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Volume 14

Issue 3
September 2016

FirstCry.com: Fighting to Lead the Giant Online Baby Care


Products Market
Case prepared by Nirankush DUTTA1 and Anil BHAT 2

In 2002, Supam Maheshwari experienced first-hand the difficulties of purchasing high-quality


baby care products. He routinely made the 18 km trek from his home in Pune, India, to buy
essentials for his new-born daughter, and during work-related travel throughout Asia, he had an
even harder time finding good diapers, baby oil, soaps, lotions, toys, and apparel [1], especially
in small towns. Almost eight years later, along with his former colleague Amitava Saha, he
founded Pune-based Brainbees Solutions Pvt. Ltd., the parent company of FirstCry.com [2].

Aiming to create a seamless experience focused on innovation, continuous improvement, and


added value, FirstCry.com built strong relationships with mothers by offering purchasing
flexibility through the use of mobile, online, and offline shopping and the largest range of baby
and maternity products in Asia; its inventory included more than 90,000 items from over 1,200
international and Indian brands, including Mattel, Ben10, Pigeon, Funskool, Hotwheels, Nuby,
Farlin, Medela, Pampers, Disney, Barbie, Gerber, and Fisher Price [3]. But in the tumultuous
online baby care products market, where several major corporations had recently closed their
doors or been sold to others, what marketing strategy should FirstCry adopt to survive and
maintain its leadership position? How should its branding strategy be crafted to strengthen its
identity and allow it to go global?

Background of Founders
Supam Maheshwari, the founder and CEO of FirstCry.com, graduated from the Indian Institute of
Management (IIM) – Ahmedabad, after earning an engineering degree from Delhi College of
Engineering [1]. Before launching his first entrepreneurial venture, he acquired experience in the
corporate world with brief stints at companies such as Vivendi and Pepsi. In 2002, he became co-
founder and CEO of Brainvisa Technologies, which was sold in 2007 to a US-based group
(Indecomm Global Services Pvt. Ltd.) for US $25 million [4]. He continued his association with
the company until 2009, serving as the President of Learning and Training Solutions of
Indecomm Global Services Pvt. Ltd. and of Indecomm Holdings, Inc.
1 Nirankush Dutta is a research scholar in the Department of Management at Birla Institute of Technology & Science (BITS)
Pilani, Rajasthan, India.
2 Anil Bhat is a professor in the Department of Management at Birla Institute of Technology & Science (BITS) Pilani, Rajasthan,
India.
© HEC Montréal 2016
All rights reserved for all countries. Any translation or alteration in any form whatsoever is prohibited.
The International Journal of Case Studies in Management is published on-line (http://www.hec.ca/en/case_centre/ijcsm/), ISSN 1911-2599.
This case is intended to be used as the framework for an educational discussion and does not imply any judgement on the
administrative situation presented. Deposited under number 9 10 2016 005 with the HEC Montréal Case Centre, 3000, chemin de
la Côte-Sainte-Catherine, Montréal (Québec) H3T 2A7 Canada.
FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

Amitava Saha, the company’s other co-founder, earned a mechanical engineering degree from the
Indian Institute of Technology – Banaras Hindu University (IIT-BHU) and graduated in
management from IIM Lucknow in 2001 with a specialization in marketing and information
systems [4]. The two men worked together at Brainvisa Technologies, where Saha was head of
sales and business operations worldwide, except North America.

Then, in December 2010, with seed capital of Rs. 25 million (about US $548,000) raised from
personal resources and friends, Maheshwari and Saha kick-started BrainBees Solutions, the
parent company of FirstCry.com and Goodlife.com [1].

A Promising Business Environment


AT Kearney’s 2015 global retail development index reported that India’s retail market is
expected to grow to US $1.3 trillion by 2020. In 2014–2015, retail sales in India totalled
US $925 billion with a compounded annual growth rate (CAGR) of 5.8% [5]. Organized retail, 1
which in 2011–2012 accounted for just 7% of the overall retail market, is predicted to grow at a
CAGR of 24%, attaining a 10.2% share of the total retail market by 2016–2017 [6].

