Textile-to-retail conglomerate Arvind is in advanced talks to acquire Sequoia Capital-funded e-commerce company Freecultr, becoming the latest brick-and-mortar store operator to snap up troubled online ventures. Arvind is currently carrying out due diligence of the online fashion and lifestyle brand and a deal is expected in the coming months, two people familiar with the talks said.
According to one of them, Freecultr will be acquired by Arvind Internet, the conglomerate’s online arm that is spearheaded by Kulin Lalbhai, son of chairman Sanjay Lalbhai. Jayesh Shah, chief financial officer and an official spokesperson of Arvind, declined to comment on the matter. Sandeep Singh, co-founder of Freecultr, called it “speculative.”
Started as an online fashion brand in 2011, Freecultr recently launched a new digital crowd sourcing platform, Freecultr Express, which allows anyone to create and sell T-shirts through their tee-stores on the company’s sites without any need to make investments in inventory, operations or logistics. Under this format, Freecultr will produce T-shirts of the selected designs and the creator gets commission on sales. Freecultr said more than 5,500 individuals have used the platform to create more than 24,000 designs.
The company also operates nine Freecultr-branded brick-and-mortar stores, including in the National Capital Region, Mumbai, Dehradun, Lucknow and Bengaluru, according to its website. In 2011, Freecultr raised $4 million from Sequoia. In the following year, it got another $9 million from Sequoia and Moscow-based venture firm Ru-net, started by Russian billionaire Leonid Boguslavsky.
Lately Freecultr has been in the market to raise funds, but without any success amid funding drying up and this prompted the company to initiate talks to sell to Arvind, the sources said. “They have been boot-strapped lately and have been trying very hard to raise funds,” a third person familiar with Freecultr said, speaking on the condition of anonymity. If the deal goes through, Arvind will become the latest among a host of offline retailers including the Future Group and Mahindra Group to acquire struggling online players.
In April, Kishore Biyani-owned Future Group acquired FabFurnish from German investors Rocket Internet. Last year, the Mahindra Group snapped up BabyOye amid Accel Partners and Tiger Global writing off their investments in the online maternity and baby products seller. Harminder Sahni, founder of retail consultancy Wazir Advisors, said foreign investors have pumped in huge amount of money into these kind of e-commerce ventures thinking online retailing is the future, but lately the investors have got a reality check as most of the online ventures are bleeding heavily with no prospects of making money.
“That money has now disappeared and it has clearly come down to this pass that these businesses are unviable or cannot survive without money,” Sahni said. A lot of online retailers are currently available at “throw away prices” and these are going to shut down “unless somebody comes and acquires them.” Arvind has many brands of its own, such as Flying Machine and Excalibur, and also sells global labels including Gap, Tommy Hilfiger, Calvin Klein, US Polo Association, Gant, Children’s Place and Aeropostale.