The resounding success of Big Billion Sales across online marketplaces is ample evidence of the rapidly growing acceptance of online shopping in India. Mr. Arvind Kajaria, Managing Director of Intrasoft Technologies, in an interview to Tejal Shringarpure of IIFL, unfolds the defining trends of the online purchase market as also Intrasoft Tech’s value proposition as a mass merchant. Excerpts from the interview…
What opportunities do you see in the Indian e-comm space vis-à-vis the overseas counterpart?
E-commerce sector highly appeals to young minds. Given the Indian demographic growth patterns, almost 65 % of our population will be under 35 years of age in the coming years. Hence I think e-commerce is the only way to grab the attention of the increasing young population. The non-urban cities are also participating in the boom now that they have access to a diversified range of goods unlike prior years. Hence, I am quite optimistic about our growth story.
What is the USP of your company? How do you plan to handle the competitive scenario with Flipkart and Snapdeal offering Big Billion and festive sales?
We are not only selling from our website 123stores.com, but also on Amazon, Ebay and 11 main. We sell anything and everything and hence are called mass merchants. This determines our expertise of being able to sell not only from our own website but also from other websites. We are at advantage because we are selling on 10 marketplaces at same time. So whether you place the order at Amazon or Ebay, you end up buying from us and that’s what keeps us very excited and motivated apart from significantly boosting our sales volume.
Festival sales is not new to FMCG sector. Like how most of the brands have Diwali sales offline, online sales are yet another route of attracting visited traffic to the website and we would also participate in it. For this year, we have not planned any promotions as we mainly operate in US market. However as soon as we establish a base in India, we will definitely plan festive sales , which could be as early as next year.
Tell us about your partnership with Amazon and Ebay.
Amazon and Ebay have opened up to allow third-party sellers to sell from their websites. For instance, if a housewife plans to make and sell terrariums, she can list her business on their websites and start selling without anybody’s help. She needs to register on the website and build up her customer ratings. As she sells more and more, the ratings will go up based on the quality of the product, the pricing and the in-time delivery. Our partnership with Amazon and Ebay is of a similar nature. We act as third party sellers and provide the online platform for vendors to sell their goods.
Can you elaborate on your role as a third-party seller?
A lot of manufacturers are not technology savvy. They don’t have an idea of how to sell online. There are various aspects like coding, uploading images, pricing & inventory management and logistics that merit attention which could prove a huge pain for manufacturers. We act as mediators, between vendors and online marketplaces like Amazon and Ebay. We help vendors go online by managing their sales, pricing, customer support and logistics. As a result, they save both money and time. The advantage for us is that by employing around 10 customer support executives, we can manage 100 customers.
Can you brief us about the finances involved in these partnerships? How do you make profit out of this arrangement?
It is more about integration of technology rather than financial investment. We create a market for hundred thousand products right now. If they are overpriced the products don’t sell, if underpriced they don’t make enough profits. We make optimal decisions based on technology. The supply chain is also a matter of concern. If a customer buys a product and the delivery is promised in 3 days, it can’t be extended to 10 days. Otherwise the customer will be disappointed. Technology also ensures efficient delivery. We buy from the vendors and sell the products to online marketplaces. For instance, if we buy at Rs. 10, we will sell at Rs. 17 or 18. Out of the profits we make, we pay our executives. The only thing we have to respect is the MRP. We can’t price the product above the MRP.
Is your tie up with Alibaba on similar lines?
We had worked out a similar pattern with Alibaba for the website 11main.com. However, there is a speculation that Alibaba has de-invested from 11main.com. I am not sure about this development as it is not official yet. However, we have continued our relationship with 11main.com. The partnership is very similar to Amazon.
You were quoted as saying that your focus is on expanding business and not on profits. Can you elaborate on this?
We make profit on a gross profit level. We prefer to re-invest it into the business as our sector is experiencing a momentum and we don’t want to miss out on this opportunity. Whatever money we make, rather than distributing it as dividends and profits, we are re-investing it and making the product life cycle much larger.
Tell us about your inroads in Canada. Are you planning any more expansions?
We have tied up with Amazon Canada. In Canada, we list products which cater to the needs of the Canadian market. Every country has its own liking and hence the customized sale. No, we are not looking at other expansions as we don’t want to expand at the cost of compromising our attention to our existing users. We live in a world of social media. Even if one customer is disappointed, the news immediately goes viral. We want to methodically build our brand and expertise. Once the trust factor is firmly established, we will look at the opportunities to enter other geographies.
Brief us about your financials. Can you give us insights on the performance for quarter ended September 30?
We are very happy with the progress of the said quarter. Our results will be out next week. We saw a number of operational changes, mainly related to our software in the last quarter. Earlier, the order which took us a few hours to execute is now processed in only 54 minutes. The reduction in time spent is the evidence that our software and business is getting more and more efficient which will allow us to scale. There is a lot of scalability in our business. The salient thing which we learnt in the last quarter is that the technology is finally working after years of hard work and efforts and we are now ready to ride the e-commerce boom.
Our consolidated revenue for the Q1 FY16 increased 97% to Rs. 118 crore from Rs. 59.78 crore in Q1 FY15, driven by e-commerce growth and Profit after Tax (PAT) increased to Rs 1.22 crore, up by 47% from Rs 0.83 crore (Y-o-Y). Our e-commerce revenues increased from Rs 53.93 crore to Rs 113.36 crore resulting in 110 % increase Y-o-Y. The number of orders shipped grew tremendously over the quarter from 116,081 to 293,894, a growth of 153% Y-o-Y.
What is your outlook for the coming quarters? What are the key challenges you are facing, especially in India?
We are very optimistic. The team is in place, the software is in place. November, December are traditionally the highest buying months in the year in India because of the festivals and the holidays. So we look forward to a very stunning quarter. Supply chain mismatch is one key issue and GST, as and when it comes into play, might prove another challenge.
Brief us about your capex plans.
Capex for us is more into people, industries and warehouses than anything else. We have seen that whatever profits we make through investments would be enough to give us very similar growth rate to that of the quarter that ended June 30. We are growing almost at 100 percent. What separates us from other e-commerce companies is that we are almost cent percent profitable, which makes a huge difference and make us confident about the prosperity of our business as we move forward.