Over the last few years, startups in India have made it a happy habit of attaining Unicorn status (valuation of $1 billion+). There were 11 startups that did it in 2020, the year we first ran into the uncertainties of the pandemic.
In 2021, things got even crazier. That year we saw 42 new Unicorns, making it difficult to believe that we were battling the second wave of the pandemic and a likely recession.
There is just one problem with these happy numbers. Most of these Unicorns are burning investor money, and not turning any profits.
Makes us think — will these funded startups ever make money?
Well, the story of FirstCry showcases an entirely different story and gives an emphatic answer of ‘yes’ to this question!
What! A profitable Unicorn!?
Among the many Unicorns in India over the last two years, less than one in five actually made profits from their operations.
FirstCry is one of those few Unicorns that turned a profit, and that by itself makes it stand out from others. At the end of FY 2021, FirstCry doubled its revenues to INR 1700 crores, and declared profits of INR 215 crores!
But, what does FirstCry do?
FirstCry is an e-commerce company. Just like Amazon & Flipkart, but focused exclusively on baby & kids products.
They chose a very specific target segment — parents of newborn babies. And, the name itself signifies a joyful & precious moment for parents.
So, how did it all begin?
The origins of FirstCry go back to 2001.
Supam Maheshwari, co-founder of FirstCry, had just welcomed a baby girl. At the time, quality baby products weren’t available in India. So, he used to stock up on toys & clothes for the newborn during his frequent work travels to US & Europe.
A bit more digging around this made him realize that the market for baby & kids products in India was highly unorganized. Parents, like him, were looking to buy quality products from top brands but had no options.
So, he set out to buildd his own venture in this space, with his partner, Amitava Saha, after exiting from his current business.
FirstCry was founded in 2010, so it took him almost a decade to work on a problem he identified & experienced himself.
Lesson → To find a startup idea, stop thinking of potential ideas and start observing problems around you.
Finding a niche and executing tirelessly
FirstCry was pitched against e-commerce biggies like Amazon & Flipkart. But, they were confident that the niche they identified was underserved.
So they focused on tireless execution, taking one step at a time.
Initially, FirstCry was a website focused only on toys for parents living in metro cities. In fact, they started with only Pune and called up their friends & families to try out their products.
Over the years, they expanded to multiple categories and tier-2 & tier-3 cities & towns. Launching a mobile app was also a natural next step, and the app now brings in ~70% of online sales.
Lesson → Your startup doesn't need to fail fast. It can succeed slow.
But, FirstCry’s growth over the years can primarily be attributed to identifying key problems that came along the way and executing solutions brilliantly.
Let’s look at a couple of examples that substantiate this.
Offline stores in tier-2 & tier-3 towns
Along the way, FirstCry realized that there was a large section of the population that wasn’t comfortable with online transactions, and wanted to actually see the products before buying.
So, FirstCry decided to venture into offline stores as well. But, they opened these stores majorly in tier-2 & tier-3 towns.
- real estate is much cheaper there, compared to cities, and
- a large part of their target audience for offline stores would likely reside there
Today, the company has 380 stores across India.
Building a logistics company!
In just a couple of years, FirstCry realized that outsourcing the delivery of products was getting expensive. Plus, they didn’t have full control over the customer experience i.e. on-time, safe delivery.
So, they started their own in-house logistics division in 2012.
Over the years, the logistics division also started fulfilling orders for other companies and was eventually separated out as an independent business entity, XpressBees.
Today, XpressBees is a Unicorn by itself and boasts of Alibaba as one of its investors!
Of course, all of these efforts paid out really well for FirstCry. A metric they aced early on itself was ‘repeat customers’ — 80% of parents who made a purchase came back to FirstCry to buy more!
But, there was one major problem that remained unsolved for FirstCry — brand awareness. While customers loved shopping on FirstCry, not many were aware that such a platform even existed.
Building a memorable brand for parents
FirstCry realized that once a baby is born, that family becomes a prospective customer for them immediately.
