Taking a small break…

I am writing this letter with a heavy heart. When we started this online business model in 2011, we never thought we would have to shut down or temporarily close the business. Every time we went through a crisis, we had the resources and will to recover from it.

We not only came out of adversities, but we bounced back stronger, meaner, and leaner. There are a few developments from which we are unable to recover, we will talk about that in a while.

When Demonetization was introduced in 2016 a major chunk of our customers stopped their reselling business. As you are already aware the end customers usually buy dresses using cash. Similarly, resellers used to deposit cash in our current account against their orders.

Things are not that easy to explain. UPI, QR code payments are the standards now, but back then cash was still the King. The end user always paid for their clothing purchase via cash and not via any digital means.

We had to ramp up our team strength to explain, educate, and raise the awareness level of how to perform digital transactions. 70 to 80% of our customer support calls were spent on convincing the customers that online payments are safe and non-fraudulent. The relationship managers were spending more time on pre-orders than on the actual orders.

GST was introduced in 2017. Most of them would not know that dress materials had no TAX before 2017. After GST implementation — dress materials attracted 5% GST and Readymades 12% GST. This brought about a huge sectoral shift. Even small shops & merchants had to employ a CA or accountant to get this GST filed. The resultant rise in prices simply wiped out the last rung of resellers as doing business was no longer profitable for them.

If I look back the only advantage that GST brought about was to lower the paperwork required for shipping. Since we were already operating in the digital format, we embraced this change pretty easily, but our customers were really having a tough time as the cost of the products went further up and the compliances too. The biggest issue was that our gross margins were within 3 to 4% whereas the taxes were higher than that.

The third disruption came with COVID lockdown. In October 2019, we spent a major chunk of our reserve capital on setting up a new shop/space in a prime real-estate location of Surat. A few of you would be aware that we need to deposit 12 months of rent as advance when you rent a space. The lockdown that started in March ended in June, but there was an additional 2 to 3 month restriction in the markets. The investments we made in the new office just went down the drain as courier restrictions/delays continued in the city areas.

We had to relocate to a warehouse outside of the town where courier partners would find it easier to pick up and deliver goods. Even our employee morale was pretty down due to the uncertainties that existed. Few of them even left the firm in the following year.

From 2011 to 2020, we had amazing 4-star & 5-star reviews on Google, after the lockdown the reviews we were mostly 1-star or 2-star. The reason — the longer time taken by courier partners & restrictions because of the containment zone. You can read those review comments and match the dates at https://g.page/ethnicsmart/review

Every crisis allowed us to improve and further better our offerings. But there were 2 to 3 challenges that we never recovered from. I would like to hear from you on how you would have handled it better.

1. Business without GST. Increasingly customers started demanding to provide products without GST and pass on the 5% discounts. Many small businesses and merchants went ahead and started providing products without GST to customers. This was a strong NO-GO zone for me. I did not want to run a business by evading tax. But structurally it left us at a disadvantage. When you get the same products at a 5% discount from a merchant who is not charging GST — why would the customer buy from us?
2. The shift to non-catalog & replica products. Customers started preferring non-branded and lower-quality look-alike (replica) products as they were cheaper than the branded alternatives. Yes, the products were cheap but the lasting, finesse and feel of these were no match for the branded products. Again, I was not interested in providing lower-quality products just for the sake of generating revenue. I felt it was a breach of trust between us & the customers.
3. The reforms & digitization policies of the Govt. contradicted our vision & mission. We had the original idea to decentralize the system and give more power to a tailor, small-scale shop, and women-led entrepreneur in each pin code of the country. Whereas the reforms changed the kismat of these Kirana shops, small-scale resellers. They will have to close their shops and give away their business to 1 or 2 big-scale e-commerce giants.

How many of the small-scale tailors, alteration centers, and saree fall stitching centers are still operational? Just walk to the suburbs and see for yourselves, if possible ask how their business is doing.

I am not saying digitization is bad, but when a reform of that scale is happening — the lowest tier of the section has to be protected first and then moved upwards.

For big businesses, it is very easy to go digital, buy GST software, or start an e-commerce website, and integrate supply chain logistics. For the ultra-small scale house-held shops — it is not. If the change is enforced top-to-down, the big businesses will eat into the competition, and attract the customers ensuring the lower tier of shops go bust.

Since I am unable to find a solution to the above 3 problems, I have decided to temporarily close down EthnicSmart.com. From 1st April 2024, we will not be accepting new orders, but the portal will be active wherein you can check your prior order history, download bills etc. The bills etc can be downloaded from https://app.ethnicsmart.com/sales/order/history/. Non-shipped products will be refunded and any existing claims will be supported via care@ethnicsmart.com.

Two of our staff have decided to operate a new website EthnicPe.com from their homes. They are based in Surat and already well-connected with the suppliers & manufacturers.

Staff names & contact numbers.

1. Vicky — +919033712190
2. Kiran — +917567080497

Whatsapp community link of EthnicPe.com — https://chat.whatsapp.com/B7eiKj9naVCI9e6ehfXda2

They will be able to process your newer orders & shipments diligently. They are operating in their individual capacities and not as a company. I am not really sure if they are planning to provide with/without GST, it would be great if you could reach out to them.

The new website & its operations are not backed or guaranteed by me nor have the enterprise support structure of EthnicSmart.com

If the situation becomes favorable, I may be able to make a comeback and reopen the shutters of EthnicSmart.com

Meanwhile, I have taken up a job as a mutual fund distributor and insurance advisor to keep my head above water. I went ahead and took the financial advisor license both from AMFI and IRDAI.

The project that I am working on can be found at — click here.

My Best,

Balachandran Viswaram

Founder, EthnicSmart.com