Avnish Bajaj, Chairman & CEO, Baazee.com

Smaller towns and cities will become big contributors to online shopping since purchasing power there is increasing at a far higher rate than ease of access to latest products.

During the dot com boom, there was a mad rush of e-commerce based sites in India. No need to mention that most of them have gone into oblivion. One website which has not only survived the bloodbath but has emerged the leading online market place for more than 2.4 million people is Baazee.com.

Though still far away from their role model, eBay, the US based auction site, Baazee.com commands respect in the marketing community in India. Some time back even STAR Group had taken a significant stake in Baazee.com. What makes Baazee.com successful when everybody had failed? Perhaps, it's got to do with the die-hard attitude and zeal to succeed of its founders - Avnish Bajaj and Suvir Sujan. They left their highflying career in US to start Baazee.com with an untested business model in India with great success.

Avnish Bajaj, the chairman & CEO of Baazee.com, shared his experiences on Internet marketing and e-commerce in India, in an exclusive chat with Akshay Bhatnagar of exchange4media. Bajaj holds an MBA from Harvard Business School besides MS in Computer Science from the University of Wisconsin, Madison and a B.Tech in Computer Science from IIT, Kanpur. He had the opportunity to work with some of the biggest names in the IT industry such as Yahoo!, eBay, Priceline and Disney's Internet operations amongst others while working in US.

Q. How is the response on Baazee?

Within a short span of just two and half years, we have over 2.4 million registered users and 63,000 sellers. We get over 32,000 unique visitors on the site everyday. We successfully started the transaction fee from March 2002 onwards. Our annualized gross merchandise sales are to the tune of Rs.75-90 crores.

Q. What makes Baazee survive and running in the Indian market?

Baazee's business model is similar to eBay which is a $15+ billion company. So the solidity of the business model is our biggest asset. We also have a diversified business revenue stream, which includes B2B that lends further solidity to our financials.

While Internet may be in its initial phase of growth in India what is critical to note is how we are tracking online shopping behaviour. Overall percentage of Indian Internet users who have bought online (during the past one month) has actually doubled over the last year metrics (as per TNS world-wide survey).

And the potential of the Indian e-market can be gauged by the fact that 16% of Indian consumers want to buy online in the next six months making it the third most online potential country after Korea (28%) and Australia (26%) leading the pack.

Q. Have you researched the consumer buying behaviour lately? What are the findings?

We have done number of consumer research exercises for decision making. We found that to make any decision on buying, consumers would want a choice of products, a way of contacting sellers in advance and finally ease in making payment.

Q. How you are promoting Baazee as a brand?

Baazee's TV campaign managed to make it a brand with high awareness while establishing it as a credible and honest site. We have so far had online alliances with leading Indian portals and Yahoo as well. We plan to use other mediums also that will help create a viral thrust for the brand without the support of TV.

Q. Looking back, how was it turning into a net entrepreneur and running an untested business model in the Indian market, after successful stints in USA?

It has definitely been the ride of our lives for both Suvir and I (Suvir Sujan and myself started the company together). Both on the upside and downside. The bubble that took 6 years to form and burst in the US, took less than 6 months to play out its entire lifecycle in India - which came with its associated extreme highs and lows. The learning of the last two and a half years could never have been imparted through any business school programme.

India, especially the Internet, is a very different and tougher market compared to the US. However, our business model has been proven world over. And this helps us ride out the tough times and leverage the better times.

Overall, would do it all over again without skipping a heartbeat!

Q. What factors can really push the growth of e-market place in India and in which segments?

Well besides higher Internet penetration, it has to be better payments and logistics infrastructure. Archaic banking regulations prevent free flow of money between banks and introduce a lot of friction and costs into the payments process. The logistics companies in India are also pathetic in their service levels (except for a couple at the top who price themselves out of the e-commerce segment). This inhibits the leveraging of the fundamental power of the Internet - that of no geographical boundaries (which needs to be supported by strong logistics backbone).

The government can help a lot by staying out of regulating the entire telecom and Internet infrastructure set-up. In India, all companies helping the growth of Internet infrastructure are vertically integrated and horizontally diversified into other telecom services. So if there is a problem in their related telecom businesses due to government interference, it adversely impacts their Internet infrastructure development plans as well.

The accessibility to products hitherto unavailable will be the largest contributor to push growth of online buying. Smaller towns and cities are deemed to become big contributors to online shopping since purchasing power is increasing at a far higher rate than ease of access to latest products.

In metros, the need for convenience owing to rapid changes in lifestyles clubbed with easier access to Internet will help sustain this growth.

Many Standard product categories like electronics, mobiles and computers, even services like travel and home loans lend themselves to purchase without 'touch and feel' and these have the highest potential in e-market.

