India Mart Case

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IndiaMART
R SRINIVASAN, MENAKA RAO AND MAYURAPRIYA MOHANAM

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R Srinivasan, Professor of Corporate Strategy and Policy, Menaka Rao and Mayurapriya Mohanam, prepared this case for class
discussion. This case is not intended to serve as an endorsement, source of primary data, or to show effective or inefficient
handling of decision or business processes.
Copyright © 2015 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or
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without the permission of Indian Institute of Management Bangalore.
This document is authorized for educator review use only by Naveen Pol, MDI Management Development until Jan 2022. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
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Dinesh Agarwal, the founder and CEO of IndiaMART was pondering over a presentation that he had to
make to his board of directors the next day. While discussing about this with his co-founder, Brijesh
Agrawal, he realized that the year 2013–2014 had been good for the company, but they had many
challenges to face as they embarked into 2014–2015. He pulled out a sheet of paper, and began listing
them. First on their mind was the speed of customer acquisition. Their earlier attempts at increasing the
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speed of customer acquisition had only been partially successful, and it was extremely important that this
time it had to be bang on target. Second, there was a need to improve the customer churn rate from the
existing levels of 26% to 20% in the next one year.
Third, they realized the opportunity being created by increasing levels of mobile penetration. It was
important that IndiaMART responded to the opportunity strategically. Numerous challenges confronted
the firm as their clients began using mobile phone as the primary mode of connecting/transacting on the
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internet. Fourth, many new marketplaces were opening up in the Indian small and medium enterprises
(SME) space. For instance, internet-based wholesalers such as Shopclues 1 and electronic retail stores of
established consumer retail brands were opening up the space for highly differentiated competition. Huge
investments were flowing towards B2C businesses (Flipkart, Snapdeal, Myntra, etc.) and Amazon had
announced its intention of setting up an online B2B business in India. Dinesh wondered if IndiaMART
should enter new marketplaces, which ones (if yes), and what new capabilities (such as logistics,
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warehousing, and fulfillment) were required to succeed in those new marketplaces.
With ambitious targets of (i) generating 10 million buying enquiries every month; (ii) expanding
customer base with over 100,000 paying customers; (iii) generating an ARPU (average revenue per user)
of USD 1000; and (iv) securing 33% EBITDA margins; IndiaMART looked to turbocharge the SME
sourcing market in India. There were many questions to answer before Dinesh prepared his presentation
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for the annual board meeting. As the sun settled across the Noida Expressway (on whose side-lanes
IndiaMART corporate office was located), Dinesh realized he had a long evening ahead of him.
ABOUT INDIAMART
Indiamart was India’s largest online B2B marketplace, which helped buyers source products and services
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from SMEs (see Exhibit 1). It provided a “360°-solution” to the SMEs including listing, storefront
creation, certification (TrustSEAL), and access to buyers’ needs (buy-leads – which marked the world’s
first such system of easy sourcing of products) (see Exhibit 2).
As on March 2014, IndiaMART had helped over 1.4 million businesses market their products online with
10 million users using the platform every month. IndiaMART was also making significant investments to
leverage the growth of mobile internet penetration in India, by offering location-specific search, and user
profile-based personalization, for the smartphone users.
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1
For instance, see http://articles.economictimes.indiatimes.com/2014-03-04/news/47894688_1_shopclues-flipkart-orders
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THE ECONOMIC LANDSCAPE BACK IN 1996
The economic reforms initiated by the Government of India in 1991 had started yielding results and the
telecom story had just started. Impact of globalization at the turn of the century had created a demand for
goods from India in the western world, and consequently, exports from India started growing at a rapid
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pace. Internet too made its entry in India, though coupled together with the high cost of PC at that time, it
was mostly expensive, and unreliable as well. The initial penetration was also very low. Internet had
become popular in the western countries by then.
SMEs in India
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The small and medium enterprise sector in India had started growing at an exponential rate and had the
potential to become one of the primary drivers of the Indian economy. India had the second largest
number of SMEs in the world (48 million) in 2012; China superseded India with an additional 2 million. 2
The market of this sector was worth $5 billion at that time, with approximately 8,000 products from 11
million units; 1.3 million SMEs accounted for 40% of India’s total exports in the same year. The sector
also employed approximately 8.11 crore people – 40% of India’s workforce (1 crore = 10 million), and
contributed 17% to India’s GDP. The space was largely dominated by micro scale businesses,
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contributing 95% of the landscape, followed by small-scale businesses with 4.8% and the rest by
medium-scale businesses; 55% of these SMEs were located in urban areas, while the rest were in rural
regions. 3
Export marketing was an expensive proposition – it was difficult and slow. Also, there were limited
options available to SMEs for promoting their businesses at global level. Moreover, the cost of attending
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tradeshows in Europe or the United States was so exorbitant that only large corporations could afford it.
With the evolution of Internet, international buyers increasingly wanted to know more about their
suppliers through the websites, though ordering and transactions were still offline.
Transforming from the pen and paper tradition, Indian SMEs were increasingly adopting technology for
the betterment of their businesses, with increased investments on PCs, internet, and dedicated websites. In
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2013, the commercial PC segment had reached a high of 6.7 million units, with a year on year growth of
15.8% over 2012. India’s PC market grew at 4.8% in 2013; but according to IDC, 2014 looked grim. 4
According to Zinnov, while the overall domestic IT spends were expected to grow at a CAGR of 12% to
reach USD 36 billion by 2015, SMEs would grow at a CAGR of 15% contributing USD 15 billion by
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2
Goyal Malini, SMEs employ close to 40% of India’s workforce, but contribute only 17% of GDP, June 9, 2013,
http://articles.economictimes.indiatimes.com/2013-06-09/news/39834857_1_smes-workforce-small-and-medium-enterprises
3
Website of the MSME ministry, Government of India,
http://msme.gov.in/Accelerating%20Manufacturing%20in%20the%20MSME%20Sector.pdf; and MSME: The opportunity knocks, available on
the internet at http://www.aspeninstitute.org/sites/default/files/content/docs/resources/MSME-
The%20Opportunity%20Knocks%20sharing%20ver.pdf.
4
The Economic Times, February 18, 2014, http://articles.economictimes.indiatimes.com/2014-02-18/news/47451309_1_pc-market-pc-shipment-
pc-sales
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2015. 5 Half a million SMEs in India had their own websites and two million accessed the Internet, four
million used PCs, which was expected to grow at 30% from 2011 to 2015.6
EVOLUTION OF INDIAMART: THE INITIAL YEARS
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Dinesh Agarwal graduated in engineering from India, and was working in the United States for a software
services firm. Sensing the differences in internet penetration between India and the United States, he saw
a great opportunity to develop an internet-based business in India. His initial thoughts were about setting
up an Internet Service Provider (ISP), but back in 1996, India had not opened up ISPs to private
participation.
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While mulling over business options, he realized that a website could deliver great value to SME
exporters by connecting them to buyers in developed economies. A website was an efficient and intuitive
value proposition, even though the penetration of computers and internet had not reached significant
levels in India. Dinesh, therefore, came back and began creating websites for small and medium export-
oriented businesses, and thus was born IndiaMART in April 1996.
It was a good value proposition; he could charge Rs. 50,000–60,000 ($1 = Rs. 62, approx. in March 2015)
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for a 10-page website and Rs.10,000–15,000 for a one-page microsite. At the end of its first year of
operations, IndiaMART had already collected Rs. 6,50,000 and was already breaking even on the
operations front.
The Early Days and Challenges Galore

