CredR, an online marketplace for second-hand bikes, was founded by Sumit Chhazed and Nikhil Jain, IIT Bombay and Stanford University background students. They are just around 25, but have already established and sold out two successful startups before finally establishing a hugely successful startup-credR which is unargubly India’s most trusted online marketplace platform for selling second-hand bikes. Another interesting thing is that when most of the big guys in the e-commerce industry are bleeding, they are thinking to be operationally cash-positive from city operations just by the end of the year.
Vikas Kumar, the editor of XING Magazine, talked to Sumit Chhazed at length about the journey of CredR, startups ecosystem and on the range of issues.
XING: How has been the journey so far?
Sumit: Till now, it has been really a great journey. We have some very interesting propositions in the market. There were initial challenges, but we have strong conviction in our business model. There was no confusion at all about what our customers’ needs. When we started, we knew that it’s not going to be like a package subscription model. The first thing we introduced on our platform was that every bike will be inspected before being listed.
For this, we have a team of 40 CredR auto inspectors who check each bike from every angle. We have a very stringent standard in place. We judge the bike on more than 80 parameters. Therefore, if anyone is buying from our website, they can be rest assured of its quality.
XING: Is there any instance of customer dissatisfaction?
Sumit: Yes, it’s a learning curve. Since inspections are done sometime before the actual bike sale, there arise discrepancies in the condition of the bike due to the time lapse. However, our parameters are so stringent that chances are very minimal and usually factored in. The first thing our team does is to do a visual validation. Another thing is that our team goes on the field for validation. We are proud to say that out of 100 bikes hardly one bike is ever returned.
XING: How are you planning to ramp your team?
Sumit: We don’t feel that need because we are just able to use our half of the team’s capacity even if 400 transactions take place per day. At the end of the year, we are planning to have at least 1000 transactions per day. We can easily scale multifold with the same team and with technology playing a huge role in scaling without increasing human resources.
XING: So being an entrepreneur was a chance or a result of well thought out process?
Sumit: We were bitten by the entrepreneurial bug right from the beginning. Before this, we had already established and successfully scaled two earlier ventures – in renewable energy and education. I have always believed in creating job opportunities for talented resources. Being from IIT also helped us provide a good platform and a steady grounding for our pursuits.
The idea behind the CredR rose from a bad personal experience of buying a second-hand bike. Our plight opened our eyes to the fact that every third person had faced this problem while buying a second-hand product, at some point. So we are extremely focused on having high standards.
XING: What has been the investors attitude regarding startups?
These days, even investors have become cautious about where they are putting their money. They want to invest in a company with sound fundamentals. They look for a company with a good customer base with a strong revenue model and huge possibility to scale up. We strongly believe that we can’t sustain on the investors’ money for long and we have to be cash positive. Our efforts are consistently in that direction.
XING: What has been your branding strategy?
Sumit: We are not focusing on television ads as we do not have a pan-India presence just yet. In fact, we are being creative and taking a more hyper-local approach in our marketing strategies. We are organizing road shows in the cities where we operate. We are also conducting workshops for IT, corporates and students about bike safety and maintenance. It’s helping us a lot in establishing a direct contact with our catchment.
XING: How much seed money you had to cough up to start your venture?
Sumit: We had started with the initial capital of rupees 20 lakhs and we had put up our own money. All of the partners had contributed.
XING: 20 lacs is a huge money. Did not you feel anytime the fear of failing?
Sumit: (Laughs) It was our own money as we had a good exit from our earlier ventures. It’s also about having conviction. If am putting my own money on the cart that also means I am confident about it. The sense of conviction and subsequent ownership was huge!
XING: What kind of challenges did you face during the prototype phase and how did you overcome it?
Sumit: Right, the first challenge was that people were already using dealers and classified to buy and sell used bikes. So, why would they convert at all? When we started inspecting, we rejected a lot of bikes. Out of 10 bikes, we used to reject 2 bikes.
It was an unusual thing for this market. Nobody had done it before and it was a daring thing for an online marketplace to take such a stand for the quality of a used product. We tried to convey a simple point that give us just 4-5 bikes and get it inspected. It will always help you fetch better purchasers. There was a complete transparency. Well, the rest is history!
XING: How much time did it take to create the prototype?
