The Season 2 of Shark Tank India has started airing online and its already a hit among viewers. Recode Studios was featured on Shark Tank Season 2 Episode 1, ended up raising no money from the sharks.
Some of the sharks were also critisized by netizens for refusing to fund Recode Studios just because they are friends with another Shark, who is into the same cosmetics industry.
While there were many impressive pitches all along the show, the pitch by Recode really baffled everyone. This article aims to understand the business model behind Recode Studios.
What is Recode Studios?
Record studios is a start-up which operates in the cosmetic industry. It was started in the year 2018 by Dheeraj Bansal and Rahul Sachdeva. The start-up is currently based in Ludhiana which functions as the base for it’s operations.
While Dheeraj is a dropout who left his BCom studies in order to fuel his drive for innovation and ambition in the entrepreneurial space. Rahul has worked as a marketing executive in the cosmetic space. He gained the core insights pertaining to the cosmetics while working with a make-up professional. Currently both of them have partnered together in order to build Recode.
What are the market gaps that Recode is trying to fix?
The cosmetics industry functions with the help of lipstick effect. This makes the industry susceptible to macroeconomic changes because consumers continue to spend money on beauty products even when the market conditions appear to be dismal.
India which operates as the eighth largest market in size for personal and beauty care products affirms this effect. The cosmetic sector in India occupies a $15 Billion valuation in India and registers a yearly growth rate of 15%.
However if we look beyond the statistics we realise that due to inflation the cost of beauty products keep rising exponentially due to rise in the costs of dependent metric such as supply chains etc. Due to these factors the expensive products in the market kept getting expensive and unaffordable for the masses. This phenomenon crafted a huge gap in the market and Recode is trying to fix this gap.
While starting out with this idea, Dheeraj recalled that while the international cosmetic brands conducted business in India their approach wasn’t specifically crafted for India.
The international brand based products were easily available in the market but these products were overpriced making it beyond the reach of an average consumer.
The story of Recode studios
Recode undertook a heavy market research in the year 2018.
After gaining insights around various factors in the cosmetic segment the startup launched around 5-6 SKU’s in the market.
Some of the initial products that were launched were eyeliner, nail paint, kohl etc.
After this the startup targeted the regional belt around Madhya Pradesh and Chhattisgarh.
They focused on making inroads into the tier-2 cities of India through local cosmetic stores.
After this the startup focused on cities such as Delhi, Jaipur and Ahmedabad but they were entering the market only with the help of these local stores.
The financial estimates took a negative turn during the pandemic wherein every store was shut and the demand for their products reduced to a trickle and subsequently evaporated.
This turned out to be a defining moment for Recode because at this point they decided to adapt their strategy according to the market and gain a foothold in the market through the online medium.
However after much adaptation they launched a website but the online medium failed to gain momentum.
Things came to a standstill with physical stores completely closed and online stores failing to gain any traction.
Inorder to stay afloat, Recode started selling its product for ₹1 on its platform. This tactic immediately helped the company to gain a huge customer base and expand multilaterally across the market.
Currently the platform of Recode not only stocks supplies from it’s own homegrown brand but also from MamaEarth, Ofra, Wowskinscience etc.
The sum total of the brands operating through the platform is around more than 55 brands.
How does Recode manage its sourcing?
Currently Recode doesn’t operate a functional manufacturing segment, instead it sources its materials from suppliers. The company procures its materials by importing the products from Germany, China and Thailand.
These manufacturers also import their raw materials from Taiwan, Japan and Italy.
In order to assure the quality of the products various in-house checks are conducted by Recode.
After assuring the quality the products undergo a private labelling process.
What is the USP of Recode and it’s current status of operations
Recode studiosn focuses on providing the Indian market with affordable cosmetic products which are expensive when bought from heavyweight cosmetic brands. The USP of Recode is providing quality products at an affordable rate.
If we look at the online marketplace, Recode doesn’t strategically position its product. But the start-up gains a substantial amount of it’s revenue from its homegrown brand’s. If you look at the average basket size of the company it’s around ₹1,200.
The startup operates with the help of a 55 member team and maintains a presence across 170 cities. Its online webstore sees a footfall of around 1 lakh active users per month. Apart from that Recode maintains a physical presence with around 300 stores. Also the startup operates 3 stores in Delhi, Raipur and Faridabad which are exclusive to Recode.
What do you think about Recode Studios? Should they have been funded? Comment below.
What did we learn?
