Niren Shah

At a time when e-commerce is being questioned as a business model and the promise of the Net is being viewed as a diminishing prospect, the success of Baazee.com comes as a breath of fresh air. Baazee.com is one of the most famous names in the Indian dot-com space today. Rather than being called a survivor, the company sees itself as a rare e-commerce success story. Not surprisingly, in the current times of slowdowns and meltdowns, when even traditional brick and mortar companies are withholding cash, baazee.com thinks it is the best time to make its presence felt by a huge ad blitzkrieg that ambitiously asks, “Did you Baazee today?”

Founded by Harvard business school graduates, Avnish Bajaj and Suvir Sujan, in March 2000, the portal has witnessed unprecedented success in its short span of existence. From a mere 30,000 transactions in the year 2000, the site currently registers over 700,000 transactions per month and is being touted as India’s answer to eBay.

Analysts say that the main part in Baazee’s success is the avoidance of a logistics model keeping the responsibility of delivering goods to the buyer in the hands of the seller. For example, in the B2C segment, vendors deliver the goods themselves with the site acting only as an interface between the buyer and the seller. While Baazee offers both the C2C (consumer to consumer) and B2C (business to consumer) model, a major part of business comes from the B2C segment. But all this is supposed to change as Baazee has started charging sellers on the basis of a successful transaction done between the buyer and the seller.

While many critics believed that this model would fail as Indian users are notoriously tight fisted and will not pay for C2C transactions, Niren Shah, chief financial officer of Baazee says that Indian customers are willing to pay for something where they feel there is value provided. Baazee charges around three percent of the value of the item sold. After the sale is done, Baazee sends an invoice to the seller with details of the items sold. This model has worked extremely well for small shops. Shah proudly exclaims, “We don’t need to have an offline store as our brand ambassadors the small time vendors cover over 5,000 offline stores. And over 70 percent of them do over Rs 5 lakh of business per month.” Currently IT contributes 20 percent to the company’s revenues, mobile phones around 20 percent, electronics around 15 percent and travel around 12-13 percent. But the bulk of the revenues (32 percent) is contributed by low value items like books and music.

In addition, the huge user base of approximately ten thousand regular sellers and over a million regular buyers gives Baazee the option of leveraging its base to prospective business houses keen to exploit this market by offering their products.

A majority of its revenues (around 85 percent) still comes from the domestic base, with the rest coming from the NRI segment. Baazee clearly understands that the NRI segment is a lucrative segment with huge potential for buying. In an innovative strategy to grab a huge chunk of the NRI segment, Baazee’s entire site converts itself to a NRI focused site after 1 am in the night.

The company made another innovative move when it launched the fixed price section that gave users the option of buying goods at fixed prices without waiting for the auction to get over. Naturally, prices are below the market price and goods are available at a huge discount.

While auctions will continue to be a major revenue earner, the company is also looking at entering into the domain of reverse auctions. For example, contrary to industry perception about Baazee being a pure consumer focused site, many reputed players in the reverse auction place were surprised when Baazee conducted a reverse auction valued at Rs 30 crore, and netted a cool

Rs 90 lakh. Break even is expected in March 2003. Baazee sees itself as a global supermarket and Shah confidently says it is aiming at a growth rate of more than 300 percent.