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It was early days in the business. Dinesh and Brijesh had to don salesmen hats during the day and double
up as tech geeks during the nights, working determinedly all through the initial years. They were quick to
understand that website development alone would not be sufficient to sustain IndiaMART’s premium
positioning. More value definitely had to be added to these websites to ensure that customers continued to
use the services.
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The requirement for Indian products in the Western markets was growing rapidly, but there was a huge
gap in the information availability. The Yellow Pages were not able to keep up with the pace of change in
a country where street names were disorganized and even changed frequently; and telephone penetration
was growing fast, resulting in frequent changes. Even industry associations did not have reliable database
of their members, and tradeshows were not frequent enough to become a regular source of business.
This gave birth to IndiaMART.com – The Online Directory during the period. It was imperative that
IndiaMART create a platform that included a searchable online directory of exporters from India.
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Sourcing of data for creating this directory was a challenge, and IndiaMART had to piece together data on
5
Zinnov, A globalization and market expansion advisory firm in a study titled ‘SMB sector contributes more than one third of overall domestic IT
spend by 2015: available on the internet at http://zinnov.com/event.php?ev_id=93
6
Biztech, February 10, 2012, http://www.firstbiz.com/biztech/smes-to-contribute-more-than-a-third-of-indian-it-spend-by-2015-14108.html
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these companies from various sources including export promotion houses, tradeshows, as well as
members’ directories of industry associations.
As most Indian export promotion organizations were not tech savvy, within a short span from its launch,
IndiaMART became popular. Many buyers considered IndiaMART as a Government of India initiative,
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similar to the business promotion organizations in China, Korea, and Taiwan. Mention this and it brings a
smile on Dinesh’s face; he recalls how a buyer had written a ‘‘thank you’’ note to him, assuming that
IndiaMART was a Government of India organization.
Although the directory was getting developed, Dinesh could sense that search engines were bound to
become important. Thus, much before the term SEO (search engine optimization) was coined, he worked
diligently to put in place a team, especially meant to optimize websites based on search engine guidelines.
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All client websites created by IndiaMART started carrying the logo of IndiaMART at the bottom of their
webpage, with a link to the relevant category page at the IndiaMART website. This (the number of links
that led to the category page) significantly improved the page-rank for IndiaMART in the Google search
algorithm. With higher page-ranks, the IndiaMART category pages were sometimes ahead of any of the
supplier pages, while searching for a product/service on Google. This high page-rank enabled
IndiaMART to expand its reach to buyers looking to source products from India, without any significant
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advertisement/promotion effort.
For IndiaMART, the two biggest challenges of that period were – low internet penetration and lack of
credible source of information related to small and medium businesses. Dinesh and Brijesh, however,
were convinced that in times to come, internet would bring in true convergence, and if he could find an
interim solution to these problems, IndiaMART would gain a great first mover advantage.
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This belief led to the first set of innovations from IndiaMART – The Free Listing and The Free Enquiry
Forwarding, as Dinesh coined these terms. He designed a free listing form and started distributing it
across – in trade fairs, etc. He also sent “return postage paid” envelops with these forms to businesses
listed in different Yellow Pages. Those who filled the form and sent it back were rewarded with a free
listing in the online directory. IndiaMART received many enquiries for businesses which did not have
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internet access. Enquiries were printed and forwarded via fax and snail mail – again, absolutely free of
cost.
The strategy started yielding results, as all businesses which received these free enquiries expressed
interest in having an online presence, and over the period of time, many of these became IndiaMART’s
paying customers.
During this time, while Dinesh and Brijesh were busy building and developing IndiaMART, Jack Ma was
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busy establishing Alibaba; it was his second attempt after the failure of China Pages.
From India’s perspective, two events had greatly fired the imaginations of people. In December 1997,
Sabeer Bhatia sold Hotmail to Microsoft for an eye popping $400 million, and Rajesh Jain sold India
world to Satyam Info way for Rs. 499 crore ($1 = Rs. 62, in March 2015). Much hype was being created
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by the media around internet and the business opportunities it could provide. By 1999, several VC-funded
projects were launched, following these two mega deals.
Dinesh’s team also followed the trend, and launched several B2C-oriented initiatives. During that period,
business plans were considered to be more important than content and traffic. Dinesh, however, stayed
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focused on his original belief and never scaled down his dream.
Interestingly, by then, Jack Ma had raised a funding of $100 million and started advertising Alibaba.com
on television in the United States. China had already emerged as the global hub for manufacturing
outsourcing.
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THE DOTCOM BUST AND LIFE AFTER Y2K
The late euphoria of capital inflow into dotcom firms towards the end of 1999 led to a financial bubble.
All dotcom firms, which did not have sound monetization plans, had to shut down their operations. A
large number of engineers working on re-engineering projects related to Y2K preparedness, suddenly
found themselves out of employment. This led to what is now known as the great dotcom bust. In quick
succession, followed the 9/11 terror strikes on the United States, along with a long war in the Middle-
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East, resulting in a global meltdown.
By the turn of the millennium, three trends were clearly visible in the marketplace for IndiaMART’s
services. First, it became clear that internet was there to stay. Internet penetration in India had increased,
leading to increased demand for website creation and hosting, albeit at low value owing to commoditizing
of website design by a host of desktop publishing (DTP) service providers. This resulted in increased
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volumes of work at higher costs and lower margins.
Second, IndiaMART’s focus on the export market made it vulnerable to the changes in the global market;
the global meltdown resulted in as much as 40% reduction in export volumes from India, significantly
hurting the business of the company.
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Third, as Information Technology (IT) and IT Enabled Services (ITES) industries in India grew in
volumes, with the growth of onsite-offshore models as well as offshore subsidiaries of MNCs investing in
India, attrition of trained manpower began to increase.
IndiaMART used the slack time created by the slump in sales to tighten their processes, improve cost
consciousness and focus on new customer acquisitions.
All this while, IndiaMART operated from a small office on the third floor of an unauthorized market
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located in Madhu Vihar, a suburb of Delhi. Dinesh reminisces:
Yes, the meltdown depressed us and we were pinched by the dropping margins because
of commoditizing of website design. Yes, we would do many things differently if we
were to do them again. On a second thought – may be not!
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Dinesh loved working against the odds. Throughout the meltdown, he did run a tight ship; being frugal
paid dividends. One fine day, a team from Business World, a leading business magazine of India, walked
through the doors of IndiaMART’s tiny office – they were conducting a survey on dotcoms that survived
the bust, and were in for a pleasant surprise after viewing the company’s financial statements. They had
unexpectedly run into a business that not only survived, but was also making profits. How could this be
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possible? They published a story with Dinesh’s photo on the cover page, making him a celebrity
overnight. Dinesh, too, was surprised to find out that IndiaMART was the only profitable company at that
point of time. It was a big turning point in his career, as he confessed. From there on, there was no
looking back for him.
With renewed vigor, he made plans and started expanding IndiaMART’s business through this turbulent
time. Unfortunately, he had to suppress his dream of pursuing MBA (he had enrolled himself with a
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business school in Delhi). In 2001, IndiaMART had around 1,000 paying customers; Dinesh and Brijesh
took upon themselves an ambitious 10× growth target in 5 years – to reach 10,000 customers and expand
to 5,000 product categories by 2006 was the aim.
Just before the 9/11 terror attack in the United States, IndiaMART acquired a new office in NOIDA in
2001 and shifted its operations there. Through the lean period of sales (2001–2003), IndiaMART began
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expanding its customer base beyond India’s National Capital Region (Delhi and its suburbs). As
IndiaMART’s footprint expanded and customers realized increased order flows through the
indiamart.com website, there was a continued renewal of their subscriptions. In contrast to many
“dotcom” companies of that era, IndiaMART explicitly focused on building its revenue through
subscriptions (acquiring new paid customers as well as encouraging existing customers to renew their
subscriptions), rather than worrying about number of page visits (or “eyeballs”) or enterprise valuation.
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Throughout this period of customer expansion, IndiaMART did not adopt an advertising or promotion
route. Dinesh said:
Google’s page-rank algorithm ensured that we were always on top of any search results.
We did not need any advertising. Google Search did all the advertising for us.
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Amidst this stretched period of slowdown, IndiaMART service pricing came under stress and it had to
reduce the prices to an all-time low of Rs. 5,000/- for one year subscription. As the customer base started
to grow, Trade Offers – a business classifieds service was added to IndiaMART’s range of offerings.
Anticipating the fact that buyers would prefer products over companies, the team had already started
working towards transforming the online company’s directory to a giant catalog of products.
IndiaMART’s value proposition, partly driven by search engine favoritism, ensured that it continued to
grow at around 30% CAGR, while other companies around it were shrinking.
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All through this period, IndiaMART continued to invest in Free Listing and Free Enquiry Forwarding.
Many registrations had started to come to IndiaMART organically.
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CHANGING LANDSCAPE: 2004-2007
As the global economy rebounded from the slump it hit on the aftermath of the dotcom bust and the 9/11
terror strikes, business boomed at IndiaMART. Outsourcing as a concept gained prominence and
suppliers from emerging economies such as India and China were sought after. The domestic market was
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also growing significantly.
Between 2003 and 2006, volume of Indian (non-IT) exports grew from Rs. 2,933 billion to Rs. 4,564
billion at a CAGR of 16%. 7 When international buyers looked for Indian suppliers, IndiaMART had a
ready online searchable business directory that could be used to identify sourcing options, owing to over 8
years of painstaking effort.
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For IndiaMART, it was new client acquisition led growth. It started expanding its footprint across India
and had opened offices in major metro cities. By 2006, IndiaMART had achieved its target of 10,000
paying customers. The subscription price, however, could be raised only to Rs. 9,000, from Rs. 5,000 in
2003. As a result, despite achieving 10× growth in the number of customers, the revenue grew only to Rs.
18 crores. Though it had a healthy 33% EBITDA, the Average Revenue per User (ARPU) remained very
small. Maintaining the focus on acquiring new customers, Dinesh and Brijesh decided that IndiaMART
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should also target improving its ARPU from Rs. 18,000 (in 2006) to USD 1,000 (or Rs. 45,000) by 2009–
2010.
With a large number of listings, the marketplace that the duo had dreamt of seemed to come alive. For
almost a decade, the value proposition of IndiaMART was linked to the search engine friendly websites
that it developed – but within a span of couple of years, it changed dramatically. By 2007, indiamart.com
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– the marketplace had started to deliver 80% value – only 20% enquiries were generated by the
customer’s own website.
As the marketplace started to grow in numbers, witnessing an increase in both, paying customers, and
free-listed customers, it created an opportunity for a premium listing service, and within a short span of its
launch, it turned out to be a highly profitable source of revenue.
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The year 2006 was the prime period for online classifieds business. Several companies in this space raised
venture capital. Naukri.com became India’s first online company to be listed – a debut with a bumper
IPO. Sensing the need for branding in order to stay ahead of the competition, IndiaMART raised Rs. 15
crore in 2006 in form of ad equity from the Bennett Coleman Company Limited (BCCL). BCCL
controlled a large share of popular media including leading dailies, The Economic Times and The Times of
India.
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The marketplace was seeing a significant growth, when Dinesh sensed the need for a service that could
help buyers in selecting suppliers. There were a few companies in the business of issuing certification –
however, these self-professed contractors of trust certification hardly added any value, in exchange for the
7
Source : Directorate General of Commercial Intelligence (DGCI) website: dgciskol.gov.in/annualreport/book_3e.pdf
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hefty premium they charged. Their certification was limited to a simple telephonic verification of a few
facts.
IndiaMART needed something more substantial, and during one of the brainstorming sessions with his
team, Dinesh and Brijesh found out the solution – The “Indian Red Tape”, the best tool for establishing
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the trust profile. If one had to do business in India, it required several registrations and certifications (it
still does). Further, there could be no better proof of authenticity, than a collection of these certificates.
IndiaMART then designed a unique score card, which was based on the availability of the documents
such as company’s registration certificate, partnership deed, PAN (Permanent Account Number), Import
Export Code (IEC), Registration with Shops and Establishment Act, PF/ESI Registration and many such
similar documents. If a business scored the minimum qualifying score on this formula, it was eligible for
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IndiaMART’s TrustSEAL. IndiaMART launched TrustSEAL in partnership with the country’s premier
credit rating agency, CRISIL. However, unlike other rating agencies, it was priced at less than one-fifth of
the prevailing market price at that time.
THE COMPETITION
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IndiaMART’s biggest and nearest competitor was Alibaba.com a China-based e-commerce company,
founded by Jack Ma a former English teacher and 18 others in 1999. Other competitors included Justdial,
TradeIndia, globalsources.com, and thomasnet.com, among many others.
Although all of them offered lead generation and were matchmaking platforms bringing buyers and
sellers together, each of them had a different focus. IndiaMART for instance, focused on its suppliers’
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directory, whereas Alibaba focused on products, TradeIndia on print media and Justdial on telephone
services. Though these online trading companies served the SME market to a certain extent, they were
present across markets, and sometimes even their listings overlapped.
According to a report by the Federation of Indian Export Organizations (FIEO), exports through the e-
commerce route had grown over 400% to $1.4 billion from 2010 to 2012. 8 According to Forrester
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Research Inc., a market research firm, e-commerce sales in 2013 were estimated at about $1.6 billion. 9
However, exports declined 1.76% to $300.6 billion in 2012–2013.10. According to Ernst & Young, India's
B2B market in 2011 stood at just US$50.37 million, a fraction of a small but rapidly growing domestic e-
commerce market of US$10 billion. 11 As various models evolved and coexisted, the B2B opportunity in
India began to attract attention from many players.
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8
Hans P Pritam, Be A Global Merchant, Money Today, June 2012, http://businesstoday.intoday.in/story/indian-exporters-take-benefits-of-online-
shopping-business/1/184740.html
9
Brohan Mark, India’s online retail market could double in size, January 11, 2013, http://www.internetretailer.com/2013/01/11/indias-online-
retail-market-could-double-size
10
Source: Zee News, April 18, 2013: http://zeenews.india.com/business/news/economy/exports-up-6-9-in-mar-declines-1-7-in-2012-
13_74402.html
11
Chowdhury Roy Debasish, Making a mark, South China Morning Post, November 19, 2013, http://www.scmp.com/business/china-
business/article/1360072/small-indian-business-alibaba-opens-door-world
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Alibaba Group
The Alibaba Group, China's leading B2B e-commerce company, was started to cater to small businesses.
The group’s major businesses included Taobao Marketplace – an online shopping site, Tmall.com a
platform for online shopping for top-quality international and Chinese branded merchandise, Juhuasuan –
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a buying platform, 1688 a wholesale marketplace for domestic China trade among small businesses,
AliExpress – an e-marketplace for global consumers, Alibaba.com – a global wholesale platform for
small businesses, Alibaba Cloud Computing for developing platforms for cloud computing and data
management, and Alipay to facilitate online and mobile payment solutions in China.
Alibaba issued its maiden IPO in 2007 at a valuation of US$10 billion, which grew past US$ 17 billion
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within no time. Immediately after its IPO, Alibaba opened offices in India and started marketing its
services to Indian exporters. Later, it partnered with Mumbai-based yellow pages services company,
Infomedia India.
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 most of their accounts.
Alibaba.com had local offices in Mumbai, Delhi, Chennai, Bangalore, and Ahmedabad. Comparing the
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Indian market with its major competitors, Khalid Isar, the Country General Manager of Alibaba.com
India, said:
India is a unique market as the characteristics of Indian SMEs are very different to
Chinese counterparts. For instance, what may work well for a supplier in India, with local
buyers, may not work with a buyer in China, as cultural, technological and socio-
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economic factors have an impact on local businesses. Indian businesses on the

