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Siddharth: Thank you so much for joining us today Komal, thank you so much for taking time out. Komal is the co-founder at Pebble, also heads the marketing there. Pebble is a mobile accessories brand; the products are available pan India. Komal, do you want to talk us through what Pebble does in brief?
Komal: Basically, Pebble is a lifestyle accessory brand I would say, which started in 2013. We started with basically power banks as our core product category because you know, at the time smartphones were just taking over the market and low battery was like a very big pain point that people had started suffering from. So we realized that power banks was going to be a big time need of the hour and that is why we started with power banks as our core category at the time. It's been seven years now and since then we've diversified into around seven to eight product categories with more than hundred SKUs, it ranges from all electronic items; like audio products, your headphones, speakers and so on, smart wearable like; smart watches and all and of course, power banks, other charging accessories and so on.
Siddharth: Yes, I was going through your website and one thing that did strike for me was the number of SKUs that you've been able to sort of develop in the last seven years. Take me through that journey of that first decision that; hey, I want to enter this particular industry and start with power banks. I know smartphones had an inflection but what was a thought process back then in terms of; I'm going to start this, I'm going to create a brand. How did you go about that?
Komal: Basically, I completed my MBA in 2013. The purpose of me doing an MBA was definitely to get into some form of entrepreneurship. That was always the basic idea I had in mind. And once I graduated, I had an option of joining my dad's business. So he's been into a UPS system uninterrupted power supply systems for the past almost 20 years. So I had an option to join that. But then, that was like a business which was already set up moving along in auto mode and everything. So it didn't really excite me much. And I've had an electrical and electronics engineering background as well, so I did want to do something in the same space. And then as I mentioned that smartphones are beginning to take over the market and everything, so we realized that, you know power banks would be something that could provide a synergy in terms of technical expertise, because UPS system got ultimately power backup devices as well. And power banks are also power backup devices, these give power to your phone and UPS give power to your computers and other devices. So we had that technical expertise there. So we saw some synergies in that area, but then power banks being a B2C product and UPS being a B2B product, we realized it had to be a fresh brand with a fresh new look and everything to appeal to an end consumer, that is why we decided to start a new company, a new brand and a completely new product portfolio.
Siddharth: Now, you don't manufacture these products yourself right?
Komal: All of our products are contract manufactured. So what usually happens as we give our technical specs and the kind of product design we are looking for, so that is done in house, the product design and development, but the actual manufacturing process is outsourced to selected manufacturing companies.
Siddharth: So one of the things that you know, I read on the internet bought Pebble was one of the taglines that you have is ‘Quality is never forgotten, price is’. Help me understand how do you leave control quality when you're not the end manufacturer and have you struggled with this, how did you go about figuring this out?
Komal: So to be honest, definitely there was an initial struggle with the same when we started out, this was definitely a new product category for us, and we didn't know that what factories would work for us, which had the right quality control in place and everything. So, there was a bit of experimentation there to be honest, but then when we started out, we started small. So, we started with very small shipment sizes of maybe 100 units or 200, 300 units of each model. And we started with around five models at the time. So, the risk was low, we had the capacity to experiment with that kind of risk. So, we started out, we visited a lot of factories, we shortlisted a few where we realized that you know, they were making these products for other brands in the US market, well known brands. So they had the quality guidelines standards in place. So we shortlisted factories accordingly, and then we started working with them. And also during the process of manufacturing and post manufacturing quality control was overlooked by us as well. So there are you know third party agencies that do this for you who go to these factories and do the entire quality control or assurance processes well, and those are the agencies that helped us maintain our quality control also.
[00:05:09 – 00:10:00]
Siddharth: And once you figure that out once you stabilize the companies that you were working for and the quality control agencies, would it be fair to say that it's smooth sailing since then?
Komal: For the product categories like power banks which has been our core category for seven years, definitely we've been working with the same partners for a long time now, they understand us, we understand them, there's a trust and everything. But for me every new category that comes into place, like I told you, we've entered multiple categories now. So there is always some sort of a bit of hidden trial in the beginning, I wouldn't say it's a completely streamlined or a smooth process. There is a bit of risk involved whenever we work with a new category or a new product.
