Ronnie Screwvala is a man who has made many savvy bets in the past. He launched an alternative to the Indian state-run channel Doordarshan in 1981, when no one else thought about doing so, growing it into the entertainment giant UTV, which he cannily sold to Disney for approximately $450 million (despite carrying a debt load of around $180 million).
He also transformed the film business in India by bringing in corporate practices and funding to an industry that was largely made up of family-run fiefdoms, and invested in films that had significantly new subject matter and ways of telling stories (at least for Indians). And he made a fortune out of all of this.
So, when Ronnie's private equity shop Unilazer Ventures recently plonked down $6 million on online lingerie store Zivame (along with existing investors IDG Ventures and Kalaari Capital), more than a few heads turned. This time, however, Ronnie is flirting with the infinitely slicker slope of internet retail investing, and not the bread and butter entertainment business that he knows so well — so it's worth figuring out whether Ronnie has made a smart bet or not.
Lingerie is not a leviathan of a market in India where most things are — it's around $2 billion in size, largely offline, and unorganized. However, most of these mom-and-pop stores that make up the landscape have largely untrained men as salespeople behind counters, so you can imagine how exciting a proposition it must be for an average Indian woman to explore bra sizes and functionalities at these stores. Or for their husbands to pop down and buy something to spice things up for their wedding anniversary.
There are other reasons why online lingerie makes increasing sense in India. Young Indian woman, between the ages of 18 and 35, are hip and savvy customers today. Since they seem to be perennially attached to their smartphones, like their male counterparts, buying lingerie is just a few clicks away. Then there's the vast, untapped marketplace — women in remote tier 2 and 3 towns who are also underserved by an unorganized sector.
Also, it turns out that men are big spenders on lingerie online, which they can do without being self-conscious — a key mitigating factor in a conservative social landscape. All of which probably explains the surge in online lingerie sites in India such as Zivame competitors Mylace, Cilory, StrapsAndStrings, Prettysecrets.com, Moodsofcloe, and Laceandme. There's even an outfit modelled on Amway.
So, what's the downside to Ronnie's investment?
As this Economic Times article mentions, lingerie is still too niche as a stand-alone business, and there are no real barriers to entry. Plus, since the cost of customer acquisition is amortized over the same category of product, there's no real opportunity to cross-sell like a site that can sell you a bra, a pair of shoes, and some gloves.
But if Zivame can scale to around $100 million, it can then focus on selling higher-margin products, rather than going for volumes. It then becomes more attractive to bigger sites that are eager to acquire winning businesses to their portfolio of offerings.