What’s more, India is home to some 50 million babies aged 0–2 and 304.8 million children aged
0–12, making it a booming market for players in this segment [7]. The domestic baby and child
care market, including apparel, footwear, toys, and baby toiletries, has grown at a CAGR of 17%
since 2012, in sync with the overall retail industry, and is predicted to grow to US $26.2 billion
by 2017 [8] and over US $31 billion by 2019 [9]. Baby clothing constitutes 65%, baby gear and
products related to outdoor activities about 18%, and baby FMCG 2 about 17% of the market
share of baby care products [10].

When FirstCry was launched, the baby product market was largely untapped and disorganized.
The lack of high-quality products and reputable brands, especially in small towns, created a
window of opportunity for new businesses. Few brands were available, distribution was
scattered, and no single platform could easily meet the needs of parents. Although FirstCry was
not the first company to enter the market, it quickly became the industry leader.

Among the BRIC countries (Brazil, Russia, India, and China), per capita spending on baby
personal care products was the lowest in India [11], but India’s mother and baby care market has
emerged as one of the most lucrative and has witnessed phenomenal growth compared to other
emerging markets. As disposable income has increased, parents are more willing and able to
spend money on their children. This is especially true in urban India, which is characterized by
nuclear families with double-income parents. Empowered by their changing socio-economic
status, mothers with decision-making power enjoy purchasing trendy, everyday, casual, and

1 Organized retail refers to the sale of merchandise by licensed retailers, usually large stores or chains of stores that are owned or
franchised by a central entity. Unorganized retail refers to small “mom and pop” stores that may not be licensed or part of any
entity of a significant size.
2 FMCG or “Fast Moving Consumer Goods” refers to inexpensive products that generally move quickly (e.g., soft drinks,
toiletries, processed foods, etc.).

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

dress-up wear for their little ones. As a result, spending on children’s apparel and other baby care
products with better brand image and quality has received a significant boost.

Thanks to increased media exposure, another important change in this market was the emergence
of youngsters in both urban and semi-urban areas as an independent, informed, and self-
conscious buyer group [3] [12]. Gaurav Saraf, director, Epiphany Ventures, an early-stage fund,
explains, “As Internet penetration grows and young parents become more comfortable buying
baby products online, this niche segment is poised for sustained growth.” [1]

Figure 1: E-Commerce Market Size in India (Billion US $) [18] [45] [9] [14] [46] [13]

13.50

11.00
2009
8.50 2010

6.30 2011
5.90
2012
2013
2.50
2014

2009 2010 2011 2012 2013 2014

This was bound to happen since India’s e-commerce market had already shown signs of
exploding, surging from US $2.5 billion in 2009 [9] to US $13.5 billion in 2014 [13], although
only some of this growth was attributed to retail, while the rest was travel-related (Figure 1).
According to the Associated Chambers of Commerce & Industry of India (ASSOCHAM), riding
on booming online retail trends and defying slower economic growth, the e-commerce market
grew to a staggering US $16 billion in 2015 [9] and is expected to reach US $56 billion by 2023
[14]. According to a Crisil study, e-commerce accounted for less than 1% of India’s
Rs. 2.94 trillion (about US $48.19 billion) retail industry in 2014, but was expected to reach
Rs. 500 billion (about US $7.8 billion) by 2016 [15]. As India’s Internet user base continued to
grow (Figures 2 and 3), consumers became increasingly comfortable with online shopping. A
Com Score report confirmed that e-commerce websites in India had experienced a 47% increase
in unique hits – from 26.1 million in 2011 to 37.5 million in 2012 [1]. Over 20 million Indian
Internet users had transacted online by the end of 2014 and over 60 million users had gone online
to look for products [10].