Alibaba.com platform also differ from other markets as they have a language advantage.
This allows them to respond to inquiries in a timely and efficient manner while reducing
language-barrier issues. 12
Alibaba.com’s unaudited financial profits for March 31, 2012 were USD53.8 million, with a total of 79.8
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million registered users, 10.3 million storefronts, and 753,955 paying members. 13
Justdial
A search service provider with a database of listings across categories was founded by VSS Mani. The
company started offering local search services in 1996 under the Justdial brand, and became a dotcom
company in 2007. It was the first mover in this space in India.
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In 2013, Justdial had a database of approximately 9.1 million listings, of which 2.39 lakh listings were
paid campaigns. It addressed 364 million search requests across multiple platforms such as the internet,
12
Sabharwal Punita, Enablers accelerating SME Growth, Entrepreneur India.com Dec 2012, available on the Internet at
http://www.entrepreneurindia.com/magazine/2012/december/Enablers-Accelerating-SME-Growth_4-1-2/
13
Source: http://www.bloomberg.com/bb/newsarchive/aSfJlwAZaZSU.html
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mobile internet, over the telephone (voice) and text (SMS), with 68% of the search requests from the
internet. The business model was to offer a dial-in number which was an operator-assisted, hot line
accessible, 24/7 with multilingual support. Business owners had the option of listing their business on the
database for free and if they wanted priority in listing or prominence, Justdial charged a fee. Justdial was
listed on the Bombay Stock Exchange in 2013. In the first quarter of 2014, Justdial’s revenues grew 28.3
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% over the same period in 2012–2013 to around Rs. 271 crore, while its net profit rose 82.2 % to Rs. 57
crore. The organization achieved a market capitalization of Rs. 12,430 crores and was ranked 99th among
the 100 most valuable companies of India in 2014. 14 In the same year, Justdial initiated a ‘‘Search Plus’’
service for users, in order to transition from being a provider of local search and related information to
being an enabler of such transactions. Justdial had its registered and corporate offices based in Mumbai,
with branches in Ahmedabad, Bengaluru, Chandigarh, Chennai, Coimbatore, Delhi, Hyderabad, Jaipur,
Kolkata, and Pune.
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Tradeindia.com
Tradeindia, headquartered in New Delhi, with pan-India operations was maintained and promoted by
Infocom Network Ltd., and conceptualized in 1996. The business model was to take the offline Yellow
Pages model online.
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Tradeindia received an average of 20.5 million hits per month. In 2013, the platform had a database of
27,44,394 registered users. 15 Tradeindia’s revenues were earned from listings which ran into several lakhs
with charges ranging from Rs. 3,000–13,000 annually.
Global Sources Ltd.

