INDIAMART: Analysis of Business Model

Under the supervision and guidance of Dr.Vinay Singh

Anni Gupta (2013IPG-022) Deepak Kumar (2013IPG-037)

ABV-IIITM, Gwalior ABV-IIITM, Gwalior
Madhya Pradesh, 474010 Madhya Pradesh, 474010
[email protected] [email protected]

Abstract—This report explains about a Company based on

Freemium Business Model namely, INDIAMART. The objective
is to analyze the implementation of the freemium model and its
implications. The rampant growth of the company based on its
value propositions are also portrayed under this analysis of
business model. Fig.1: IndiaMART LOGO
Keywords—freemium; value proposition; business model; e-
commerce; e-business.
II. ORIGIN OF THE E-COMMERCE PLATFORM
I. INTRODUCTION
After returning from the US in 1996, Dinesh Agarwal started
IndiaMART is an Indian internet limited company Intermesh, a company that made websites for Delhi-based
headquartered in Noida. It is an online business-to- companies like Nirula's. He then created India MART, a
business B2B marketplace which matches buyers and website directory of the sites that his company created. In
suppliers. It has about 1.5 million suppliers listed on its 1998, he set up the second office in Mumbai. By 1999, around
website, with as many as 1 crore buyers visiting the company's 1,000 clients were added to the list. After the US terror attack
platform every month. In 2009, IAMAI conducted a study, on 11 September 2001, India MART's revenue fell by nearly
which declared that India MART has a 60 percent market 40 per cent but the company overcame the slump. In early
share in India's online B2B marketplace. It has also been 2009, IndiaMART raised an undisclosed amount of money
declared as the world's second largest online B2B marketplace from Intel Capital. A total of $23 million was invested in India
by Economic Times. MART 197 Communications and Global Talent
Track. Building on the platform for suppliers, it also created a
As on March 2014, IndiaMART had helped over 1.4 million buyer-dedicated forum in 2011. Today, India MART has 40
businesses market their products online with 10 million users offices in 100 cities across the country and total employee
using the platform every month. IndiaMART was also making count of 2600. Of these, 800 employees work at the head
significant investments to leverage the growth of mobile office in Noida, Uttar Pradesh. India MART roped in Irrfan
internet penetration in India, by offering location-specific Khan as its brand ambassador for its latest brand campaign
search, and user profile-based personalization, for the that went live in November 2014.
smartphone users.
Today, e-Commerce is entering the third phase with the focus
on how the internet can impact profitability. We call this phase
e-business and it includes all the applications and processes
enabling a company to service a business transaction. In
addition to encompassing e-commerce, e-business includes
both front and back office applications that form the core
engine for modern business. Thus, e-business is not just about
e-commerce transactions or buying and selling over the web;
it’s the overall strategy of redefining old business models,
with the aid of technology, to maximize customer value and
profits. To paraphrase Business Week, “Forget B2B or B2C,
e-Business is about P2P – path to profitability

Fig.2: IndiaMART Web Portal

 III. SERVICES AND OFFERINGS IV. VALUE CHAIN ANALYSIS
With this was born IndiaMART the first company in India to
provide directory services for exporters and importers on the The value chain analysis for IndiaMART brings forth the key
net. Initially, for IndiaMART, the project was that of primary activities are;
collecting the queries and forwarding the same to the
 Maintaining database of suppliers.
merchants free of cost. It seemed to be a big boost for the
SME (small & medium enterprise) who otherwise would  Directory listing and categorization.
never have even think of selling their goods globally on their
own. The next important revenue source is the B2B auctions,  Manage queries and buy-sell transactions.
which was launched last year in December. In fact this  Delivery and payments.
addition of auctions on to the site has given IndiaMART a
opportunity to cash to the high visibility that it has earned for  Suppliers rating.
itself for the past few years.  Key support activities include;
The Auction platform, which is the biggest in Asia, caters to  Focus on product, process and business model
over five lakh global B2B buyers that visit IndiaMART every innovation.
month. Here suppliers can register online and list their
 Setting up technology and operational benchmarks.
inventory for auction on an annual basis. The seller decides on
the Reserve Price, Minimum bid price and bid increment  Setting up infrastructure (Technology and physical
amount. Interested buyers can bid on the items listed free of setup)
cost after going through the product information online. After
the auction times out the seller is introduced to the winner to
complete the transaction. The success of the B2B auction
portal can be gauged from the fact form its introduction in Dec
2001 it has already earned through commissions Rs. 0.48 lakh
for the last financial year. The other income streams for
IndiaMART are Web advertising which accounted for Rs
35.86 lakhs, e-business solutions worth Rs. 24.21 lakhs and
co-branded online promotion campaigns for Rs 21 lakh.

