Fabmall rises out of Fabmart ashes

Ranjeet Rayen

BANGALORE: India’s first pure play online retailer, Fabmart India Private Limited is completing a heart transplant. This involves substituting its investors ChrysCap and Reliance with a new one. It is closing operations of Fabmart and transferring assets and infrastructure into a new company, Fabmall. It plans to keep online presence only as strategic operation and focus more on physical stores and corporate services.

The new arrangement comes to effect from January 1, 2003. The company, led by 6 promoters led by VS Sudhakar and Hari Menon, are finalizing the deal between the new investor and the existing ones. Sources said the two parties have arrived at a formula to book the cost of the assets and infrastructure transfer to the new company.

The fresh tranche of funds to the tune of $1 million is known to have come from a Mauritius based VC.

(CIOLShop, part of CIOL, has an exclusive partnership with Fabmart for fulfillment services.)

Fabmart had a total investment of Rs 20 crore between 1999 and December 2002. Fabmart had posted a revenue of Rs 3.5 crore during the first full year of operation in 2000-01. The following year it registered Rs 9.5 crore and expects to end this fiscal with a revenue of Rs 11 to 12 crore. In its first year of operations, Fabmall is expected to turn in revenues of about Rs 25 crore and a possible break-even in three years.

Launched in the heydays of the Internet boom, Fabmart caught the imagination of both the investors and the online consumer. However, after infusing Rs 20 crore the company realized that online operations alone will not take it anywhere near being profitable. It ventured into setting up physical stores, starting in Bangalore, and planned a nation-wide chain. Meanwhile, Reliance, which had run out of its fascination for Internet incubations, refused to bet more money on the new plans of Fabmart to go physical - forcing the promoters to look for alternative sources of funds.

Inside sources revealed that the new investors wanted a brand new legal entity. In order to start with a clean balance sheet and help post-healthy growth. Fabmall as a name was chosen to ensure brand continuity since the erstwhile Fabmart had a section by that name.

The fresh funds are primarily used to expand its physical presence. Fabmall has three large stores in Bangalore. The plan is to make this physical stores a chain across the country. The numbers of physical stores is to be increased to 25 to 30 stores across four locations in the country within the next 12 months.

From an online retailer, Fabmall is trying to become a specialist retailer with a multi channel delivery model in place as in the case of international trend. "Big names in retailers like Walmart, Victoria Secret, JC Penny, North Storm, Tesco have all identified online as an additional medium to their strong physical store chain. Similarly AOL had also identified physical stores as the supplementing medium to their successful online model. Here they are just setting direction in line with the global trends and success stories," said sources close to the new Fabmall board.

Fabmall’s online strategy will be more to leverage on its physical and corporate business. In line with its new focus, Fabmall will source goods from single vendors in each categories unlike Fabmart’s model of sourcing from multiple distributors.

The company has realized that it is sitting on a gold mine with its online shopping software. This software is already being offered to corporates to enable their internal online shopping requirements or loyalty programs on an ASP based model. There plans to set up a national call center with a toll free number to boost sales from its physical stores.