How to Lose a Unicorn in 7 Steps
This is the story of www.fashionandyou.com, India’s first company that ventured into the e-commerce and retail space back in 2009. This was much before the Flipkart’s of the world came into existence.
Fashion and You was basically a flash sale website that could be accessed only by invitation.
Once you were a member, you had access to high-end luxury brands that had several of their products on display at hugely slashed prices.
Think the likes of Louis Vuitton’s and Chanel available at 80% of their cost price. (We saw your eyes light up :P)
Fashion and You was slated to be one of the first potential Indian unicorns in the fashion space and was well on its way to making history. They raised $8 million from Sequoia Capital India in 2010. This was closely followed by another round of funding to the tune of a whopping $40 million led by Norwest Venture Partners and Intel Capital, which also saw participation from Sequoia Capital India and Nokia Growth Partners in November 2011.
They claimed to have 400,000 registered members and over 140 brands on sale in May 2011.
One of their proudest moments was when they flew their top customers from smaller cities like Guwahati, Chennai and Goa to attend the Lakme Fashion Week in Mumbai and had them flaunt brands purchased from Fashion and You at the most grand fashion event.
There was literally nothing that could go wrong for them, or was there? Well, there’s clearly a reason why you don’t hear so much as a whisper about Fashion and You today.
We at 91springboard have brought on board a new event lovingly called ‘FuckUp Nights’. This recurring event takes place every two months and sees seasoned entrepreneurs tell us about their failure stories and their learnings from those failures. This serves as a great insight for budding entrepreneurs who can learn how not to make the same mistakes.
We were privileged to have Mr. Rahul Narvekar, cofounder of fashionandyou.com, speak at the first edition of ‘FuckUp Nights’ and tell us about what went wrong at the startup. Here’s what we learnt:
1. They took money from a fund: Apart from taking the funding too soon, the major problem was the minute they took money from a fund, the fund took over and introduced their own set of principles, thoughts and ideas which did not match that of their’s. This was the start of the friction that led to the eventual downfall of India’s first potential unicorn.
2. They got into multiple ventures: They took the fact that they did well in the fashion space for granted and got into way too many ventures. This took them away from their core which was fashion. So, they weren’t Fashion and You anymore but a place that sold just about anything and everything. For example, they could afford to give 80% off on a Gucci bag which was from last year’s collection (We know how instantly the value of fashion products drops once a new collection is out). But, they tried to apply this to things like electronics and that’s when it all went south. You cannot sell a phone at an 80% discount even a year after it’s release date. They didn’t realize that every product category doesn’t work the way fashion does.
3. Management woes: The management bandwidth got distracted due to multiple ventures and less and less focus was given to their core, fashion. This kept pushing them further away from what actually got them on the map and made them successful.
4. Scaled up too quickly: This is the one thing that most startups end up doing and it almost always leads to their downfall. They scaled up too quickly and were left with more employees and not enough work for them to do. This naturally started eating into their profits.
5. The product quality started depreciating: When this happens, there’s nothing that can save you! When they first started selling mobile phones (remember the good old blackberry days?) they sold Rs.26 lakh worth of blackberry’s in one day, that’s right, in one day! This led to them thinking they could sell anything and people would buy it. Due to this, fakes and first copies started seeping into their inventory.
6. Too much idle stock: Another big blunder on their part was to purchase an obscene amount of stock in the hope that it’ll sell like hot cakes. What happened was quite the contrary.
7. Sending wrong products to customers: Employees started resorting to any possible means to meet their targets. They started sending customers wrong products just to meet their daily target. This led to the growth graph looking great but eventually all the returns piled up and were hugely detremental to them.
The sum total of all these pointers led to the reputation of Fashion and You going for a complete toss and you know what happens to a brand with a bad reputation, it dies. And that’s exactly what happened.
Rahul Narvekar went on to found NDTV Ethnic Retail Limited (www.indianroots.com) where he broke even in a mere 8 months and took the company to a valuation of $85 million in just 18 months.
Hence, we’d say persistence is probably the best trait an entrepreneur can have and hence you mustn’t get disheartened if your first venture doesn’t do as well as you’d have liked it to. Learn from your mistakes and apply those learnings to your new idea.
Thoughts by Mr. Rahul Narvekar. As spoken at Fuckup Nights, Delhi Chapter, and originally posted here.
We’re always on the look out for talent to add to our ever-growing team. So, if you think you’ve got what it takes and would like to come be a part of our community, get in touch with us here.