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

Figure 2: Internet Users in India (million) [47]


*June 2015 is estimated

354

257
216
Rural
189.6
165 Urban
137 130 138
Total
99 92
59.6
38

juin-12 juin-13 juin-14 juin-15

Figure 3: Mobile Internet Users in India (millions) [48]


*June 2015 is estimated

213
juin 2015 160
53
137
juin 2014 101
36 Total

91 Urban
juin 2013 70 Rural
21
48
juin 2012 44
4

0 50 100 150 200 250


Million

India’s online baby care market has experienced strong growth opportunities in recent years.
Powered by 27 million births a year [1] along with a growing middle to upper class, the online
baby product market was valued at around Rs. 2–2.5 billion (about US $37.4–46.8 million) in
mid-2012 [11]. A year later, the baby care and maternity products sector was being served by
some half dozen online retailers [16]. Online sales of baby care products grew to

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

US $100 million in 2014, still accounting for just 2% of India’s entire baby and maternity
product market [10]. It is expected to grow to US $500 million by 2017 [10]. This category also
posted phenomenal growth in online searches: in 2014, PC searches increased by 45% YOY
(year over year) and mobile searches jumped by 93% YOY. Most searches originated in the
southwest zone, especially Maharashtra, Karnataka, and Andhra Pradesh [10]. This growth
continued in 2015, when India’s online baby care sector grew by 53% [17].

Baby care saw more repeat business than other sectors, with over 50% of shoppers being repeat
buyers and 60% of all buyers being women. In India, about fifteen baby care products were sold
online every minute. With over 5 million new mobile users every month, e-commerce players
found the conversion rate for mobile apps to be higher than for websites. As consumers from
Tier-II and Tier-III cities 1 dominated the first-time mobile user group, cash-on-delivery (COD)
service was expected to drive sales (see below) [10].

Challenges on the Way


In spite of these encouraging statistics, cornering the Indian e-commerce market turned out to be
tougher and more expensive than expected. Issues with logistics, payment gateways, and intense
competition had companies struggling to survive.

Ensuring timely delivery was not easy. No single courier company could cover the entire country.
Orders generated from outside the major cities were generally fulfilled by small, often unreliable,
third-party services that made deliveries by bicycle since major multinationals such as DHL and
FedEx did not cover rural areas [18].

Low credit card penetration (see Figure 4) coupled with the unwillingness of credit card holders
to divulge their personal information over the Internet made COD the preferred payment form
(see Figure 5). Customers would pay the full amount to the delivery person upon receiving their
orders. This extended the cash cycle since courier companies would often hold payments for as
long as two weeks, forcing sellers to restock before receiving payment for their products.
Moreover, courier companies often charged as much as 3% for this service [18]. The problem
was exacerbated when orders were returned because customers changed their mind or could not
be reached. These products would eventually be restocked, incurring high restocking and relisting
charges.

1 Classification of Indian cities based on population used to allocate certain benefits to public servants employed in different
cities in the country. Indian cities are divided into three categories: X, Y, and Z, commonly known as Tier-I, Tier-II, and Tier-
III. Ahmedabad, Bangalore, Chennai, Delhi, Hyderabad, Kolkata, Mumbai, and Pune are in the Tier-I (X) category, which
includes the most populous cities. Tier-III (Z) are the least populous. A map showing the Tier-I and Tier-II cities can be found
at http://www.mapsofindia.com/maps/india/tier-1-and-2-cities.html.

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

Figure 4: Number of Debit and Credit Card Users in India (millions) [49]

600.00
21.11

500.00

400.00 19.18
19.54
Credit Card
300.00 17.65 553.45
Debit Card
17.78
200.00 394.42
331.20
278.28
230.26
100.00

0.00
2011 2012 2013 2014 2015

Figure 5: Preferred Mode of Payment of Indian Online Shoppers: 2015 [50]

Cash on Delivery

8%
10% Debit Card
45%
16%
Credit Card

21% Internet Banking

Prepaid Card / Mobile


Wallet

Competitors
FirstCry.com faced tough competition from BabyOye.com in its efforts to corner India’s lucrative
online baby care products market (See Table 1). Hopscotch.in, Babybuzzle.com and
Mybabycart.com were the other contenders. Babybox.in, Toonz.in, Precared.com, Mahindra
Retail’s Mom & Me, and the UK’s Mothercare also catered to the same sector, albeit using a

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

somewhat different business approach. Flipkart, Amazon India, SnapDeal, and other generic
online retailers were also angling to capture their share of the attractive market.