Sumit: It took us 4 weeks to create the prototype and within a very short time we had got 15 bikes registered on to our platform. Our motive was to create an inventory of 20-50 bikes so that we could begin with our product experimentation.
XING: Your company was established on 14 Feb which is Valentines Day, was it a deliberate choice?
Sumit: It was just a coincidence that our entire documentation and process was completed on that day. But we would consider ourselves fortunate in that regard.
XING: (Cuts in) So it was a chance….
Sumit: (Laughs) yes, but it was a good chance I would say.
XING: When your prototype was ready and you were pretty convinced that it has potential, then how did you create the business plan and approached for VC funding?
Sumit: Since we have been entrepreneurs we had met Kunal Bahl of Snapdeal and K Ganesh of Big Basket. So, when we started credR and were ready with the prototype, we met Ganesh and then Kunal. They understood the potential and the existing problem. They saw a huge potential in the business and backed us. They came onboard as an angel investor with us. So, we got the first level of funding from them and also the initial guidance.
XING: Ok that means you were lucky in the sense that you had a good support system in its place. But that’s not the case for many other such startups. What’s the current ecosystem for startups?
Sumit: 5-6 years ago, the situation was a bit difficult for people like us. IIT Bombay had some good success stories and the more exciting part was that successful entrepreneurs were generous enough to guide us and share their experiences. It helped build up a flourishing startup ecosystem in Mumbai.
Apart from that, Bangalore has a very supportive startup culture and now Kochi is also emerging on the landscape. In the past 2-3 years, the system has emerged very fast. Now if you have a good idea, it’s possible to get good mentors.
XING: You had a very successful VC round, what’s the situation right now?
Sumit: We have learnt a lot from our past experiences. During our earlier venture, we had no backing of investors so we know the importance of money. We know that you have to have cash in order to maintain and sustain operations.
XING: What’s the emerging trend in the online marketplace?
Sumit: The newest trend in the market is going hyperlocal. In groceries, we have seen good businesses coming out. Grofer’s is a good example. In the hyperlocal market, deliveries can happen in a short span of time. Companies like Big Basket are working on this model.
XING: It has been a challenge to deliver in a short-time considering the poor infrastructure and traffic. How can it be possible to deliver in 30 minutes?
Sumit: People like Ravi Gururaj and a few others are trying to solve this problem. They are trying to resolve logistics related issues. They are trying to solve a problem in their own ingenious way. One interesting thing that happens is that you build a solution around any problem and when it scales up; another problem resurfaces.
So the problem is that not all Kirana stores are registered with them to make an effective hyperlocal atmosphere. However, over a period of time, the situation will improve.
XING: So can we infer that the local Kirana stores will become part of the e-commerce supply chain…
Sumit: Yes, you are very right. The kind of customer understanding these local shops have is quite immense. They know their customers deeply. We too feel that it’s difficult to compete at every place. Rather we would like to collaborate with bike dealers to spread across the length and breadth of the market.
Many companies have started their own delivery centres, but they soon realised that they should be better limited to accepting orders and partnering with delivery companies such as Roadrunner and other logistics companies. It’s because we would like to do the work we can do the best.
XING: Rural hinterland is a big 2-wheeler market, do you have the intention to enter that segment?
Sumit: We understand that there is a huge potential, but big cities have a huge volume that can sustain the business. We are also doing our own market research to understand those markets and will certainly expand to those areas once we have completed our expansion in cities.
The newest trend in the market is going hyperlocal. In groceries, we have seen good businesses coming out. Grofer’s is a good example. In the hyperlocal market, deliveries can happen in a short span of time. Companies like Big Basket are working on this model.
XING: Are you able to generate sufficient profit to sustain operational expenses?
Sumit: We hope to become operationally cash positive from city operations by the end of this year. As of now our GMV of December 21014 month was over 2 million dollars and we are targeting a GMV of 20 million dollars by the end of next year. We are trying to make sure that every city is earning for us. We don’t believe in giving discounts and bleeding the investor’s money.
Obviously, we are not operationally positive right now as we are investing a lot on technology and R&D. Before us, there was no such transaction-related platform. We are the first such company that is selling second-hand bikes on the web platform. Before that, there were classifieds and listing portals. Therefore, we have to also make people aware of this platform.