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It was a Hong-Kong based business-to-business media company that provided information and integrated
marketing services, with a particular focus on the Greater China market. The company, together with its
subsidiaries, provides services that allowed global buyers to identify suppliers and products, and enabled
suppliers to market their products to a number of buyers. It operated in three segments: online and other
media services, exhibitions and other segments.
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Thomasnet.com
It was an information and technology company that connected manufacturing and industrial buyers and
sellers. The platform included a news section which covered product news, information, business trends,
and analysis.
Some platforms also catered to niche products or services such as the e-commerce Kolkata-based
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Mjunction Services, which managed Metaljunction, the world's largest online marketplace for steel and
allied products. The MetalJunction portal, the largest e-marketplace for steel in the world, was a 50:50
14
Business Standard, January 22, 2014: http://cms.justdial.com/press-releases/Business-Standard/Just-Dial-hits-new-high--joins-club-of-100-
most-valuable-companies-(Business-Standard)/id-942
15
See: http://www.tradeindia.com/AboutUs/mission_goal.html
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online steel sales and procurement joint venture between SAIL and Tata Steel, and followed a transaction-
led model. It had sold over 4 million tonnes of steel for its clients at an average rate of 150,000 tonnes per
month. Its over 5,400 strong buyer community comprised traders, fabricators, re-rollers, and end-users. 16
2007–2010: DOMESTIC FOCUS AND RAPID GROWTH
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2007–2010 was an interesting phase in the evolution of internet-based businesses in India, as well as
IndiaMART’s growth strategy. Indian currency had appreciated significantly against US$ and reached Rs.
38 for 1 US$, severely impacting the export from India. This was followed by the global financial
meltdown in 2008 – arguably the worst economic crisis since the Great Depression of the 1930s. India
was no exception, and the rules of the game changed dramatically.
yo
A customer base of over 10,000 posed a fresh set of problems for IndiaMART. High dependence on low-
skilled manpower led to increasing number of errors in customer catalogs, resulting in an increase in
customer churn; while higher inflation was pushing the costs up.
The meltdown took Dinesh back to the era of 2001, albeit with one difference – now, there was money in
the bank, and a competent team in place to execute. Dinesh started doing what he did best – re-
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engineering processes to improve efficiencies and protect its operating margins.
IndiaMART decided to increase the subscription price and also launched the scheme, wherein customers
could pay for 2 years and the subscription for the third year was absolutely free of cost. Three-year lock-
in helped in reducing customer churn. Premium listing also contributed towards improving the ARPU.
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To reduce human errors, template-based mini-dynamic catalog was launched. It replaced the custom-
made microsite, and the subscription price was increased from Rs. 9,000. to Rs. 15,000.
From a customer’s perspective also, it was a good move, as the single page microsite was upgraded to a
five-page dynamic catalog with many features. Templates led to elimination of errors and reduced
dependence on low skilled design team – there was a significant increase in the quality of catalogs. All
No
these changes gave a great boost to the overall sales performance of the company.
During the same period, search engines, Google in particular, realized that people searching through the
internet preferred to see local results and therefore, modified it and made it locally relevant. This implied
that search results would prioritize links to pages that were in the same geography as the user. For
IndiaMART, it meant that their appearance in the international search results (made by prospective
buyers) would be lower than before. For instance, if one searched for “pencil suppliers” from a PC in
Mountain View, CA, the top ranked results would include suppliers from that geography, rather than a
Do
global listing of suppliers (including the IndiaMART 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.
16
See: http://www.metaljunction.com/misc/aboutus#sthash.bUiOV0JN.dpuf
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Two developments took place at IndiaMART. With the rapidly increasing domestic adoption,
IndiaMART started to shift its focus from international business to domestic business. The shift meant
that another round of product innovation was required. Dinesh instructed his team to meet customers to
gauge their reaction to the slump in export business. As anticipated, the feedback was clear that the
exporters who were earlier averse to domestic orders had started catering to local clientele, despite the
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reduction in margins. There was a huge business opportunity amidst this crisis – domestic focus meant
rapid growth in the market size; possibility of building an online business community in a highly
fragmented domestic B2B marketing segment started to look much more appealing than the international
business.
Dinesh and Brijesh decided to raise capital and invest in products with an aim to establish its leadership
position in the domestic market. IndiaMART raised US $10 million from Intel Capital in 2008.
yo
Although the revised business strategy was being formulated, IndiaMART had already started re-
modelling the online directory behind the scenes. In fact, the process was initiated long time back – to
transform indiamart.com from a company directory into a giant product catalog.
Until then, IndiaMART offered only a two-liner business description to free listed companies, and its
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product catalog was derived from its paying customers. Dinesh decided to offer a full-featured business
catalog to all free-listed companies as well – and suddenly the product catalog started to grow in leaps and
bounds. The sales team evaluated on a regular basis if clients benefitted from the domestic focus.
The move helped IndiaMART to retain its preferred positioning in Google, as even with its changed
algorithm, Google continued to find high quality content to show to its users. Google’s locally relevant
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searches helped IndiaMART garner a huge share of domestic B2B trade.
Investments made by BCCL in 2006 and Intel Capital in 2008, significantly aided the growth intent.
Following these investments, IndiaMART formed a professional board constituting independent directors,
including well-respected business leaders such as Sarayu Srinivasan (Intel Capital), Nachiket Mor
(ICICI), Deep Kalra (MakeMyTrip.com), and P N Vijay (Investment Advisory). This reconstituted board
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helped IndiaMART significantly in disciplined financial reporting.
Increased internet awareness and its usage as a marketing tool implied that many SMEs were using
IndiaMART as their chief source of buy-leads. More and more SMEs who used free listings as a trial
converted into paid subscribers on the IndiaMART platform, resulting in IndiaMART achieving around
US$ 750 ARPU in 2009.
By 2010, IndiaMART consisted of 14,000 paying subscribers and had achieved its ARPU target of
Do
US$1000 per paying customer. The annual cash collection topped Rs. 61 crore. This was achieved partly
by increasing the subscription pricing, and partly from premium listing solutions.
Dinesh presented an aggressive plan to the IndiaMART Board, a plan which was based on rapid customer
acquisition. It was an audacious move, after staying profitable for 12 consecutive years; IndiaMART was
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now prepared to tread the path of high cash burn. The revised aim was to grow to 1 million listed
businesses and 100,000 paying customers.
By 2010, after strongly trying to gain market-share for 2 years, Alibaba, IndiaMART’s closest and biggest
competitor, had started to reduce its focus on the Indian market. It was clear that it aimed at only those
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companies which were focusing on exports from India – apparently it did not show any intent of serving
India’s domestic B2B firms. IndiaMART’s “do-it-for-me” approach, as against “do-it-yourselves”
approach of Alibaba, coupled with the large differences in internet adoption within Indian and Chinese
SMEs, turned out to be the biggest roadblocks in Alibaba’s path.
2010–2012: RAMPANT CUSTOMER ACQUISITION
yo
By 2010, the internet penetration and usage landscape in India had changed significantly. MakeMyTrip,
one of the leading online travel agencies, had created history by listing on Nasdaq with a bumper IPO.
There was a renewed faith of investors in online businesses. Several online ventures had received an
initial round of funding, and had also started advertising heavily in the traditional media to create
awareness about their businesses.
op
IndiaMART embarked on an ambitious customer acquisition target of 100,000 SME subscribers. Sales
closures were monitored by the week (as opposed to by the month, which was the norm until 2008).
Further, in order to accelerate their customer acquisition efforts, IndiaMART opened offices at the rate of
one per week – at times, several within the same city. In just the year 2010, IndiaMART opened 52
offices in 52 weeks – the idea was to ensure that a sales person officer (commonly referred to as “Feet on
the Street”) should not travel more than 30 minutes to meet a customer. Attractive incentive plans were
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offered to motivate the sales team to go out and bring in more customers. With burgeoning number of
sales officers, IndiaMART acquired about 21,000 new customers in 2010 and another 28,000 customers
in 2011. The size of the domestic business increased to 80% of IndiaMART’s volumes owing to these
rampant customer acquisitions. Within a span of 2 years, the rate of customer acquisition had climbed to
2,500 customers a month, from around 400 customers a month. IndiaMART had spent Rs. 40 crore in a
year towards branding and customer acquisition process.
No
During this period, IndiaMART also re-located its corporate office to a larger and far-superior facility on
Noida-Greater Noida Expressway.
The growth in customer acquisition, however, brought with it a variety of problems. It exposed chinks in
the organizational processes that were designed to support a lower growth, resulting in the acquisition of
non-relevant customers – essentially the ones who could not have benefited from the IndiaMART
platform.
Do
A significant number of these suppliers did not present good quality content (about themselves, and their
products and services) on the platform, which reinforced the poor response they received from their
customers through the IndiaMART platform. Part of the problem was attributed to the production
department, which was responsible for working in partnership with the suppliers to ensure high quality
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content on the supplier pages. Perhaps, they were not able to manage such a rapid customer acquisition.