Mom & Me claimed to be one of India’s largest offline baby product retail chains [19], while
BabyOye used both an inventory storage model and a just-in-time arrangement with distribution
partners [16] to make online sales targeting babies, children (up to 8 years), and expectant and
new mothers. Hopscotch relied primarily on online flash sales of international baby and
children’s brands as its major business strategy [20]. Precared.com sold used baby care products,
and Babybox.in engaged in marketing activities similar to those of FirstCry’s Gift Box campaign
[21]. Mybabycart worked closely with mothers to sell them baby care products in a hassle-free
online marketplace, providing them with full support from data entry through customer service
and order fulfilment.

Founded in 2007 as an online bookstore, Flipkart had come a long way to emerge as India’s
leading e-commerce marketplace, selling 30 million products in more than 70 categories [22].
Amazon started its Indian operations in 2013, soon becoming Flipkart’s biggest rival. SnapDeal,
founded in 2010, was one of India’s top three online retailers with more than 12 million products
sold by 150,000 sellers [23]. All three of these online retailers were heavily financed to fight for
the top spot in the generic online retail market.

The baby care market had been in turmoil for the past few years. In April 2013, backed by Indian
movie star Karishma Kapoor, Accel Partners, and Tiger Global, BabyOye.com acquired Hoopos
– a popular Bangalore-based online retailer of baby care products – in an all-stock deal [24]. In
February 2015, BabyOye.com was acquired by Mahindra Group’s Mom & Me Retail after the
start-up failed to raise follow-on funding [25]. Hushbabies.com, opened in 2009, shut down in
October 2013 [26]. Hopscotch.in, its Mumbai-based competitor, raised US $11 million led by
Facebook co-founder Eduardo Saverin’s VC fund Velos Partners [27].

Table 1: Snapshot of FirstCry’s Major Competitors [51] [8] [25] [52] [19] [25] [53]
Online Founder(s)/company/ Funds raised Acquisitions Revenue Current situation
retailer Year
BabyOye.com Sanjay Nadkarni and Initial capital: Hoopos.com Rs. 298 M 10,000+ products
Arunima Singhdeo / Rs. 2.5 M (about (about from 500+
Nest Childcare US $53,000) US $4.9 M) national and
Services / July 2010 international
Undisclosed Net loss: brands; Acquired
amount from Rs. 151 M by Mahindra
Karishma Kapoor (about Group’s Mom &
(Dec 2011) US $2.5 M) Me Retail, which
(March 2014) has 110 stores
Series A: nationwide
US $2.5 M (April
2011)

Series B:
US $12 million
(Rs. 648 M) (April
2013)

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

Online Founder(s)/company/ Funds raised Acquisitions Revenue Current situation


retailer Year
Hopscotch.in Rahul Anand and Lisa Initial investment: SkoolShop Rs. 250 M Over 400 different
Kennedy / US $2 M (2012) (about brands from 1,000
Hopscotch.in; Hit the US$3.9 M) by local and
Mark Inc. / October Series A: 2015 (expected) international
2012 US $2 M vendors; Nearly
Series B: 1,500 shipments
US $11 M per day
(January 2015)

Business Model
Realizing that consumers wanted a combination of online and offline shopping, FirstCry honed
its competitive edge by offering a hybrid model of clicks and bricks, also known as O2O
(online2offline commerce) or omni-channel retailing, with a focus on Tier-II and Tier-III towns
[28]. This helped to overcome fears about on-line shopping and to make sales in small towns –
through the website and in stores –, which account for almost half of the company’s revenues [1].

A franchise model was adopted, with each store branded FirstCry.com. The franchise stores,
which offered a wide range of products and facilitated last-mile delivery, were carefully screened
and selected by an in-house team. The team then helped to set up the stores so franchisees could
run them smoothly with the goal of breaking even within a month or two and generating a return
on investment (ROI) within 18–24 months [29]. Franchisees were assisted with everything from
store layout and design to inventory selection, systems, point-of-sale (POS) software, and staff
training [30]. Stores ranged from 1,000 to 2,000 square feet, with a franchisee investment of
about Rs. 3,000 (about US $47) per square foot [28].