Siddharth: You mentioned that you guys do the design in house while you get the products manufactured at contract manufacturing locations, obviously the product that you're dealing with such as smart watches, they're pretty complex products. How are you doing this entire electronics and electrical design in house?
Komal: So, when I say that we're designing it in house, what we design basically is the look and feel of the product, the mold of the product, the shape, color, size, material of the product, right. The technology that goes inside the product is what we tell them what we are expecting that for example, we are looking for a headphone with this kind of voltage with this kind of impedance and all those tech specs are aligned with the factory. And then the development of that is done by the factory because they have the expertise, they have the R&D in place to give us the right output for what we require.
Siddharth: Okay, that makes sense. Back in 2013, you said you started with 100 and 150 units, right?
Komal: Yeah.
Siddharth: Take me through that process of scale up, one, first of all, on what channels did you tap into in your early days and how has your distribution channels sort of expanded offline online over the last few years?
Komal Right. So when we started, like to just mentioned about around five models and hundred units of each we imported, so around 500 units and all. So how we started was, we started locally, since we're based out of Noida, we tried to reach out to electronic distributors in the offline market who were dealing with either mobile phones or other similar category products. We reached out to them; we had to explain to them firstly what the product was because nobody even understood the term power bank at the time, so it had to be called a portable charger or a pocket charger and things like that. So we had to explain to them that this is a new product, this would be an upcoming need of the hour and you should really look into this and the investment was not very high. This is obviously a low ASP product. So we tried to tap such few offline partners locally those couple of cities, metro cities, maybe one in Bombay, one in Delhi and so on, that is how we started. We started with local markets offline major markets and new cities. So, once we started getting some traction from these areas, we started our next shipment onwards we started ordering more volumes, we also did a bit of iterations then in terms of the product also that once the product was into the market, there was feedback that you know, this is what we require more, this is what a customer is asking. So there were iterations in the product as well those were changes that were made. The biggest vague that we bought was after a few months down the line, couple of months down the line was when we had reached out to these airline partners, Jet Airways and Air India and all, what we realized was a power bank is basically a travel related product, at the time it was, the people required only during travel, an airline customer is a premium customer who wants a jolly good quality product irrespective of price, it is something that they would need as an impulse purchase. If you are, you know, flying and you suddenly realize your phone is out of battery, you need a power bank then in there. So we reached out to these people and it was an immediate click for them as well considering the new product category, the quality of the product, everything. And immediately our sales, which we were importing 500 units a piece, it jumped around 8 to 10,000 units immediately. So that was a definitely big break for us and it gave us a lot of credibility as well, because if a product is being sold to premium customer base, then people try to assume or they try to understand that the quality must be of a certain level.
Siddharth: Take me through what it takes to work with an airline. So from what I understand these are the catalogs that we see on our flights that are and I've seen Pebble products on the Indigo catalogs. So you know, in this particular segment, correct?
[00:10:00 – 00:15:20]
Komal: Correct. So we call it travel retail, essentially. So, either it's being sold in flight or at airports. So what happens is we don't actually deal directly with the flights, with these airlines, there are agencies that work with these airlines and provide them and manage their catalogs in flight catalogs, essentially, whether it is electronic items or just cosmetics or anything. So we have to work with these partners. So we identified who these right partners are and these are the people we work with.
Siddharth: And one of the things that I've heard is the credit period generally because the inventory clearing can take time from the airline perspective, there is a decent credit period also involved in this channel.
Komal: Definitely, that is there I won't lie that there is a big credit period there. But then you know, considering the overall exposure in terms of marketing because there is no additional marketing involved but we are getting a lot of eyeballs to look at our product and everything. If we get all that into the picture then I think it is a good deal to get into an airline, travel retail sort of space.
Siddharth: That actually makes a lot of sense, because as you said, I think nearly everyone who's bored on the flight picks up that magazine might not want to buy anything but just flips through. I do that every single time I am on flight. And that's how the first time I heard about Pebble was, I think on an indigo flight before I met you. And from a marketing expense perspective, as we said, there is no additional money that's going in, it's just the credit period. So probably you can budget the extra finance cost as a marketing expense, you know, if you want to rationalize that expanse.
Komal: Exactly, yeah.
Siddharth: Okay, so that's the first breakthrough in the journey. What I'm really trying to uncover here Komal is how do you build a consumer brand in India and you've done it in a sustainable way. You've done it bootstrapped and you’re now present across multiple sales channels, and we will get to all that those also. So take me through the next breakthrough that happened in the journey.