Q. More online players like indiatimes.com are giving serious attention to online auctions. How do you plan to create a differentiating factor between Baazee and others?

With due respect to indiatimes, we really do not find ourselves having any competition in the consumer auctions space. Other than one airline ticket auctions deal, there isn't a liquid auctions marketplace on any other site. Sites like indiatimes are general interest portals (with extensions like in the mobile space like the 8888 service etc.) rather than a focussed e-commerce site like ours. Given the challenge of the Indian e-commerce marketplace, we believe that this singular focus will itself create differentiation via better consumer value proposition and innovation.

The biggest differentiating factor in our business model is "network effect" - whereby more buyers get more sellers, which gets more buyers and so on. Being the single largest player in this space (with more than 90% market share in C2C and B2C auctions), we feel that we disproportionately benefit from the network effect.

The width of product offerings at various trading formats will remain our biggest USP. While most e-commerce in India today is based on low value gifting sort of items, Baazee is the only site that consumers relate to (as validated by 3rd party surveys) when it comes to high value purchases such as mobile phones, computers, jewellery and electronics. This is a huge differentiating factor for us on which we intend to build further.

Q. What is the profile of your users?

Our users are 80% male and 20% females. Almost 50% of our user base is spread across the metros. Mumbai contributes the biggest business share. Age wise, we target the quality user profile in the age band of 25-32+ years.

Q. How the findings have helped you in making Baazee a better place?

Immensely! We have made number of changes and improvements on our site. To address the "variety" need, our site has a width across 23 different product categories - from mobiles, jewellery, electronics, computer, travel, Bollywood, fashion, music, movies, health & beauty, gifts, books, cars & bikes, personal finance, sports, toys, arts & antiques etc. And within each category, the depth has also improved with hundreds of sub-categories.

Online reputations system that we have on our site gives at a single glance the ratings that others have given to any user. Also online contact with sellers is also a feature we encourage people to use - if one has any query regarding the product you can actually send a mail and get answers to your requests.

On payment - since a big number of Baazee's user base (60%+) has credit cards, Baazee is going to be providing online payment options to pay sellers very soon. This will then be extended to include online bank transfers. This would cover most of our user base and also constitutes the fundamental building blocks of a paypal like service.

Q. How Internet is changing the nature and rules of marketing both in the Indian and global context?

In both contexts, marketing is changing dramatically with the advent and adoption of the Internet since companies are realizing that they have a mechanism to touch their consumer directly via the Internet. In this context, viral marketing and permission-based marketing concepts have become very well adopted in the West and are slowly catching on in India.

Ultimately, the Internet provides ability for any company to drive up its repeat purchases, get instant consumer feedback and allow users to interactively experience their brand.

Q. The retail sector in the conventional market is booming in India. How Baazee intends to cope up with this threat of indirect offline competition?

You must note that the sellers on Baazee are actually dis-intermediating the offline retail margins. They do not have to invest in the real estate and offline marketing that go with such a business. Consequently, they pass off these lower costs to consumers and so Baazee products are generally at lower costs than offline channels.

Moreover, Baazee offers lots of unique product propositions for buyers - i.e. either that product itself is not available anywhere else offline or online. Lots of imported and unique products fall in this category like electronics, arts etc. Another is better price on Baazee than anywhere else. In the last 2 months, we have sold more than 100 Provogue membership cards with free Air Sahara tickets, 250 Daewoo and Kenstar microwaves at more than 30-50% off prices etc. We also offer a used product for which an offline marketplace does not even exist. Where else can you go and buy a used TV set at a great price from someone in Pune by sitting in Mumbai or that hard to find Calvin & Hobbes comic. Or is from a specialty area which the buyer does not have access to e.g. leather products from Kanpur, Petha from Agra etc.

This means that buyers are even more willing to transact on Baazee than they would be on any other e-commerce site or a retail chain. Baazee gives them choice and access to products that they would otherwise not be able to get.

Other competition like offline retail will always remain a localized medium and that really cannot be compared with an online medium. Intra-city trading has shown potential to grow on Baazee - today almost 40% of transactions on our site happen from the smaller towns.

Q. Besides the P2P(Person to person) transactions, what are you doing on the B2B and B2C fronts?

We are actively in the B2B business and have a number of large clients doing reverse auctions worth crores of rupees and market making through Baazee. We intend to continue to scale up this line of business and intend to dominate the B2B space as well.

The Kenstar, Daewoo, Samsung etc. deals are directly through the manufacturers. These deals are then routed through an existing Baazee trader since the manufacturers tend not to ship and service end consumers directly. The trader takes a very nominal commission (less than 5%) so the bulk of the discount is actually passed on to the consumer.