FirstCry.com installed kiosks in its stores to enable customers to browse its wide selection [31].
Using 32-inch touch screens, they could view the more than 90,000 products [28] from 1,200
brands [29] in 20 categories that were posted on its website. Customers could then choose to
order online or have their order delivered to a store in two or three days [3]. The kiosks increased
conversion by 10%, and by the end of 2014 they had become an integral part of all new stores
opening across the country.

Empowered by the logistics savings on individual customer orders, FirstCry kept prices the same
for both online and offline customers [30]. While online customers were mainly looking for
discounts and deals, offline customers enjoyed the ease of access to products.

The wide variety of brands and products and close brand partnerships ensured that FirstCry had
the best product selection. The combination of easy access via local stores and timely home
delivery ensured its success. The fully integrated and synergistic clicks and bricks approach with
a focus on Tier-II and Tier-III towns strengthened their model.

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

FirstCry adopted an inventory-based model, shipping products across the country from its own
warehouses [16]. Customers who ordered products online received them in two to four days and
could pay either online or COD. They also received loyalty discounts on repeat purchases [1].

In May 2015, FirstCry announced same-day and next-day delivery at no extra charge for
customers in 75 cities [3]. This enhanced service helped it achieve a higher net promoter score
(NPS) and increase its loyal customer base.

To allay concerns about the quality of its baby products, the company claimed that it monitored
and assessed the quality of all national and international brands before listing or accepting their
products in its warehouse [3].

Customer engagement was high on the agenda through extensive use of social media, savings
offered through subscription services, and discount coupons for repeat buys, for example. Early
on, FirstCry improved its margins by adopting a private label strategy.

In February 2012, FirstCry launched a personal care e-commerce venture called GoodLife.com,
through which it sold products in categories such as makeup, fragrance, skincare, bath & body,
hair care, men’s toiletries, natural & organic products, and health & nutrition. It later expanded to
home decor and kitchenware. Perhaps to concentrate on FirstCry and reduce cash burn, it stopped
taking orders in October 2013 [24]. Although there were rumours that GoodLife.com would be
relaunched in early 2015 and would offer flash sales based on the just-in-time procurement model
[32], the site ran in its beta version for some time but never resumed operations.

Service Back-End
Minimizing the cash burn for FirstCry.com was a priority for Maheshwari and Saha from the
beginning. Every online and offline sale was tracked using a point-of-sale system developed in-
house. This helped save an estimated Rs. 100 million (about US $1.7 million) in annual fees to
third-party service providers [1].

In addition, an automated email or telephone call was made to each customer who placed an
online order and chose to pay COD. Orders were dispatched only after they had been confirmed
by customers [1].

Intelligent Promotion
Most of India’s e-commerce companies struggled to manage their marketing budget, which
sometimes bankrupted them. Even the purchase of key words or slogans for online marketing
could be costly. FirstCry had to be prudent in its marketing efforts to increase brand loyalty in the
price-sensitive Indian e-commerce market without hurting its profitability or competitiveness.

In January 2013, FirstCry launched a national television campaign featuring the slogan “Mommy
knows best.” The goal was to build strong brand differentiation based on the idea that babies are
demanding and mommies always know what is best for them. In the ad, a large office bell was

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

rung by babies to signal their demands. The company’s claim that, with over 70,000 products,
FirstCry.com was Asia’s largest online baby and children’s store was used simultaneously in the
ad and on its website, Facebook page, and Twitter account. In particular, it was highlighted in the
“FC Diaries” blog in the “SOS Mom” section of its website to stimulate conversations among
mothers in a forum where they could offer advice and support to each other. The idea was to
solicit stories from mothers across India illustrating that they knew their babies best. It quickly
generated more than 200 heart-felt stories [33]. In addition, the company cleverly used another
section of its blog to showcase mommy-generated content.

In August of that same year, FirstCry.com launched a subscription service for products such as
diapers [24].

Rather than using social media to directly promote sales, FirstCry used them to create content and
generate conversations that enabled people to share in the parenting experience. After having
placed a few TV and print ads in the early days, FirstCry realized these were high-cost, low-
return marketing tools [30]. It therefore started to focus more on word-of-mouth and online
advertising. The biggest marketing challenge for FirstCry was to reach parents in the most cost-
effective way and establish a presence in all cities with a minimum population of 1 million or
with a good economic rating; it planned to have a presence in about fifty cities by the end of 2014
[34].