Komal: This wasn't what like I said a big breakthrough. But at the same time, we started hiring a few people in our sales team in different locations in the core areas, like one for North India, one for south, east and west and so on. And they were simultaneously developing distributors in the area. And again, the kind of partners retail partners that we were looking for were ones who had a place in the market already, who are already tied up with, let's say hundred retailers each, we did not want to partner with someone new at the time, because if the partner is also new, a product is also new, it will take a long time to establish that market and with the whole airlines thing. It gave us a lot more credibility and we did end up getting some really good partners in the major Metro cities. So that simultaneously was getting, you know it was growing. At the same time flip kart and Amazon's were starting to grow as well, I remember Amazon had just launched in India at the time for electronics especially they were starting. So we tied up with these channels as well, that was a no brainer for us to be listed with these platforms online. And initially, we did start doing good volumes with them as well. But then we were always a bit hesitant to take the ecommerce channel forward, as more and more players started coming into this, price competitiveness became really, I mean it actually became insane. So people were just trying to sell volumes and not bothering about the price at all. Amazon and Flip kart themselves are also trying to burn money to sell more and more volumes initially, I mean, all of us know how it was for them as well, crazy sales and crazy pricings. What that did was always would have given us volumes, but then our brand would have ultimately the perception of a brand would have reached that low price point and we would have ended up competing with unbranded or low quality material which we did not want to position ourselves at all, we wanted to maintain the quality, the brand positioning and the brand pricing. So, that is why we were never very aggressive in the e commerce platform in the beginning few years at least. We maintained our premium channels like airlines, the right distributors, good electronic shops, and eventually we moved on into modern retail. So, modern retail again was a big breakthrough for us. There was retail chain called the mobile store, so we tied up with them. So they had more than 800 stores across pan India and we were immediately present in most of those stores. So those are the kind of big partnerships that really helped us build and why they also preferred us as a partner was like I said, because of the brand positioning, the credibility of the quality of the product and there was no conflict with online pricing. What they failed with a lot of brands was that the same product online people were selling it at let's say a 500 bucks, whereas the pricing they were getting was almost double that. So obviously a customer would not buy that product from the store. Whereas, we always maintained our pricing, uniform pricing across channels, so that definitely had been pushed through these modern retail chains as well.
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Sahil: You mentioned that some of the big breakthroughs that you had were working with these distributors or working with some of these big chains like T Mobile store, how exactly did you work to get into these modern retail stores, like the mobile store, because for example, I know that when it comes to food, and if you want to work with, let's say nature's basket, they charge you a certain upfront fee, a listing fee basically did you also face that issue when you want to do start with modern retail?
Komal: We did face this issue with some of the really big retail chains like the Reliance Digital's and Chroma and they had a lot of such commercials that we were not comfortable with. So that is why we did not go ahead with those chains. But then retail chains like the mobile store and others who were more focused on this category on mobiles and its accessories. So they were also happy to have a brand associated with them, which has a certain credibility and you know, quality assurance that we did not face a lot of competition, to be honest, because 99% of the brands who were coming in at the time were just looking at e commerce, they just wanted to, you know, sell at the cheapest price and just sell volumes on e-commerce, which is fine, which is also a good strategy for them perhaps but for us, we had a different mindset. So it happens with these kinds of big retail chains.
Sahil: What do you do from your marketing perspective to really push this whole idea and this whole branding of being a high quality player in a market that is dominated by low quality players?