Fig.3: IndiaMART Services & Offerings

Internet Profile: Fig.4: IndiaMART Value Chain

V. VALUE PROPOSITION
IndiaMART defined its business around the key objective of
more buyers, more suppliers and more business. The rationale
behind this objective was that the creation of a technology
platform as a virtual market place would lead to growth in
business by bridging the connectivity and accessibility barriers wholesale marketplace for domestic China trade among small
between small-scale suppliers in India and global buyers. businesses, AliExpress - an e-marketplace for global
consumers, Alibaba.com - a global wholesale platform for
For suppliers, the value proposition included;
small businesses, Alibaba Cloud Computing for developing
 Increase in revenues by having access to global platforms for cloud computing and data management and
buyers. Alipay to facilitate online and mobile payment solutions in
China.
 Access to information on competitive market
trends. Alibaba went public with its maiden IPO in 2007 at a
 For buyers, the value proposition included; valuation of US$10 Biliion, which grew past US$ 17 Billion
within no time. Immediately after its IPO, Alibaba opened
 Access to network of suppliers offerings. offices in India and started marketing its services to Indian
Exporters. Later, they partnered with Mumbai-based yellow
 Access to feedback and rating of suppliers. pages services company, Infomedia India.
 Ease of evaluation and transactions.
In India, Alibaba.com drove various local initiatives, for
 instance, workshops were conducted to train supplier members
on how best to leverage e-commerce and how to make the
VI. THE COMPETITION most of their account. Alibaba.com had local offices in
Mumbai, Delhi, Chennai, Bangalore and Ahmedabad.
The Competition IndiaMART’s biggest and nearest Comparing the Indian market with its major competitors,
competitor was Alibaba.com a China-based e-commerce Khalid Isar, the Country General Manager of Alibaba.com
company, founded by Jack Ma a former English teacher and India, said, “India is a unique market as the characteristics of
18 others in 1999. Other competitors included Justdial, Indian SMEs are very different to Chinese counterparts. For
TradeIndia, globalsources.com, thomasnet.com among many instance, what may work well for a supplier in India, with
others. local buyers, may not work with a buyer in China, as cultural,
technological and socioeconomic factors have an impact on
Although all of them offered lead generation and were local businesses. Indian businesses on the Alibaba.com
matchmaking platforms bringing buyers and sellers together, platform also differ from other markets as they have a
each of them had a different focus. IndiaMART for instance, language advantage. This allows them to respond to inquiries
focused on its suppliers’ directory, whereas Alibaba focused in a timely and efficient manner while reducing language-
on products, TradeIndia on print media and Justdial on barrier issues12.”
telephone services. Though these online trading companies
served the SME market to a certain extent, they were present Alibaba.com’s unaudited financial profits for March end 2012
across markets, and sometimes even overlapped in their were USD53.8 million, with a total of 79.8 million registered
listings. users, 10.3 million storefronts and 753,955 paying
members13.
According to a report by the Federation of Indian Export
Organizations (FIEO), exports through the e-commerce route Justdial: A search service provider with a database of listings
had grown over 400 % to $1.4 billion from 2010 to 20128. across categories was founded by VSS Mani. The company
According to Forrester Research Inc., a market research firm, started offering local search services in 1996 under the Justdial
e-commerce sales in 2013 were estimated at about $1.6 brand, and became a dotcom company in 2007. It was the first
billion9. mover in this space in India.
However, exports declined 1.76% to $300.6 billion in 2012-
201310. According to Ernst & Young, India's B2B market in In 2013, Justdial had a database of approximately 9.1 million
2011 stood at just US$50.37 million, a fraction of a small but listings, of which 2.39 lakh listings were paid campaigns. It
rapidly growing domestic e-commerce market of US$10 addressed 364 million search requests across multiple
billion11. platforms, such as the internet, mobile Internet, over the
As various models evolved and coexisted, the B2B telephone (voice) and text (SMS), with 68% of the search
opportunity in India began to attract attention from many requests from the internet. The business model was to offer a
players. dial-in number which was an operator assisted, hot line
accessible, 24/7 with multi lingual support. Business owners
Alibaba Group: The Alibaba Group, China's leading B2B e- had the option of listing their business on the database for free
commerce Company, was started to cater to small businesses. and if they wanted priority in listing or prominence, Justdial
The Group’s major businesses included Taobao Marketplace - charged a fee. Justdial was listed on the Bombay stock
an online shopping site, Tmall.com a platform for online exchange in 2013. In the first quarter of 2014, Justdial’s
shopping for top-quality international and Chinese branded revenues grew 28.3 % over the same period in 2012-13 to
merchandise, Juhuasuan - a buying platform, 1688 - a around Rs.271 crore, while its net profit rose 82.2 % to Rs.57
crore. The organization had a market capitalization of meltdown in 2008 – arguably the worst economic crisis since
Rs.12,430 crores and ranked 99th in the 100 most valuable the Great depression of the 1930s. India was no exception, and
companies in India in 201414. In the same year, Justdial the rules of the game changed dramatically.
initiated a ‘Search Plus’ Service for users, in order to
transition from being a provider of local search and related A customer base of over 10,000 posed a fresh set of problems
information to being an enabler of such transactions. Justdial for IndiaMART. High dependence on low skilled manpower
had its registered and corporate offices based in Mumbai, with led of increasing number of errors in customer catalogues,
branches in Ahmedabad, Bengaluru, Chandigarh, Chennai, resulting in an increase in customer churn; while higher
Coimbatore, Delhi, Hyderabad, Jaipur, Kolkata and Pune. inflation was pushing the costs up.