The company launched an on-ground campaign, “Celebrating the happiest cry ever,” through
which a FirstCry box was delivered to new mothers at hospitals across the country. Sponsored by
partner brands such as Mamy Poko, Libero, Palmer’s, Pigeon, and Chicco, the boxes contained a
mix of products such as diapers, baby wipes, personal care products, and stretch mark cream that
a mother would need immediately after returning home with her baby (value Rs. 700 to 1,000, or
about US $11–16) [30]. The boxes also contained coupons that could be used for initial purchases
at FirstCry. The campaign aimed to make parents aware of the available brands and products.
Since trust plays an important role when choosing baby products, mothers are likely to remain
loyal to the brands they know. The company also entered into an agreement with Max Life
Insurance to inform young parents about life insurance [34].

The company formed Gift Box partnerships with over 6,000 hospitals in 30 cities, working
closely with top chains such as Apollo, Aditya Birla Group, and Columbia Asia [34]. In the next
four months, it partnered with some 500 maternity and primary care hospitals in Bangalore,
including Motherhood Medical Centre, Apollo Medical Centre, Isis Mom & Kid Care Medical
Centre, and Manipal Hospital [21]. The campaign was run in all eight metropolises 1 and most of
the Tier I cities. Launched in August 2014, the gift box campaign led to the distribution of some
60,000 gift boxes in the first month [30] and more than 200,000 in the first three months [26].
The campaign enabled FirstCry to reach more than one million parents a year with a good
conversion rate [34]. It planned to reach more than 2 million parents in 2015 [31]. It also
promoted its offline stores through boxes distributed in the catchment areas. The integration of
online and offline sales meant that parents could use the coupons in the box either online or
offline, as they wished.

1 Metropolitan cities or metro cities are cities in India with a population of at least one million inhabitants. The eight Indian metro
cities are Delhi, Mumbai, Kolkata, Bangalore, Pune, Hyderabad, Chennai and Vishakhapatnam.

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

In March 2015, FirstCry launched worldofmoms.com, showcasing its efforts to become India’s
most beloved mommy community [35]. This online social platform helped women to connect
with other mothers, share experiences, and enjoy the journey of motherhood together. It provided
a secure, protected environment since members had to log in using their Facebook account to
confirm that they were indeed women! Moreover, participation was personalized according to the
stage of motherhood and the mother’s home town. To promote brand awareness, stimulate
discussion, and involve more parents, FirstCry launched “FirstCry TV Star” on
worldofmoms.com to find the next baby celebrity in the final six days of May 2015. To
participate in this campaign, registered users had to share photos of their babies on the portal.

In 2015, FirstCry began holding flash sales, generally for a few minutes at about 10 p.m. Users
who signed up for mobile notifications were informed of upcoming sales so they could place
products in their shopping cart and purchase them.

Growth Story
Within just three years, FirstCry grew from marketing 100 national and international brands to
being Asia’s largest online portal, selling 400 brands to more than 500,000 registered users plus
other non-registered users [36]. In another year and a half, this number tripled to more than 1,200
brands and 90,000 items [29] including diapers, toys, toiletries, strollers, apparel, and footwear as
well as books for children under 15 and maternity products [37]. In 2012–2013, its gross sales
totalled Rs. 1 billion (about US $18.72 Million); in 2013–2014, they had more than doubled to
about Rs. 2.5 billion (about US $42.73 Million), which saw the company break even.
Maheshwari expected the company’s business to turn cash-flow positive by 2014–2015, with
gross sales of about Rs. 400 billion (about US $6.56 Billion) [1].

Starting with one warehouse in Pune, from where it shipped to more than 2,000 Indian towns and
cities [38], FirstCry expanded in three years to four warehouses in Pune, Delhi, Bangalore, and
Kolkata [1], delivering products to more than 14,000 pin-codes 1 [39].