Komal: Sahil I'll be very honest. In our marketing communication that we bring forward, we do not very directly talk about quality, you know quality something, even if we tell them to their faces that you know, this is really good quality, it can only be assured once a person has used the product or there is some sort of something backing that what I'm saying, right, so if I just write, saying that this is good quality, that's not just going to help us. So what really helped us are few things. First of all, the customer care process that we built up, and I still very confidently say that this is one of the best in the industry, the kind of customer service that we have in place. So we give a standard six month to one year or replacement guarantee on all our products, which means that if you have any issue in the product, it will immediately be replaced with a fresh product. We don't have service centers where you take the product, they do something to the product, try to repair it, that doesn't happen. It's immediate replacement with a fresh product through courier that we do. So that, first of all gives the customer a lot of assurance that; okay, I buy this product in case if something happen it's fine, these guys are telling me that we'll replace it, we are happy with that. So that is one way to tell you about the confidence that we as a brand have on quality. So these are the indirect ways which in which we've tried to portray this. Second is obviously like I said, the credibility we received by being in certain places, we sell in Apple Stores today; you understand an apple store wouldn't just sell any product in the stores. They are very, very particular about the kind of product the quality that they're selling, an airline has to cater to a very premium segment, they wouldn't sell to just anyone. So being in such premium places, again, has given us credibility. And people if they see my product online now or in a shop they’ll say; oh yeah, I saw this in the airport or I saw this on the airline, this must be a good product, let me purchase it. So these kinds of things as also help. Thirdly, of course online reviews and sort of other associations with YouTube bloggers and other technical bloggers, the kind of reviews these people give, all these people have helped us gain this quality of credibility for customers.
Siddharth: So Komal, one of the things that I've uncovered from this discussion so far right, you get quality at the center of every decision you make, you've led that as the core principle that you're following. But what you've also done is, I don't know if it's a result of focusing on quality, but what you've also done is taking a lot of long term decisions that will pay off in the long run and not playing the short term games, for example, the offline to online right, like I can understand 2015, 16, 17 when e-commerce was blowing up with all the kind of sales and everything by your competitor, some of your competitors might have gone online or might have been just online first and getting the volume that they were getting. I can only imagine how difficult that decision would have been to say that; hey, we're going to stick to what we stand for and we're going to play the long term game. And I think that's primarily why you've been able to build a sustainable organization out of this something of an organization that can turn a profit and organization that doesn't rely on outside funding to sort of keep growing. Is that a fair assumption?
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Komal: No, definitely, that was a very conscious decision of keeping the long term aspect in mind. And like you said, we also did second guess these decisions when we saw some players selling big volumes online and everything, but then we maintained our ground that we do not want to get into a volume game just for the sake of pricing and reducing quality in everything that is something was non-negotiable for us. And we also saw a lot of brands that came up during the time that also died during the same time. So they were there for probably 10 to 12 months, and you will no longer know about them. So there was no point in just doing that right, so that is why we've consciously made this decision, long term decision to build the brand, that was our core target in mind and it still is that we have to build a brand here, we are not in a trading business. My purpose is not to get 10,000 units and just sell it off. My purpose is to build a brand, purpose is that a customer recognizes us, proudly uses a Pebble product that is what the ultimate goal in mind is.
Siddharth: You mentioned about how you got into mobile stores. I'm keener on the distributor segment because I would assume that's a huge part of the business just given how distributed they are and you working pan India will happen through working with these midsize distributors. What these people care about at the end of the day, because they're not dealing with the end consumer themselves. I'm assuming what they care about the most is the margins that they make out to the business, unless it's a very well done renowned brand, let's say a one plus or an apple, where they say; Hey, I will work with them just because these products will sell with no risk at all. Apart from margins, how do you get a distributor to work with you?
Komal: So I think that's a very good question. And this is something that the biggest brands still sort of try to get the right strategy in mind to get the right partners and maintain those partners for a long term purpose. So, you know, some things that worked out in our favor was, again, I'm just going to come back to quality one more time, because what these people faced at the time was, you know, there was an influx of a lot of unbranded Chinese products in the market without any guarantee warranty in place, and it really bombarded the market. Although, it did do that, after a few months, these retailers and distributors started realizing that all 50% of those products were coming back to them from the customer saying that this is not working, that is not working, in which case they ended up incurring a lot more costs, but then the margins that they were getting on these products. So this is something they realized as well, the distribution partners that it would be safer or a better prospect deal with brands, especially brands that are locally based that if they had an issue, they could come to us and talk to us about it, and we would be there to help them resolve those situations. So that is a better proposition for them as well, this is something they realized. Like you mentioned, margins is always the biggest factor these guys work on but margins can only go to a certain point I mean, if I can give them a 10% or 15% margin that is it, I cannot increase it to 20 or 30, or more than that. So beyond margins, the other thing that comes into play is how the strong customer care service that we have in place first of all, second thing is what we are doing to help them increase the tertiary sales. Let's say my distributor comes to me saying that; okay, my job is to place your products in 1000 retail stores, let's say I have done that. Now that retail store, whether they are able to sell that product to the end customer and take repeat purchases from the distributor, that is something that they need our help for as well. Because like you said, brands like apple and one plus have a lot of pool in the market, a person is going to come to the shop saying; I want one plus phone. But at the time, they wouldn't come to a shop saying I want a Pebble accessory because we weren’t that bigger brand. So they also look that what kind of push marketing we as a brand are going to help them do their secondary and tertiary sales. That is some phrase I would come back to the marketing now, saying that we were pretty strong in our point of sale marketing, and we still are. So instead of doing mass marketing on you know, for on TVCs, or print and so on. Our core focus, in fact, 80% of our budget went into point of sale marketing, we identified let's say 100 retailers with each distributor that these are the only good retailers with a really good footfall. So we ensure we did the right kind of insurance branding for these people, we provided them with all sorts of display stands and other marketing material so that a customer who enters that store, you know, sees Pebble all around and is inclined to purchase a product from a brand. So that also gave the distributor confidence that this band is here to stay, this partner is here to stay, they won't just go off tomorrow and there will be nobody to listen to us. So these things had them give more and more confidence and they decided to partner with us.