Tradeindia.com: Tradeindia, headquartered in New Delhi, The meltdown took Dinesh back to the era of 2001, albeit with
with pan India operations was maintained and promoted by one difference – now, there was money in the bank, and a
Infocom Network Ltd, and conceptualized in 1996. The competent team in place to execute. Dinesh got down to doing
business model was to take the offline yellow pages model what he did best – re-engineering processes to improve
online. efficiencies and protect its operating margins.

Tradeindia received an average of 20.5 million hits per IndiaMART decided to increase the subscription price and
month. In 2013, the platform had a database of 27,44,394 also launched the scheme, wherein customers could pay for
registered users15. Tradeindia’s revenues were earned from two years and get the subscription for the third year absolutely
listings which ran into several lakhs with charges ranging from free of cost. Three year lock-in helped in reducing customer
Rs.3,000-13,000 annually. churn. Premium listing was also contributing in improving the
ARPU.
Global Sources Ltd.: It was a Hong-Kong based business-to-
business media company that provided information and To reduce human errors, template based mini-dynamic
integrated marketing services, with a particular focus on the catalogue was launched. It replaced the custom made
Greater China market. The Company, together with its microsite, and the subscription price was increased from Rs.
subsidiaries, provides services that allowed global buyers to 9000. to Rs. 15000.
identify suppliers and products, and enabled suppliers to
market their products to a number of buyers. It operated in From a customer’s perspective also, it was a good move, as
three segments: online and other media services, exhibitions the single page microsite was upgraded to a 5-page dynamic
and other segments. catalogue with many features. Templates led to elimination of
errors and reduced dependence on low skilled design team –
Thomasnet.com: It was an information and technology there was a significant increase in the quality of catalogues.
company that connected manufacturing and industrial buyers All these changes gave a great boost to the overall sales
and sellers. The platform had a news section which covered performance of the company.
product news, information, business trends and analysis
During the same period, search engines, Google in particular,
Some platforms also catered to niche products or services, realized that people searching through the Internet preferred to
like, for instance, the e-commerce Kolkata-based Mjunction see local results and therefore, modified it and made it locally
Services, which ran Metaljunction, the world's largest online relevant. This implied that search results would prioritize links
marketplace for steel and allied products. The MetalJunction to pages that were in the same geography as the user. For
portal, the largest e-marketplace for steel in the world, was a IndiaMART, it meant that their appearance in the international
50:50 online steel sales and procurement joint venture search results (made by prospective buyers) would be lower
between SAIL and Tata Steel, and followed a transaction-led than before. For instance, if one searched for “pencil
model. It had sold over 4 million tonnes of steel for its clients suppliers” from a PC in Mountain View, CA, the top ranked
at an average rate of 150,000 tonnes per month. Its over 5,400 results would include suppliers from that geography, rather
strong buyer community comprised of traders, fabricators, re- than a global listing of suppliers (including the IndiaMART
rollers and end-users. writing instruments category page). This shift by Google to
provide locally relevant search helped IndiaMART garner a
huge share of domestic B2B (business-to-business) trade.

