The new buzz in music

As we chat with 33-year-old Ashutosh Pande, founder, Bajaao.com, India’s first and largest online retailer of musical instruments and professional audio equipment, in his soundproof office in Andheri East, Mumbai, an attendant knocks and announces a visitor. “That’s Snapdeal. They come every three months to convince us to sell on their site,” he says. “But we’ve stayed away from marketplaces. That’s a revenue stream we have not yet tapped, and it makes our investors very happy and excited.”

Delhi-headquartered online shopping site Snapdeal.com’s persistence in trying to strike a deal with Pande’s website isn’t unexpected. Started in 2005 with a seed capital of Rs 2.5 lakh, Bajaao clocked Rs 13 crore in revenue in FY13 (compared to Rs 5.15 crore in FY12—that’s more than 100% growth), and sells around 15,000 products a month. It has delivered to over 450 cities and towns in India. For Snapdeal—one of the few e-retailers selling musical instruments—this is one of the fastest-growing categories.

“There are few musical instruments stores in India and the supplier base is highly fragmented. So we expect three times growth in this category in the next six months,” says Amit Maheshwari, Snapdeal’s vice president—fashion.

Other e-retailers, such as Amazon and eBay, also sell musical instruments. “But their catalogue is a tenth of ours,” says Pande.

Many brick-and-mortar stores have websites, such as Furtadosonline.com, RajMusicals.com, and Saptaswara.in. But Bajaao has the edge because Pande and his team are able to give expert advice to amateur musicians. Pande was the lead guitarist for independent rock bands Xenon and Khiladi that he and some friends set up, and has participated in music festivals across the country. So he speaks of music with some authority.

As does Shawn Pereira, Bajaao’s chief operating officer, who is the lead singer of popular band BLAKC. Sidharth Kadadi, product specialist-guitars, is an alumnus of Musicians Institute in Los Angeles, and Trinity College of Music in Britain, and best known for being the lead guitarist for groove metal band Zygnema. In 2010, he was adjudged “best guitarist” among 674 contestants at the Yamaha Asian Beat finals in Bangkok. Mayank Sharma, product specialist-drums and percussion, is also part of Zygnema and has played in over 100 shows, including Inferno in Norway and Wacken Open Air in Germany.

The only non-musician is director Rajesh Joshi, who helped in the acquisition of Bajaao by JMD Telefilms, a BSE-listed company which trades in audio and video products and is involved in sound recording.

“Customers prefer to buy from an expert who will help choose the right instrument,” says Ashvin Vellody, partner–IT advisory, at consultancy firm KPMG in India.

Bajaao’s 14-day money-back guarantee, which allows a customer to try out the instrument, also helped it gain traction among music lovers. “It’s very important to get a feel of the instrument; being musicians ourselves, we understood that. You won’t get the 14-day trial service in a music store,” says Pereira.

Bajaao was the result of Pande and his friends being unable to source quality musical instruments when they were in the music circuit. There were few brands, and those that were available were exorbitantly priced. To keep prices reasonable, Pande says he made eight trips to Bangkok in the first year because it was impossible to get many instruments here. “I would consolidate the orders and get them shipped.” He adds that to save costs in the first three years, “I even rode my bike three days a week to Bhiwandi, about 40 km away, to source products.”

Pande’s previous three-year stint with a tech publishing company, where he researched and edited seven titles on various e-commerce engines, helped him in building his website and preparing content for Bajaao. “We wrote product descriptions ourselves to save costs and were No. 1 on Google search for the first four years. We didn’t have the money to advertise, but Google always gave us traffic through organic search results,” says Pande. KPMG’s Vellody agrees that proper cataloguing and accurate descriptions of products help bring in and retain customers.

PANDE SAYS BAJAAO will break even this year; it has an annual revenue target of Rs 50 crore in the next three years. But to see that happen, the company needs to sort out one of its biggest problems: supply chain. “It’s why we are not on e-marketplaces,” says Pande. He is trying to solve this by identifying the bestsellers in his portfolio. “From the last three years’ data, we will identify around 300 of our 14,000 products and make sure
we are the strongest buyers of those. Too much inventory of dead stock can take a company down. Strategic stocking will help us.” Bajaao won’t pare its portfolio, but will maintain lower stocks of products that are not hugely popular.

To get a grip on supply chain, Bajaao also launched a private label guitar brand, Vault, in March and sold around six guitars within 10 days of a soft launch. The guitars, manufactured in China, are priced between Rs 4,000 and Rs 20,000. Instead of asking for samples and selecting from them, like most other retailers do, Kadadi and Pande sat on the shop floor and created mock-ups of every product they wanted to sell. “We know what people are looking for in looks and features. We also know how costs are cut. So we ensure that cost-cutting doesn’t compromise quality—we can afford to do that because we directly buy and sell and don’t pay a dealer margin,”
says Pande.

For example, guitars in the range of Rs 20,000 and Rs 30,000 have dual-action truss rods, used to adjust the lengthwise curvature of the instrument, which tends to bend with humidity. The cheaper ones have single-action truss rods.

“But our Rs 4,000 guitar has a dual-action truss rod. It cost us around a $1 (Rs 60) more to add it, but it will go a long way in getting us more customers,” says Pande. To offset such investments and streamline costs, Bajaao has introduced enterprise resource planning.

Pande plans to expand Bajaao. This includes steps such as tying up with private schools to supply musical instruments. He also hopes to convince government schools to make music education mandatory.

Pande has also ventured into acoustic consulting by floating a separate company called Bajaao Consulting and Entertainment, which designs studios and auditoriums, organises live concerts, and has consulted for movies such as Aashiqui 2. “It’s already profitable and doesn’t need funding,” says Pande. The new firm will get into live concerts and jamming rooms. A new website is also in the offing. “We have a certain revenue stream and a good team, which are allowing us to stretch our wings,” says Pande.

Bajaao’s story has inspired other musicians to start similar e-commerce ventures—SoundMonk.com, for instance. Pande’s advice: Don’t give up easily. He says Bajaao stuck it out even during tough times. “It’s a challenging category, and there were many constraints from day one. But I didn’t give up because music is not just a business for me.”

To give the business better direction, Bajaao has hired consulting firm Deloitte. “As the stakes get higher, we need strong advisors, auditors, and legal experts,” says Pande. He is looking for people with strong credentials—Harvard and Wharton B-school backgrounds in senior management positions. A second round of funding is expected too. Talk about hitting all the right notes.