This poor quality of information about the suppliers resulted in increased search costs for the buyers,
resulting in lower business provided to these newly acquired suppliers. Consequently, these new suppliers
either did not receive sufficient business to warrant continuation of the subscription, or received poor
quality requirements (that did not match their product portfolio). The first year churn rate (number of
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customers discontinuing their subscriptions at the end of the first year) reached record high levels. The
sullying of the supplier pool also manifested in the lowered ARPU, which reduced from US$742 per
month in 2009 to US$500 per month in 2011.
This coincided with the period when e-commerce businesses were rapidly gaining ground in India –
companies such as Snapdeal, Flipkart, Myntra, Jabong, etc. had raised large sums of capital and were
investing in building their online platforms. India remained a high-inflation economy, pushing the cost of
yo
people, operations, and infrastructure.
Also, until 2012, most transactions originating via IndiaMART concluded outside it. Buyers would call
the suppliers directly through the contact details provided on the site and given that the call came from an
unknown number, it could not be tracked, resulting that several suppliers would either not pick up the call
or their response would be delayed. It was also not possible for IndiaMART to track the responsiveness of
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their suppliers, after the initial contact between the buyer and the supplier was made. For instance, a
supplier might agree to email the buyer his product brochure during the telephonic conversation, but
might either forget to do so, or do so only after a significant delay.
Hence, IndiaMART launched the “preferred number service” (PNS) in 2012 for buyers to connect with
the suppliers. The feature is similar to Google Voice, used in the United States. PNS service provided
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several bundled advantages. Whenever a buyer called on the supplier’s number (listed on the IndiaMART
website), the call would be received from a single number (+91-11-71997199). In this way, the supplier
could immediately understand that the particular call was from an IndiaMART buyer trying to reach them
for business, so that they could respond appropriately. These PNS calls could also be routed to multiple
phones in the supplier organization (for instance, multiple partners or at the office landline and the
managers’ mobile phones) to ensure higher response rates. All calls, including missed calls could be
No
tracked – a huge value for SMEs considering they did not have any organized customer relationship
management (CRM) applications. The process helped IndiaMART to track and evaluate the
responsiveness of the suppliers to the queries received through their platform. The suppliers who were
consistently non-responsive were downgraded (high proportion of missed calls/significant delay in
responding/response after multiple calls) in their search results, regardless of the package chosen by them
or the relevance of their products/services in the buyer’s search. Also, there was a reduction in
spam/telemarketers, as the PNS service was able to identify and block these calls. PNS was then
implemented for all the clients, though it was originally designed only for the premium ones. The
Do
investment was justified.
By March 2012, IndiaMART’s customer base had increased to 48,000 from 14,000 in March 2010.
However, the customer churn rate had reached the same level as their new customer acquisition rate, and
the target of 100,000 paying customers started to appear as a tough task.
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2013-14: THE TURNING POINT
Inadequately equipped processes and team, high cash burn, and high customer churn – diminished value
delivery. Above all, owing to crowding of non-serious suppliers on the platform, the buying experience
was being impacted – most of the performance indicators were signaling caution/bad times ahead.
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IndiaMART’s leadership needed solutions for managing the influx of large number of customers. One of
the obvious problems was the lack of management bandwidth and expertise. The team was inadequately
equipped to handle this large volume of business. Until then, IndiaMART had relied on internally
equipped resources, as it used to hire fresh candidates out of college and then develop these resources
over the period of time to take on higher responsibilities. This strength became IndiaMART’s weakness –
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it needed more talent – and lateral hiring was the only recourse. IndiaMART started looking out for
people to join them at mid and senior levels of management.
The cash burn had reached above Rs. 4 crore a month, but Dinesh was not very worried about the high
burn rate, it was one area that he was familiar with and was confident about bringing it under control
within 3–6 months. However, a multi-pronged approach was needed. Rationalizing the sales setup,
including the number of offices, size and span of the sales team and support infrastructure was the first
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step in this direction. The team that had increased to over 5,000 employees was brought down to about
3,000. Dinesh managed to control the cash burn within two quarters.
IndiaMART began weeding out the flippant sellers actively. In order to ensure that wrong customers are
not acquired, a negative list of businesses was prepared. Businesses and service providers with hyper-
local focus were added to this list and IndiaMART started to refuse paid listing to these customers (see
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Exhibit 5).
IndiaMART introduced a four-category classification system to rank the supplier content (see Exhibits 6
and 7), and serve as a guide for the production team to call the suppliers and seek specific content.
Changes were made in the order booking process. In order to ensure right commitments to the customer,
pre-printed proforma invoices were introduced and an order verification process (OVP) was set up. The
No
OVP team ensured that the customer’s expectations were set correctly. However, in spite of these efforts,
if the quality of content did not improve within a specified period after customer acquisition, owing to the
suppliers’ unwillingness to provide additional data or they were simply non-responsive, they were pulled
out of the system and the money collected from them was even refunded completely (see Exhibit 8).
A series of product innovations was implemented in quick succession to improve the value delivery to
suppliers. Until then, IndiaMART used to impose a limit on the number of products that a paying member
could showcase in its catalog. IndiaMART removed the cap on number of products. It was raised to 400
Do
(virtually unlimited) for SMEs. This enhanced the value proposition of the catalog, especially for the
customer, and also gave a big fillip to the marketplace.
A surprise benefit of the PNS service emerged in the form of buyer success ratio – IndiaMART was able
to track and measure the calls that were being answered, and also started educating its customers on the
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importance of attending these calls – which was later linked to their position in listing on marketplace,
compelling most of its members to start taking IndiaMART buyer’s calls.
IndiaMART’s platform, by this time, had aggregated over 1 million suppliers and 10 million products.
Buyers had to patiently wade through a sea of suppliers and ferret out the ones relevant to them. Dinesh
rP
wanted to simplify the use of the platform and conducted several idea-generation sessions, along with
studies of other similar platforms in different countries. One of the most prevalent concepts at that time
was offering easy-to-use filters to the buyers, using which they could refine their search on the platform.
However, Dinesh believed that such features only make the platform complex, and their usage turns the
customers away from it. He believed in keeping the UI/UX simple.
He started thinking – how could IndiaMART assist buyers in fulfilling their request for quotes, expression
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of interest, tenders, invitation to bid – or simply speaking, their buying needs? The buyers’ marketplace
emerged as the solution.
IndiaMART started encouraging buyers to share/post their buying needs. A team was appointed to call
back the buyer, immediately after posting the requirements to discuss the same in detail. The content was
then moderated and published as a buy-lead on the buyer’s marketplace. Anyone could view the full
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requirement, except the contact details of the buyer.
Thus, was born IndiaMART’s award winning “Buy-Lead” (BL) product that allowed interested suppliers
to respond with their quotes and offers. It was not only simple and effective, but also a unique “pay per
seen lead” concept. There are several pay per lead models effective globally, however all these models are
known to generate “Blind Leads”, that is, one is aware about the requirements only after the lead lands in
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your mailbox. BL emerged as a unique pay-as-you-go offering and rapidly started gaining popularity.
With every BL package, few monthly credits were provided. The product won a prestigious award for
innovative concept and execution.
The service was absolutely free for buyers, whereas suppliers had to pay a nominal fee per lead for the
introduction. Suppliers earned some credits during their initial sign-up, and could subsequently buy them
No
off the site. The price (credits) for access to the buy-leads was initially variable, but was soon
standardized as Rs. 200 per lead, an amount that remained unchanged until February 2014. Soon after its
introduction, there were over 100,000 active buying requirements on the IndiaMART platform.
With the formation of the buyer marketplace, IndiaMART provided the sellers on the platform an
opportunity to source material for their products their website. For instance, a coat manufacturer could
register at IndiaMART as a supplier and respond to buyer enquiries; at the same time, he could source
threads and buttons for manufacturing his coats through IndiaMART. Without active encouragement, by
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2013, nearly 25% of the sellers on the site also bought through IndiaMART. A key target that the
company hoped to achieve was to engage with 51% of sellers on their platform as buyers as well.
As of 2013, the website of IndiaMART supported about 40,000 suppliers with an ARPU of US$ 503. Its
revenues primarily stemmed from subscription to list on its online directory of suppliers stood at Rs.127
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crores (in March 2013), up from Rs. 36 crores in 2010 (a CAGR of 52%). Owing to heavy spending on
infrastructure and people, IndiaMART suffered a loss of Rs. 8.8 crores for the year ending March 2013
(see Exhibit 9). In the meantime, IndiaMART’s employee count also grew from 1,412 employees in
March 2010 to 2,689 employees in March 2013 (this occured after the rationalization and trimming of
rampant customer acquisition spree) bringing with it a rising employee cost (see Table 2).