FirstCry was able to differentiate itself from its competitors with its franchise stores. Starting
with its first store in June 2011 [30], it had opened more than 50 stores in 45 different cities by
January 2014 [36]. By the end of that year, FirstCry had more than 100 stores in 82 towns and
cities in more than 20 Indian states [28], the majority in Tier-II and Tier-III towns such as Hosur,
Kota, Malegaon, Baramulla, Karnal, and Raichur and cities such as Bangalore, Hyderabad,
Mumbai, Ahmedabad, Patna, and Ranchi. With this hybrid strategy, FirstCry had reached
1.5 million parents within the first three years [30], and it planned to double its franchise network
by the end of 2015 [35].

By 2015, the private FirstCry-BabyHug label was India’s leading baby apparel brand [2]. Its
footwear brand CuteWalk was also popular [30]. BabyHug and CuteWalk, which included
locally produced products and imports, accounted for 20% of revenues by 2015 [30]. The

1 India Post uses a 6 digit postal index number (PIN) or PIN Code to identify post offices. As of March 31, 2014, there were more
than 154,882 post offices in India. [Source: http://www.indiapost.gov.in/Pincode.aspx]

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

company had recently begun to expand the brand into multiple categories in addition to apparel,
such as nursery items. Private label sales were growing rapidly and accounted for 25% of the
company’s sales [2].

During the first two years, over 60% of FirstCry’s sales came from small Indian towns [37].
According to the company and its investors, it had the highest repeat customer base (50%-75%)
in India’s e-commerce sector [37] [40]. Twenty percent of its revenues came from mobile-based
transactions [4]. Women constituted 60% of its clientele [10]. And apparel was its biggest
product category, followed by diapers and other baby essentials [3].

Investment
In May 2011, six months after Brainbee Solutions Pvt. Ltd. was founded, SAIF invested
US $4 million in private equity capital in the company [24].

In February 2012, the company jumped on the bandwagon with e-commerce portals such as
Flipkart and Myntra with a US $14 million [41] (Rs. 680 million) investment from technology
investors IDG Ventures India and SAIF Partners [37]. It planned to use the funds to expand its
product selection by introducing new business categories and brands, increase its warehouse
space and ship from multiple locations, enhance overall customer experience, increase marketing,
accelerate growth in existing categories, and recruit staff to expand its supply chain.

In January 2014, in what was the largest investment in an e-commerce company selling just one
category of products, the company secured US $15 million [42] (Rs. 920 million [4]), from
Vertex Venture Holdings, a subsidiary of Singapore’s state-run investment company Temasek
Holdings. Earlier investors IDG Ventures India and SAIF Partners also participated in this third
round of funding, which enabled the company to double its network of brick-and-mortar stores
and hire more people for its online retail and mobile commerce services.

In February 2015, in a Series D round of funding led by Valiant Capital, the company raised an
additional US $26 million [43] (Rs. 1.56 billion [40]). Previous investors IDG Ventures India,
Ventex Venture Holdings, and SAIF Partners also participated in the round. Co-founder and CEO
Supam Maheshwari said, “The funds raised will be used to scale across channels, online, mobile,
and offline, and invest in growing the private label business.” With this round, FirstCry aimed to
double its offline franchise network to 200 by the end of 2015 and quadruple it to over 400 over
the next three years [35]. FirstCry.com’s founders also said they planned to expand into other
related verticals, including family care products [43].

In April 2015, in Phase II of Series D led by Valiant Capital Partners and New Enterprise
Associates (NEA), Brainbee raised another US $10 million, bringing the Series D total to
$36 million [25] (See Table 2).

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

Table 2: Investment History of FirstCry [4] [41] [24] [25] [32] [37] [40] [42] [43]
Round of Date Amount Investors
Funding
Initial Capital Dec 2010 Rs. 25 M (about Founders
US $548,000)
Series A May 2011 US $4 M SAIF Partners
Series B Feb 2012 US $14 M SAIF Partners and IDG Ventures
India
Series C Jan 2014 US $15 M SAIF Partners, Temasek Holdings,
Vertex Venture Holdings and IDG
Ventures India
Series D Feb 2015 US $36 M Phase I- SAIF Partners, Vertex Venture
US $26 M Holdings, IDG Ventures India and
Valiant Capital Partners
Apr 2015 Phase II- Valiant Capital Partners and New
US $10 M Enterprise Associates

Customer Feedback
Given the size of the market captured by FirstCry, there was no shortage of happy customers
enjoying fast delivery of quality products at reasonable prices. While some companies charged
extra for same-day or next-day delivery, FirstCry offered those services at no extra charge. As
Ms. Kiran, a satisfied customer of FirstCry.com, put it, “You can rely on FirstCry for the best
delivery service of a wide range of products.” Many parents willingly shared their cherished
memories or favourite products purchased from FirstCry on its Facebook page, either to
participate in a contest organized by the company or as part of a general discussion.

