D2C apparel startup The Souled Store raises Rs 135 crore funding led by Xponentia Capital

Existing shareholders Elevation Capital and RPSG Capital, an early-stage consumer VC fund from RP-Sanjiv Goenka group, also participated in the new round.

The D2C brand will use the capital to expand its offline stores to more than 100 across the country and invest in newer categories like kids wear and sneakers, cofounder Vedang Patel told ET.

“One of the reasons we want to raise money is because our offline stores are doing extremely well; they beat industry metrics and we want to really capitalise on that growth lever,” he said. “The second thing we want to do is launch new categories like kids wear; footwear is doing really well.”

He said unlike the industry standard of selling Rs 10,000 to Rs 20,000 worth of products per square foot per year, The Souled Store sells about Rs 70,000 per square foot per year. It currently operates 12 stores across Mumbai, Bengaluru, Gurugram and other cities.

Currently, 70% of its revenue comes from the app or website, 15% from offline stores, and 15% from online marketplaces like Myntra and Amazon.

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As much as 60% of its revenue comes from outside the top 10 cities and the new offline stores will help it sell better in tier II and tier III cities.The investment will also be used to offer a buyback of 100% of vested employee stock options, Patel said.

The Souled Store will also expand to more international markets in the next two-three years. Patel said it had started selling in the UAE and was looking to expand to the wider GCC region.

Countries in East Asia and Europe were also being considered, he said.

The deal comes at a time when late stage D2C brands are finding it difficult to raise funds amid a tough funding environment globally, leading to distress sales in many cases.

Goat Brand Labs, backed by Flipkart Ventures and Tiger Global, acquired Chumbak, along with other D2C brands in January in a fire sale. Traditional brick and mortar companies like Unilever, Aditya Birla Group and ITC have also acquired multiple D2C brands like Oziva, Wellbeing Nutrition, Yoga Bar, and Bewakoof, among others.

Patel said the company has built in multiple competitive advantages since inception in 2013. For pop culture apparel, several brands have offered The Souled Store better licensing deals, he said. The company pays licensors like Disney, football club and sport franchisors a percentage of the sales.

Patel said the company’s expansion offline is not a function of the rising costs of advertising on tech platforms like Meta or Alphabet.

The Souled Store was able to sell Star Wars and Marvel T-shirts cheaper than offline sellers by capitalising on the low costs of targeted advertising through these platforms six years ago.

Patel said the reason why it was expanding into kids wear, a key target group for pop culture-licensed products, is that the company could never target children through online ads.

But now that the brand is mature, the company is confident of venturing into the space.

“Kids’ is a natural extension of what we are doing,” he said. “Everything we are doing is relatable to the younger audience. When you are doing kids, it is an older customer base that you have to target. So, now that we are a decently household brand, I think it is the right time to enter the kids’ segment. The offline story will also aid in helping the kids’ category grow as families would be shopping together in malls.”

Many D2C brands are going offline as a result of the rising costs online.

Patel said it would be difficult for any other such online-focused pop culture apparel player to emerge in the market.

“Timing is everything,” said Patel. “We started when customer acquisition cost (CAC) was very low. Today, we have cemented ourselves in the consumer’s head as the go-to place, so our CACs are low. Today if you do something similar the CACs will be very high. It would be 10x of what it would be six years ago. We have built a cult-like customer base, and we enjoy the benefits of it…”

The Souled Store is currently operating at an annualised revenue of more than Rs 450 crore and has raised Rs 85 crore till date.