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To address customer responsiveness, IndiaMART also launched its toll-free number and encouraged
customers to raise their concerns, which were recorded in the form of tickets. Customer
grievances/concern resolution became the new mantra for the entire servicing team. Repeat complaints
were considered very seriously. The servicing team was instructed to conduct a complete 360° review of
customer’s catalog, whenever a ticket was raised.
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Several similarities could be drawn between the years 2001 and 2013 – however, this time, one key
difference emerged. In 2001, Dinesh and Brijesh were single-handedly managing multiple roles, whereas
in 2013, Dinesh had placed a strong leadership team which was empowered to experiment and execute
ideas during the course correction. Results were evident as the users of IndiaMART platform expressed
their satisfaction. There were huge gains in visits to enquiries/buy-leads ratio. The returns on investment
to the paid members increased significantly, capitalizing on the platform success matrices.
op
Customer churn had improved, the sales team started exhibiting greater vigor, and there was a sense of
urgency among all. At the same time, several e-commerce companies (Snapdeal, Flipkart, and many
more) were receiving huge VC funds. After its successful IPO, Justdial flush with funds, started spreading
its presence beyond tier-2 cities. Dinesh could foresee several challenges ahead; however, the immediate
need was to improve its customer acquisition rate and set the organization back on track to achieve the
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target of 100,000 paying customers.
2014 AND THE WAY AHEAD
As on February 2014, IndiaMART had a pan-Indian presence with total 60 offices and over 2,800
employees. Its website attracted 10 million visitors per month and IndiaMART had over 49,000 paid
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subscribers and 3.5 million registered customers, including 1.5 million active suppliers catering to over 10
million buyers. It earned its revenue through four major sources: cataloging services and subscriptions
from suppliers; premium listings of suppliers, charges for accessing buy-leads posted by buyers, and
advertising.
With the clear shift in user behaviors where people were becoming increasingly comfortable with
shopping online, Dinesh and Brijesh decided that it was the right time for them to make the most of the
opportunity. They agreed that one of them had to focus on this exclusively and build this business from
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scratch. Brijesh took this challenge and began giving shape to this idea of bringing consumer shopping
experience to business buyers. This marked the birth of Tolexo – an online ecommerce platform for
buying business supplies and consumables.
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Within 5 months of Brijesh giving a concrete shape to the idea, Tolexo had built India’s largest collection
of consumables and supplies for businesses. As of July 2014, Tolexo hosted over 150 product brands in
six broad categories – safety, security, fasteners, hand tools, power tools, and cutting tools. Dinesh and
Brijesh believed that Tolexo would help IndiaMART’s value grow by about 100× in the next 3 years.
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As IndiaMART entered the financial year 2014–2015, it faced a number of challenges.
The Mobile Opportunity
As IndiaMART looked to the future, the screen size had shifted – from the eras of desktops and laptops to
mobiles and tablets. With mobile (smartphone) subscriptions in India growing to 67 million by 2013 (a
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52% year-on-year growth) and still accounting only 6% of total mobile subscriptions, this was a channel
that promised to increase engagement with IndiaMART exponentially (see Table 3). As early as 2012,
22–25% of the traffic to the indiamart.com site was received from mobiles.
In accordance with this shift, the company launched m.indiamart.com – a mobile site optimized to enable
transactions previously held on the IndiaMART.com website in 2013. It also launched an Android App on
Google Play. Buyers could now peruse the seller listings and contact sellers using their tablets and mobile
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phones. Similarly, sellers could peruse Buy-Leads, upload their catalogs, make changes to the product
description and profile information, buy ‘‘Buy-Leads’’, upgrade packages, and track buyer requests to
them on the mobile site. Going forward, IndiaMART expected mobiles to be the predominant medium of
transaction in the SME space. Mobile transactions had the advantage of immediacy, whereby a supplier
receiving a buyer enquiry obtains that information immediately and did not have to separately log on to a
computer or his mail. He could immediately call the buyer or respond to buyer queries through the PNS.
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Mobile penetration helped IndiaMART assess the responsiveness of its supplier base, and make
appropriate decisions to downgrade non-responsive suppliers, and reward the more responsive ones. The
mobile App and site also helped IndiaMART gain significant visibility into the behavior of buyers, by
allowing them to easily track buyer responsiveness to supplier responses (to buyer inquiries or buy-leads).
This could also go a long way in improving the quality of the buyer base on the IndiaMART platform.
No
However, there were a number of challenges in adopting the mobile phone/tablet as the primary medium
of interaction between buyers and sellers on the IndiaMART platform.
x Accessing IndiaMART website through the mobile channel offered immense opportunities to
speed up the responses at both ends – suppliers and buyers. For instance, it enabled a “click-to-
call” facility to reach suppliers through the PNS service, thereby allowing IndiaMART to track
the initiation of the conversation as well as the entire lifecycle of the transaction. Historically,
suppliers would conclude the transaction outside the IndiaMART platform, in spite of the lead
Do
generated through IndiaMART. Now, the mobile opportunity allowed all transactions that
originated on IndiaMART to conclude on the IndiaMART platform by enabling the mobile App
to manage the supplier’s response to the buyer queries, buyers’ order placement, and suppliers’
confirmation of order fulfillment.
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x Given the power of the mobile site and App, it also raises the question of what functions should
be enabled through mobile. Replicating the IndiaMART site on the mobile, though
technologically feasible and strategically tempting, it might turn out to be counterproductive. A
vast number of infrequent activities that occur on the IndiaMART site such as catalog uploading,
content editing, and adding new products and services might be possible on mobile, but will be
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better performed using a larger screen (PC). Therefore, the design of the mobile site and App that
was functionally capable, should have an easy to use interface, without compromising on the
speed of response was critical. Whether this challenge called for a separate team that was capable
of responding to this “mobile” opportunity, or would IndiaMART’s product development team
that had so far managed the platform with a deep understanding of the Indian suppliers be capable
of facing this challenge was to be seen.
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Ranking of suppliers: re-prioritization
The reduced screen-size of the mobile phones and tablets required provision of only the appropriate
search results for any category of suppliers. At that time, IndiaMART displayed suppliers in the order of
their package subscription and within each package (say platinum), suppliers appeared in a random order.
A mobile user would want no more than 5–10 search results but with a greatly increased relevance.
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Consequently, IndiaMART had to develop a mechanism of ranking the suppliers. Given that the primary
source of revenue was subscription fees, ranking suppliers on any basis other than the subscription fees
would either wipe out the entire revenue stream or sully the ranking system. Transitioning to a
transaction-based pricing model would require a change of the fundamental business model of the firm,
and should such an attempt be made was itself debatable.
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In order to make mobile searches more relevant (prioritizing suppliers to display on the mobile
phone/tablet), IndiaMART could use a geographical bound – say a radius of 250 km (customizable) from
the place where the buyer is searching and display results from that area. This logic would work best for
services that inherently valued local search (such as JustDial) that greatly benefited from clustering of
suppliers. In the instance of a B2B platform such as IndiaMART, this clustering could pose serious
implications. Although certain areas could be home to a large number of suppliers, certain others would
No
not have even enough suppliers to list. This too, therefore has revenue implications – the pricing would
then be dependent on the number of competing suppliers present within a region. The revenue model
would have to undergo a change – albeit not a complete overhaul.
Expanding supplier base
One of the ways to increase the general supplier base of the site, while preventing the lack of suppliers in
certain geographical circles, was to acquire a wide list of suppliers. It would require large financial
Do
investments, in terms of opening field offices and increasing the feet-on-the-street (direct sales people).
On the other hand, IndiaMART could greatly benefit from its existing clients supporting the acquisition
of new clients by word-of-mouth and other means. It was therefore imperative for IndiaMART to measure
and manage its Net Promoter Score (NPS) among its clients (suppliers and buyers).
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Encouraging suppliers to be buyers
In order to sustain the stickiness to the platform, it was imperative that a large proportion of suppliers also
perform their own buying through IndiaMART. As a B2B platform, IndiaMART believed that every
supplier is a buyer, and when they actually play the role of a buyer, they would also realize the
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importance of issues such as customer responsiveness, fairness of trade, and maintaining credibility of
commitments. This also ensured that the volumes of transactions on the IndiaMART platform increased
and the clients were loyal to IndiaMART, deepening their engagement with the brand. In order to
facilitate this development, IndiaMART had to invest in a strong recommendation engine that could
display and push products on the basis of earlier purchases in relation to the products in their catalogs.
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IndiaMART, in order to sustain its rapid growth, also had to decide on its advertising policy. They could
increase the number of buyers on the site who were seeking suppliers, thereby increasing the
attractiveness for more number of suppliers to be engaged with the platform and vice versa. In order to
rapidly increase the numbers on either side of the platform, large mass-market advertising and promotion
could be required.
Reducing supplier churn

