Life came full circle for Pankaj Vermani when he founded Clovia, a lingerie company. While his family had a lingerie business, where he spent many afternoons as an apprentice, Pankaj was encouraged to focus on academics instead of taking over the business. He ended up cracking IIT JEE to join the prestigious IIT Delhi. Starting his career as a software engineer, he soon ventured into startups and co-founded adtech and eLearning startups. But life had other plans for Pankaj, and in 2012, he co-founded Clovia.

In March 2022, Reliance Retail acquired an 89% stake in Clovia for USD 125M. Benefitting from Reliance’s scale and retail expertise, the brand hopes to bolster its brand presence and value proposition to scale up.

In June 2023, Pankaj sat down with Ankur Gattani, VP-Growth and Marketing of WebEngage (a Blume Fund I company), at EngageMint, WebEngage’s marquee thought leadership event. Below are the key insights from his chat for all D2C founders aspiring to build multi-million-dollar brands.

Lessons from past attempts

Before founding Clovia, Pankaj founded an ed-tech startup, Vriti, in 2006. Vriti was a platform for content providers to create/sell courses and students to find & buy them. 

Vriti provided three key lessons to Pankaj. First, your product may solve a real pain point, but if it is ahead of its time, it will not work. As a founder, your business should not only tap into the right market but also be there at the right time with the tailwinds and internet infrastructure, like digital payments and eCommerce enablers.

The second learning was wherein he realized that “the power of consumption is more than the power of numbers.” Amassing users is not the endgame for app-based businesses. The usage numbers give a true picture of how commercially viable the product is. Vriti amassed 1.5 million students in 2011. However, the usage of the platform was only 2.5%.

Lastly, he decided to only sell aspirin and not vitamins to his customers. He wanted to solve a problem that caused a headache for his customers and not provide solutions to problems that were not a priority to the customers.

Pankaj: “The customer’s head has to be bursting for my product rather than selling them a product that will help them have a good muscular body.”
Similar to a conundrum that every founder must answer for their business – “Is it a good-to-have product, or is it a must-have product?”

Deep market insights and the power of data lead to the creation of a powerful product

While looking for this answer, the duo found that the people in tier 2 and tier 3 cities, from where 63% of the business comes, considered lingerie an aspirin problem as they couldn’t find innerwear that could get them the right fit. Pankaj discovered that the population's lingerie preferences change even within a radius of 100 km as the body sizes, seasons, and economic levels change. Add to this the complexity of having 40+ sizes in lingerie, compared to 5-6 sizes (such as Small, Medium, and Large) in outerwear. 

This made it difficult for a national brand to win in the market as they preferred a one-size-fits-all approach. 

At the same time, there were numerous local brands in the market that were making a killing by deeply understanding the local consumption patterns. For instance, in Pankaj’s hometown, a father-son duo manufactured lingerie and drove most of the sales. They operated only around the Western UP region and dominated the market by leveraging their local sizing and seasonality knowledge.

Pankaj coupled these insights with the power of data to build a national lingerie brand in a market with highly heterogeneous consumer demand. For instance, Clovia built a tech back-end that lets them collect and analyze sales patterns at the pincode level from online sales. They used this data to re-engineer their supply chain stack to reduce the manufacturing complexity from a typical 10,000 pieces for a style to 500, enabling them to reduce costs and still sell in a complex market.

The Aha Moment

While people were flocking to Clovia for different colors, patterns, and styles of their products, the aha moment for the founder was Quality. Pankaj arrived at this inference when Clovia tried to acquire four lingerie manufacturers but could not, as their products were really mediocre. Pankaj observed that the big brands with good quality were expensive, and the local brands did not meet any quality standards.

This led to a crucial revelation - bridging a gap for the consumers who did not even know that they were using a bad product or a misfitting product. In fact, when Pankaj surveyed Clovia’s office, he realized that 85% of the women in his office did not know the right sizing. 

This aha moment enabled Clovia to create their 'category of one' - an affordable lingerie brand that provided good quality products across various sizes.

Retention is business, everything else is marketing

Pankaj: “A customer making his/her first purchase is marketing, the customer coming back to you is business”.

Pankaj suggests that D2C founders should consider returning customers as the only factor for determining their success. Clovia’s online sales, which comprise 50% of the total revenue, have a customer return rate of 60%.

Pankaj: “The hard reality of business is – Business is rhetorical and rhetorical is boring, but boring makes money!”

Sustainable businesses are based on penny-wise decisions. It is a well-established fact that it is very difficult for a business to build its marketing funnel without Google Ads and Facebook Ads. As Pankaj puts it, “they are necessary evils." From a founder’s lens, these channels should be considered seed platforms that a company leverages to target wider audiences to get them on the company’s platform/website.  

Clovia’s level one strategy was to go brute force and spend ad dollars on Facebook and Google. As it gathered more data, it shifted to a level two strategy wherein it kept track of channels with lower CAC and better ROI. 

As these ad platforms do not update dashboards in real-time, Clovia has a team that manually calculates the return on ad spend (RoAS) to create a report every 8 hours on which spending decisions are made.

Pankaj: “There is a team which works in 8 hour shifts and every 8 hours a whatsapp message is shared with details of where each penny is spent and return generated. A decision is made on an hourly basis. If a decision is not taken, atleast there is awareness with regards to what is happening.”

This is in stark contrast to how many D2C businesses operate, wherein ad spends are outsourced to media agencies and spends are reviewed only on a monthly basis.

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How to choose good business ideas

When looking at starting a business and scouring for ideas, Pankaj believes three essential questions need to be answered:

Building product expertise is the most important job of the founding team. The differentiating factor that sets successful businesses apart is having someone on the founding team with deep experience in the domain. In Clovia’s case, Pankaj’s co-founder, Suman, brought 21 years of experience in making lingerie to the company. If the existing founding team does not have the understanding of how to build the product, it is essential to bring on board someone who does.

Revenue is vanity

Pankaj believes that a business can have a topline of USD 1B, but if the gross margin is 10%, the earning is USD 100m, and that is the stature of the business.

When gross margins are thin, marketing dollars need to be spent with greater care, and there is less room for misses. Clovia has a 65% gross margin and could afford to make certain mistakes. However, low-margin brands do not have this luxury. So, he encourages founders to consider revenue as vanity and margins as the real metric to track.

You can watch the whole session below. 

Thanks to the WebEngage team (Avlesh and Ankur) for hosting this insightful session.


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