A happy experience with FirstCry in those first few days could easily turn them into customers. The first few months of a newborn baby is also the time when they are most visited by friends & relatives. And the parents are likely to talk about their good experience with FirstCry, resulting in impressive word of mouth publicity.
In short, these new parents could become FirstCry's "micro influencers" in their tiny communities.
So, FirstCry came up with a "Gift Box" program to impress these parents. They partnered with hospitals across India to provide a free gift hamper to the parents whenever any of these hospitals had a newborn.
Parents are delighted to receive these gift boxes, which contain useful babycare products from well known brands like Pampers, Dove, Vaseline, and others.
The "Gift Box" program doesn't just benefit FirstCry, but it also helps the individual brands like Pampers & Dove get more visibility. Given this benefit, FirstCry pushes these brands to sponsor the items in the gift boxes, reducing the cost for FirstCry drastically. In fact, brands are equally happy to contribute, given it's a highly targeted marketing campaign for them.
A win-win for FirstCry and the product brands!
FirstCry Gift Box: Is it worth the money spent?
The “Gift Box” program seems like a hit right away, but we’re not satisfied unless the numbers tell us the same story :) So let’s do some math!
Number of families reached
- There are ~69,000 hospitals in India.
- FirstCry has partnered with ~10,000 hospitals. So, it has a coverage of 10,000 / 69,000 = ~14.5% hospitals in India.
- Now, ~67,000 babies are born every day in India, and one third of India’s population is urban.
So, we can assume that 67,000 / 3 = ~22,000 babies are born in urban hospitals in India.
- FirstCry has a 14.5% coverage of these hospitals, so 22,000 x 14.5% = ~3200 families receive the FirstCry gift box every day.
- Over a year, FirstCry sends gift boxes to 3200 x 365 = ~12 lakh families!
- But, that’s not the end of the story. As we saw, the new parents are “micro influencers” for FirstCry, and they would happily talk about the wonderful gift box they received.
The number of visitors who come to see the newborn baby is also huge. So, a lot of people get to know about FirstCry through a single gift box.
- If we assume 2-10 families get to know about FirstCry from a family that received the gift box,
Number of families reached in a year =
A) 2 families → 12 lakhs x 2 = 24 lakh families reached
B) 5 families → 12 lakhs x 5 = 60 lakh families reached
C) 10 families → 12 lakhs x 10 = 1.2 crore families reached
So, FirstCry is able to crack a reach of 2,400,000 to 12,000,000 households in a year with its gift box program!
Customer Acquisition Cost
Now, we already saw that the gift box program is equally beneficial for product brands and they would happily sponsor most of the products in the boxes.
But for a second, let’s assume that FirstCry has to bear the cost of these boxes. Let’s see what it would cost FirstCry to run such a program in this scenario.
- Let’s say it costs FirstCry INR 500 to put together a gift box.
- Given they distribute 12 lakh gift boxes in a year, the cost comes out to 1,200,000 x 500 = INR 600,000,000 (INR 60 crores).
- Assuming they are able to reach 2,400,000 to 12,000,000 households,
Cost to acquire a customer =
A) 24 lakh families reached → 600,000,000 / 2,400,000 = INR 250
B) 60 lakh families reached → 600,000,000 / 6,000,000 = INR 100
C) 1.2 crore families reached → 600,000,000 / 12,000,000 = INR 50
So, the customer acquisition cost for FirstCry comes out to just INR 50 to 250!
Of course, that cost is actually much lesser since product brands end up sponsoring these boxes.
FirstCry is a true testament to the fact that you can survive & thrive even in a highly competitive industry by carving out a niche for yourself.
Of course, FirstCry’s brilliant execution and masterstrokes like the Gift Box program have been a major contributor to its success.
An IPO is likely on the cards for FirstCry in the coming year. It’d be interesting to see whether investors shower as much love on FirstCry as Indian parents :)