Deal focus: The flair apparent

Brick-and-mortar shops that sell domestic trappings such as photo frames and wind chimes do not typically come to mind when investors think about targeting young digitally savvy demographics. But in fast-growing economies like India, an emerging consumer appetite for all things stylish is creating some unexpected opportunities. 

Gaja Capital is demonstrating this point by leading a INR850 million ($13.2 million) funding round for Indian consumer products retailer Chumbak Design. The company, which sells exclusively in-house designed fashion and houseware products, sees a big opportunity in the evolving tastes and increasing affluence of the 400 million Indians born between 1980 and 2000. 

“India’s millennials are consuming quite differently than India in general because they are receptive to paying for proprietary design and quality in design,” says Gopal Jain, co-founder and managing partner at Gaja. “Businesses in India have so far largely been built on the back of distribution capabilities. Now, what we’re seeing for the first time is a new generation of customers that are willing to pay a premium for distinctive products.”

Chumback products – which run the gamut from home decor to women’s apparel and accessories – are often characterized by a whimsical aesthetic, floral prints and vibrant pastels. This formula has generated a substantial social media buzz, which in turn is expected to underpin expansion ambitions beyond a current portfolio of 17 stores across eight cities.

Additional participation in the round came from existing backers Matrix Partners India and Seedfund, as well as Gaja operating partner Narayan Ramachandran, who invested in his personal capacity. The company raised $2 million in 2012 and an undisclosed sum in 2014. 

Operations are currently only 20% online. This figure is expected to increase in the coming years, but under the Gaja growth plan, physical outlets will continue to be the dominant distribution channel. Gaja has been watching the company for the past 18 months and is expected to plot new store locations with equal patience, noting a difficult domestic real estate market.

Value-add efforts on the product front will also reflect a measured approach. At a time when it seems most retailers are turning toward sophisticated customer monitoring software to optimize their offerings, Chumbak has no plans to automate. Customer engagement and market research will continue to be consulted, but in a world where pizzazz and panache are priorities, number crunching will have its limits.    

“This is a very data-driven business, so conceiving and launching new products is a very systematic process,” Jain explains. “But Chumbak also has an avant-garde aspect, so a pure data approach won’t work. In design, you have to combine analytics and human intelligence if you want to stay ahead of the curve.”

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• Topics
• South Asia
• Consumer
• Expansion
• India
• Gaja Capital Partners
• Matrix Partners
• Growth capital