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Sahil: Makes sense. And I think what you've been able to do because you built out that offline retail channel and the distributor network is a very high barrier to entry. While the e-commerce market as you said is very low barrier to entry. Anybody with a brand could come and try to sell volumes at a huge discount and hopefully all these huge discounts need to be funded by someone, so either that person needs to have deep pockets or needs to get venture backed funding, saying that; hey, I've built a brand and the kind of volume site and if you don't you vanish in 12 months or 18 months. And because of the offline channel, I think the more that you have is extremely strong, because it's not easy to create this distribution network, not just easy, it also requires patience, and I was reading, I think an article that you had written or the when you were interviewed a couple of years back where your primary points were north and west, primary revenue points were north and west in that, I could imagine that just primarily because of the distribution network. And over the years, you might have expanded to south and east and other parts of the world, now you're also in Middle East now. This building of distribution network is always a very slow process. But once you build it, it's very, very hard to sort of break it and for somebody else to enter it.
Komal: The stability is much more in this offline channel than online. At least I would say before covid stuck us, it certainly was. So, that has definitely given us a lot of stability overall in terms of sales and volumes. This decision in hindsight was definitely a good decision for us that we stuck to the offline channel as our core business for a long time. And not only that, diversifying into multiple channels within offline as well that what we call this the distributor network is more of a general trade and then there is a modern retail and then there was travel, retail and airlines. So all of them together definitely gave us stability, because like Siddharth mentioned these are not very easy to enter into these spaces, not every small or big brand can enter into it, there are a lot of things factors to be logged into. These people could also not want to change brands or partners very easily if they are also comfortable and happy with certain brands. So that is definitely given us good stability in the business overall, main channel that I forgot which actually catered to almost a 30 to 40% of our sales for a while, was corporates, which was more of institutional sales for us. So basically all these products are very useful as a gifting product as well, until years back, all the corporate gifting that was happening was off merchandise like t shirts and coffee mugs and stuff like that, if you had to give things to your clients or to your employees on Diwali or anything of that sort. And when these kinds of accessories, power banks, headphones and all came into play, people realize that at the same price; get something far more useful for their customers and employees. We tap into this and this was also a major breakthrough for us. So now we are actually literally catering to more than 500 big corporates in the country who choose us for their gifting needs.
Sahil: Now that you guys have invested so much in building a distributorship model and having these corporates also for buying from you, you guys can also push new products onto those distribution channels quite easily.
Komal: Exactly, and that is the reason why we actually diversified from power bands into almost seven, eight other categories now and more than hundred SKUs.
Sahil: Because I've also heard of some companies who have been acquired specifically for their distribution network, because building a distribution network is not easy. And having that network gives you a lot of added value.
Komal: I think it's a big asset for any company or a brand especially, their distribution network.
Siddharth: So I think every company that tries to do this, and I'm trying to understand where you fall in that spectrum right now. Every company that tries to do this has to fund the distributor network in some way or form initially, in the sense that I'm assuming you would have had to give a lot of credit to the initial set of distributors because you will try to prove your brand.
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