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Once customers were acquired, suppliers/buyers might not continue their engagement with IndiaMART,
and therefore not renew their subscriptions at the end of the first period. Supplier churn rate stood at 26%
as on 2014, and IndiaMART targeted to bring this down to 20% by 2015. In order to reduce the supplier
churn, it was important that the platform provided sufficient number of relevant business leads, and
invested in appropriate supplier education.
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Managing employee attrition
Employee attrition was another challenge faced by IndiaMART. Attrition of direct sales officers was at
60% in 2014, and 30% for technology/product development personnel. There were plans to adapt the
concept of NPS to measure and monitor employee satisfaction and engagement with the company.
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The sun had set across the expressway, and Dinesh was jotting down his plans on his pad. He happened to
glance out of his glass door and saw that almost the entire office had left for the day, and there were just a
few people, packing their bags. He walked up to the water cooler, and was greeted by a few young
engineers, planning their weekends. Dinesh realized that he had to prepare his presentation to the board,
and went back to his office quickly.
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Exhibit 1
IndiaMART site details
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No
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Source: Company documents
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Exhibit 2
IndiaMART service offerings and deliverables
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tC
No

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Exhibit 3
Supplier signup form
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op
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No
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Exhibit 4
Proforma invoice used by FOS to collect data from suppliers
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yo
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tC
No
Do
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IndiaMART
t
os
Exhibit 5
Supplier content SLA signoff for production team to prepare artwork
rP
Exhibit 6 yo
Supplier ranking scheme – 2013
op
A Rank B Rank
At least 1 Photo Product At least 1 Photo Product
At least 1 Extended Profile No Extended Profile
tC
C Rank D Rank
No Photo Product None of the following
Any of the below Photo Product
Extended Profile Extended Profile
Job Posting Job Posting
News Posting News Posting
No
Testimonial Testimonial

