Why StalkBuyLove founder cringes when rivals sell apparel at $4 a piece

Photo credit: StalkBuyLove.com

When StalkBuyLove CEO Tushar Ahluwalia was five years old, he used to visit garment factories in China. His mom, a German designer for big apparel brands, would subcontract manufacturing to these factories. This made fashion business percolate Tushar’s genes.

When he was 23 years, he built home decor commerce business HeavenandHome with VC money, and later exited to FabFurnish. In his own words “not having his skin in the game, didn’t teach him the hard lessons of entrepreneurship.”

That’s why in his new avatar, he wants to build the Zara of India, from India. “I’ve pooled in all I ever earned in this venture. If you are literally not pulling your hair every day and standing on the brink with little resources, you will never learn the art of entrepreneurship,” says Tushar, 28, who is building StalkBuyLove from the dusty bylanes of Okhla Industrial Area in New Delhi.

“Real businessmen are not built on OPM (other people’s money). They should have their own skin in the game,” he adds.

StalkBuyLove cofounders include ex-Rocket Internet employees Nishrit Srivastva, Aashna Chopra besides Tushar’s sister Shikha Ahluwalia, a fashion expert.

Building businesses with other people’s money

It has become a cyclical thing in India. VCs face pressure from their limited partners to invest money in India, and show them the returns in five years. “A lot of unhealthy businesses are thus getting funded along the way.” adds Tushar, a former mergers and acquisitions (M&A) specialist with Deutsche Bank.

Tushar cites an example of a recent hyperlocal delivery company. “It was valued based on the gross merchandise value (GMV) of the goods its delivery boys were carrying, and not its own earnings!” He refuses to name it.

“A lot of entrepreneurs in India now think that if they can churn out even US$1-$5 million for themselves in a startup’s lifecycle, that’s good enough,” he adds.

However, it’s not that Tushar has not raised VC money for his startup. StalkBuyLove has raised about US$1.5 million till date from investors such as former Rocket Internet CEO Mato Peric and Asian Ecommerce Alliance partner Peter Kabel.

India’s startups pay customers more than they earn

On his Linkedin profile Tushar fiercely advertises this tagline: “High Net CLV is the solution to Indian eCommerce.”

He gives a ratio of two metrics which are basic to valuing any ecommerce business. According to him, customer lifetime value (CLV) – for about a year – when divided by customer acquisition cost in a year, should always be greater than one. “The higher the ratio, the most cash positive the company can be,” Tushar adds.

“But almost all of the big ecommerce businesses in India have this ratio in negative,” he adds.

This means that Indian ecommerce companies are paying more money to customers to buy that shirt or jeans in a year, than they earn from those customers in a year. If you add the marketing and advertising costs to bring that customer on to the ecommerce platform, the ratio will fall even further.

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