Ecommerce majors Amazon and Flipkart are in talks with Hopscotch to buy a significant minority stake in the six-year-old company that sells kids’ apparel online, two people with direct knowledge of the matter said. Hopscotch has appointed Barclays as the investment banker to raise up to $60 million (Rs 428 crore) to fund its expansion plans, including hiring more employees. Founder Rahul Anand confirmed the company was in talks with potential investors, but didn’t name them. "We have commenced negotiations with some financial investors and strategic players but no deal has been signed yet," he said.
The children’s clothing space in India, pegged at Rs 95,000 crore and expanding 20% a year, is largely controlled by unbranded units. Hopscotch, with annual revenue of Rs 500 crore, caught the attention of investors in this market with its frugal spending and cost-conscious approach. The company, which competes with Firstcry in the online market, focuses on lifestyle products that offer significantly higher margins and a bigger basket size. It operates a well-connected supply chain that extends up to traditional retailers who stock high and discount high. Half of its business comes from small cities and towns. Hopscotch is its main fashion brand with four other in-house private labels.
The market for children’s wear is a tough, but ripe, one for unique brands, said Harminder Sahni, retail expert and managing director of Wazir Advisors, while noting that both Hopscotch and Firstcry were retailers offering already existing brands. “Even after years of being out of business, Lilliput still comes in top on brand surveys as no other brand has taken its place yet,” he said. The biggest challenge in kids’ wear is the lack of distribution, Sahni said, adding “There are no store chains specialising in kids wear. Exclusive brand stores are hard to make money from.”
Hopscotch is into differentiated lifestyle categories that aren’t low-margin, a senior company executive said. “Our data and technology throw up 400-500 styles every day and can help us understand top-selling fashion within a few hours,” he said.