Do
Page 26 of 33
IndiaMART
t
os
Exhibit 7
Supplier ranking metrics
rP
yo
op
tC

No
Do
Page 27 of 33
IndiaMART
t
os
Exhibit 8
IndiaMART’s customer acquisition process
rP
yo
op
tC
No
Do
Source: Authors’ representation
Page 28 of 33
IndiaMART
t
os
Exhibit 9
IndiaMART’s financial information
rP
yo
op
tC
No
Do
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IndiaMART
t
os
Exhibit 10
Internet User Statistics, India (2012)
rP
yo
op
Source: Ethinos digital Marketing
Exhibit 11
Concept of buy-leads
tC
No
Do
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IndiaMART
t
os
Exhibit 11 (Contd.)
rP
yo
op
tC
No
Do
Page 31 of 33
IndiaMART
t
os
Exhibit 12
Pricing of services on IndiaMART
rP
yo
op
Table 1
ARPU trends (2004-13)
tC
No
Table 2
Employee count
Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014
Employee count 1412 3714 2916 2689 2800

Do
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IndiaMART
t
os
Table 3
Trivia on India’s smart phone market
94% of India Smartphone users access the internet on their phone
rP
Almost 80% of Indians have performed a financial transaction on the phone
Most popular activities online
98% emailing
76% Searching or buying
yo
69% download music
62% search jobs
61% social networking
59% searching or buying travel products

op
A total of 9 million internet users carried out online transactions in 2011. The number is
predicted to reach 38 million by 2015
Source: Ethinos Digital Marketing Aug 16, 2012

tC
No
Do
Page 33 of 33

India Mart Case

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t

R SRINIVASAN, MENAKA RAO AND MAYURAPRIYA MOHANAM

EVOLUTION OF INDIAMART: THE INITIAL YEARS

The Early Days and Challenges Galore

volumes of work at higher costs and lower margins.

located in Madhu Vihar, a suburb of Delhi. Dinesh reminisces:

economic factors have an impact on local businesses. Indian businesses on the

Global Sources Ltd.

2007–2010: DOMESTIC FOCUS AND RAPID GROWTH

searches helped IndiaMART garner a huge share of domestic B2B trade.

helped IndiaMART significantly in disciplined financial reporting.

2010–2012: RAMPANT CUSTOMER ACQUISITION

investment was justified.

target of 100,000 paying customers.

2014 AND THE WAY AHEAD

The Mobile Opportunity

Expanding supplier base

Reducing supplier churn

Managing employee attrition

Source: Company documents

Source: Company documents

Source: Company documents

Source: Company documents

Source: Company documents

Source: Company documents

Source: Authors’ representation

Source: Company documents

Source: Company documents

Source: Company documents

Employee count 1412 3714 2916 2689 2800

Source: Company documents

94% of India Smartphone users access the internet on their phone

Most popular activities online

76% Searching or buying

62% search jobs

61% social networking

59% searching or buying travel products

Source: Ethinos Digital Marketing Aug 16, 2012

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