But not everyone was thrilled with the company’s service. Out of 67 posts to FirstCry.com’s
Facebook page between May 16, 2015, and June 15, 2015, 20 were complaints about poor
shipping and delivery service. 1 The biggest complaint was that orders were not delivered within
the promised time frame. Two users complained that the company had cancelled their orders for
various reasons without proper notification.

One irate customer complained that the company’s promotional offers were too restricted in an
attempt to encourage parents to buy more than they needed, while another claimed that although
FirstCry claimed that some offers were valid on all products, this was not true. Interestingly,
FirstCry did not reply to these posts.

Five customers complained about the poor quality of products purchased from FirstCry. The
company responded to only one of these complaints, promising to look into the issue. One post
claimed that the company did not contact the winner of a contest while another wondered
whether the contests were fake since she too had not been contacted after winning a contest. One
customer reported rude customer care staff who would neither listen to customers’ complaints nor

1 Compiled by authors on June 16, 2015.

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

address them. Two users complained about the difficult registration process for “worldofmoms,”
although the company responded to one of them in an attempt to resolve the problem.

But the most serious complaint was that expressed in four posts claiming that FirstCry was
reporting false discounts on inflated maximum retail prices (MRP). (All packaged goods in India,
from beverages to mobile phones to cosmetics, are stamped with a price set by the manufacturer
as the maximum allowable price at which they can be sold to retail consumers.) In one case, the
company was accused of selling products above the MRP, as shown in the picture accompanying
the product description. The company responded to two such complaints and within a day either
removed or changed the pictures showing the MRP. In those cases, it stated that the images were
outdated, and that discounts were based on the current MRP.

The Future
FirstCry had been leading India’s online baby care products market and had stepped up its
marketing and operations to beat the competition. While many parents were pleased by its
extensive selection of brands and products, customer feedback nevertheless revealed areas where
it was lagging behind in ways that were inconsistent with its claims.

Manik Arora, managing director, IDG Ventures India, revealed in an interview that replicating
the strong success of FirstCry in new categories would be challenging [1]. He noted that, aided
by higher margins, higher capital efficiency, and upside options of offline expansion and private
label expansion, vertical e-commerce provided wider product selection and a more customized
user experience. These companies also had more exit options. “Vertically (or single category)
focused players tend to build greater differentiation by going deeper into the category in a
number of ways,” added Aashish Bhinde, executive director at investment bank Avendus [4].

“As the company scales rapidly, the challenge will be maintaining service quality, as logistics
become more complex,” said Gaurav Saraf, director of Epiphany Ventures. He cautioned that this
was a marathon, not a sprint, and that there would be many more milestones ahead [1].

In recent years, other companies operating in the same online industry have been forced to shut
their doors due to fierce competition and inadequate funding. Giant online retailers such as
Flipkart, Amazon, and SnapDeal have also set their sights on this lucrative sector. Under these
circumstances, it would be interesting to know what marketing and branding strategies would
enable FirstCry to survive and retain its status as a leader. How can it scale greater heights to
grow from a national leader to a global icon?

2016-06-27

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

Exhibit
Average Exchange Rate of US $ and Indian Rupees (Rs.) [44]
Year 1 USD = ? INR
2010 45.66
2011 46.46
2012 53.42
2013 58.51
2014 61.01
2015 64.12

Map of India Showing Major Cities 1

1 This map is for representative purposes only. Political boundaries shown in the map may not be accurate. [Source:
https://upload.wikimedia.org/wikipedia/commons/thumb/7/78/India_roadway_map.svg/1639px-India_roadway_map.svg.png]

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FirstCry.com: Fighting to Lead the Giant Online Baby Care Products Market

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