VII. DOMESTIC FOCUS AND RAPID GROWTH (2007-2010) Two developments took place at IndiaMART. With the
rapidly increasing domestic adoption, IndiaMART started to
2007-10 was an interesting phase in the evolution of Internet-
shift its focus from international business to domestic
based businesses in India, as well as IndiaMART’s growth
business. The shift meant that another round of product
strategy. Indian currency had appreciated significantly against
innovation was required. Dinesh instructed his team to step
US$ and reached to Rs.38 for 1 US$, severely impacting the
out and meet customers to gauge their reaction to the slump in
export from India. This was followed by the global financial
export business. As anticipated, the feedback was clear that Dinesh presented an aggressive plan to its Board, a plan which
the exporters who were earlier averse to domestic orders had was based on rapid customer acquisition. It was an audacious
started catering to local clientele, despite the drop in margins. move, after staying profitable for 12 consecutive years,
There was a huge business opportunity amidst this crisis – IndiaMART was now prepared to tread the path of high cash
domestic focus meant rapid growth in the market size; burn. The revised aim was to grow to 1 million listed
possibility of building an online business community in a businesses and 100,000 paying customers.
highly fragmented domestic B2B marketing segment started to
look much more appealing than the international business. By 2010, after strongly trying to gain market-share for two
years, Alibaba, IndiaMART’s closest and biggest competitor,
Dinesh & Brijesh decided to raise capital and invest in had started to reduce its focus from the Indian market. It was
products with an aim to establish its leadership position in the clear that it aimed at only those companies which were
domestic market. IndiaMART raised US $10 Million from focusing on Exports from India – apparently it did not show
Intel Capital in 2008. any intent of serving India’s domestic B2B Businesses.
IndiaMART’s “Do-it-for-me” approach, as against “Do-it-
While the revised business strategy was getting formulated, Yourselves” approach of Alibaba, coupled with the large
IndiaMART had already started re-modelling the online differences in Internet adoption within Indian SMEs and
directory behind the scenes. In fact, the process was initiated Chinese SMEs, turned out to be the biggest roadblocks in
long time back – to transform IndiaMART.com from a Alibaba’s path.
company directory into a giant product catalogue.

