. It gets top brands in the country and internationally to list on its platform. The company advertises heavily and starts seeing traction on its private label. Kar is excited. It trickles down to the employees.
The private label sees a huge demand and helps make good money. In late 2015, Kar has another idea. Wanting Zivame to be India’s answer to Victoria’s Secret, she opens an experience store in Indiranagar, an upmarket neighborhood in Bengaluru.
“The idea’s to encourage women to come to the store and treat it as going to the hairdresser. Spend an hour picking lingerie, finding the right size and then help these women buy online,” says a former Zivame employee. Now, the experience store has only Zivame’s private labels, both premium and the economy versions. Kar sees the opportunity to build Zivame into a bigger brand than it already is. She goes for private labels, just like competitors Clovia and PrettySecrets. The investors turn skeptical. But Kar insists that the company pivot.
Phase 2: “The private label was doing well. Women were choosing it over some big brands,” adds the former employee. Kar gets the green light and pivots in September 2016. Zivame becomes a single-brand, private-label retailer. Then, the stitches come loose. The company goes on to another spending spree. It changes the website, becomes content-heavy, picks artistic photographs, and hires more people. But then the sales start to drop.
“Women came to Zivame because it had a mix of international brands and private labels. They would buy three pieces of big brands such as Jockey, and while doing that, order one of Zivame’s too. Without the big brands, customers weren’t very keen,” the former employee explains.
It gets worse though. By this time, Flipkart has bought Jabong, cornered the apparel market, and turned up the volume on discounts. And those who are loyal on the Zivame platform start getting annoyed by the customer service. The popular products run out of stock before Zivame can replenish them.
“There is a nuance to moving to an inventory-led model — the lead time in production,” says the former employee quoted above. In the marketplace model, whenever Zivame would start to run out of stock, it would order more. “Jockey, for example, would make fresh stock available within a week. In an inventory model, you need to produce and ship. Often it takes longer than a week,” the former employee adds.
Kar’s reaction is to increase production and open stores in malls and high streets across Bengaluru. “It created chaos. The inventory managers at the warehouse would say, ‘no more stock’ but there were pieces available at the stores. Customers would be confused,” the employee explains. “Women would find sizes and fits in stores and wonder what the point was in encouraging them to buy online?”
Why are the investors anxious?
Then the investors at Zivame get anxious, and the pressure on Kar grows until they started asking for numbers. Kar’s COO, Sinha, asks the investors to switch back to the marketplace model.
Meanwhile, competitors see an uptick in their revenue while Zivame dabbles with a private brand. “One of the major problems that Zivame faced was changing their DNA,” says one of the biggest investors at Zivame’s competitor. He explains that everything changes during the switch from a marketplace to a private label brand. “Something as essential as hiring changes.
You don’t hire smart kids from business schools; you need to hire from design institutes,” All of this increases the cost to the company. The burn increases. “Design and supply chain takes months to perfect. You can’t just switch and start making money,” he adds.