Until then, IndiaMART offered only a two-liner business

description to Free Listed companies, and its product VIII. RAMPANT CUSTOMER ACQUISITION (2010-2012)
catalogue was derived from its paying customers. Dinesh By 2010, the internet penetration and usage landscape in India
decided to offer a full-featured business catalogue to all free had changed significantly. MakeMyTrip, one of the leading
listed companies as well– and suddenly the product catalogue online travel agencies, had created history by listing on
started to grow in leaps and bounds. The sales team evaluated Nasdaq with a bumper IPO. There was a renewed faith of
on a regular basis if clients benefitted from the domestic focus. investors in online businesses. Several online ventures had
received initial round of funding, and had also started
The move helped IndiaMART in retaining its preferred advertising heavily in the traditional media to create
positioning in Google, as even with its changed algorithm, awareness about their businesses.
Google continued to find high quality content to show to its
users. Google’s locally relevant searches helped IndiaMART IndiaMART embarked on an ambitious customer acquisition
garner a huge share of domestic B2B (business-to-business) target of 100,000 SME subscribers. Sales closures were
trade. monitored by the week (as opposed to by the month, as was
the norm until 2008). Further, in order to accelerate their
Investments made by BCCL in 2006 and Intel Capital in 2008, customer acquisition efforts, IndiaMART opened offices at the
significantly aided the growth intent. Following these rate of one per week – at times, several within the same city.
investments, IndiaMART built a professional board filled with In just the year 2010, IndiaMART opened 52 offices in 52
independent directors, including well-respected business weeks – the idea was to ensure that a sales person officers
leaders like Sarayu Srinivasan (Intel Capital), Nachiket Mor (commonly referred to as “Feet on the Street”) should not
(ICICI), Deep Kalra (MakeMyTrip.com), and PN Vijay travel more than 30 minutes to meet a customer. Attractive
(Investment Advisory). This reconstituted board helped incentive plans were offered to motivate the sales team to go
IndiaMART significantly in disciplined financial reporting. out and bring in more customers. With burgeoning number of
sales officers, IndiaMART acquired about 21,000 new
Increased internet awareness and its usage as a marketing tool customers in 2010, and another 28,000 customers in 2011.
implied that many SMEs were using IndiaMART as their chief The size of the domestic business went up to 80% of
source of buy leads. More and more SMEs who used free IndiaMART’s volumes due to these rampant customer
listings as a trial converted into paid subscribers on the acquisitions. Within a span of two years, the rate of customer
IndiaMART platform, resulting in IndiaMART achieving acquisition had climbed to 2500 customers a month, from
around US$ 750 ARPU in 2009. around 400 customers a month. IndiaMART had spent Rs.40
Crore in a year in branding and customer acquisition process.
By 2010, IndiaMART had 14,000 Paying subscribers and had
achieved its ARPU target of US$1000 per paying customer. During this period, IndiaMART also re-located its corporate
The annual cash collection topped Rs.61 Crore. This was office to a larger and far-superior facility on NoidaGreater
achieved partly by increasing the subscription pricing, and Noida Expressway.
partly from premium listing solutions.
The growth in customer acquisition, however, brought with it online presence and access to global market. Once the MSME
a variety of problems. It exposed chinks in the organizational felt happy and found value in having presence with India mart,
processes that were designed to support a lower growth, they had the option of upgrading themselves for a paid
resulting in the acquisition of non-relevant customers – membership, which entitled them an access to premium
essentially the ones who could not have benefited from the services like web catalogues, priority listing and trusted seal
IndiaMART platform. rating. The company also introduce pay per lead model to the
MSMEs which provided the facility of choosing relevant
business lead at India mart website with nominal amount and
continuing the same. The platform will also avail support
services including logistics, insurance buyer verification and
sampling services online to participating members through a
tie-up with global verification giant SGS (Société Générale
de Surveillance, Geneva) to help build trust in online trade.
India MART is already talking to ICICI and Citibank for
provision of online payment gateway services for B2B
transactions through the portal.

Fig.6: Freemium Model

A conservative estimate by the company reveals B2B

transactions worth Rs 1,200 crores through the portal in the
current year, resulting from estimated 3000 online auction
deals. In addition, IndiaMART is confident of achieving at
least 2,500 online0 catalogues of member businesses on the
portal by the end of the year, making IndiaMART.com the
largest Indian B2B portal, not far behind those largest in the
world. IndiaMART.com offers products that enable small &
medium size businesses generate business leads (online
catalogs/store-fronts), establish their credibility (third party
verified trust profile) and use business information (finance,
Fig.5: IndiaMART’s customer acquisition process news, trade shows, tenders) for their business promotion.

REFERENCES
IX. CONCLUSION OF THE BUSINESS MODEL
[1] http://www.authorstream.com/Presentation/Triggr-1084248-
The company followed a Freemium (free + premium) business IndiaMART-case-study/
model, where it offered certain services for free to the MSMEs [2] http://www.digitalbusinessmodelguru.com/2013/03/how-to-analyze-
and charged for the registration fee for the premium services. business-model.html
This approach helped to build awareness and acceptance [3] http://www.slideshare.net/nayananayana355/ecommerce-
among the MSMEs, especially those who are not willing to assignment?qid=a19a93b6-6ecb-463b-8a17-
a9643efb307c&v=&b=&from_search=15
avail the fee based services without seeing the results. The
[4] https://www.quora.com/Whats-the-best-way-to-analyse-a-business-
free registration on IndiaMART enabled the MSMEs to get an model-of-a-company