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Professor R. Srinivasan, Menaka Rao, and Mayurapriya Mohamam 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 2014 by the Indian Institute of Management Bangalore. No part of the publication may be reproduced or transmitted in any form or by any means electronic, mechanical, photocopying, recording, or otherwise (including internet) without the permission of Indian Institute of Management Bangalore.

R SRINIVASAN, MENAKA RAO AND MAYURAPRIYA MOHANAM IndiaMART

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 2013-14 had been good for the company, but there were many challenges they needed to face as they embarked into 2014-15. 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 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 current 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 responds to the opportunity strategically. Numerous challenges confronted the firm as their clients began using the mobile phone as the primary mode of connecting/ transacting on the Internet (see Table 3). Fourth, many new marketplaces were opening up in the Indian SME space. For instance, internet based wholesalers like Shopclues1 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 (like logistics, 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 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 Indias largest online B2B marketplace, which helped buyers source products and services from small and medium enterprises (SME) (See Exhibit 1). It provided a 360 degree solution to the SMEs including listing, storefront creation, certification (TrustSEAL), and access to buyers needs (Buy leads which marked the worlds 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. 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 pace. Internet too made its entry 1 For instance, see http://articles.economictimes.indiatimes.com/2014-03-04/news/47894688_1_shopclues-flipkart-orders

IndiaMART Page 2 of 28 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. On the other side, Internet had become quite popular in the western countries by then. SMEs in India The small and medium enterprise (SME) 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 million2. The market of this sector was worth $5billion at that time, with approximately 8000 products from 11 million units. 1.3 million SMEs accounted for 40% of Indias total exports in the same year. The sector also employed approximately 8.11 crore people - 40% of Indias workforce, and contributed 17% to Indias GDP. The space was largely dominated by micro scale businesses, 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 regions3. 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 tradeshows in Europe or the US was so exorbitant that only large corporations could afford to attend. With the evolution of Internet, international buyers increasingly began looking to know more about their suppliers through the websites, though ordering and transactions were still offline. Transforming from the pen & paper tradition, Indian SMEs were increasingly adopting technology for the betterment of their businesses, with increased investments on PCs, internet and dedicated websites. In 2013, the commercial PC segment had hit a high of 6.7 million units, with a year on year growth of 15.8% over 2012. Indias PC market grew at 4.8% in 2013 but 2014 looks grim, said IDC4. 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 20155. 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 20156. Evolution of IndiaMART: The Initial Years 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 US, 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. 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.

2 Goyal Malini, SMEs employ close to 40% of Indias workforce, but contribute only 17% of GDP, Jun 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, Feb 18,2014, http://articles.economictimes.indiatimes.com/2014-02-18/news/47451309_1_pc-market-pc-shipment-pc-sales 5Zinnov a globalization and Market expansion Advisory firm in a study titled SMB Sector Cotributes More than One Third of Overall Domestic IT spend by 2015: available on the internet at http://zinnov.com/event.php?ev_id=93 6Biztech, Feb 10 2012, http://www.firstbiz.com/biztech/smes-to-contribute-more-than-a-third-of-indian-it-spend-by-2015-14108.html

IndiaMART Page 3 of 28 It was a good value proposition; he could charge Rs.50,000 - Rs.60,000 for a 10-page website and Rs.10,000 Rs.15,000 for a one-page microsite. At the end of its first year of operations, IndiaMART had already clocked in Rs.6,50,000 in cash collection and was already breaking even at operations front. The Early Days and Challenges Galore It was early days in the business and Dinesh & Brijesh had to don the salesmans hat during the day and double up as the tech geek 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 IndiaMARTs premium positioning. More value definitely need to be added to these websites to ensure that customers continued to use the services. The requirement for Indian products in 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 were 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. Sourcing of data for creating this directory was a challenge, and IndiaMART had to piece together data on 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 quite popular. Many buyers considered IndiaMART as a Government of India Initiative, similar to the business promotion organizations in China, Korea and Taiwan. Mention this and it brings a smile on Dineshs face; he recalls how a buyer had written a thank you note to him, assuming that IndiaMART was a Government of India organization. While the directory was getting developed, Dinesh could sense that search engines are bound to become important. Thus, much before the term SEO (search engine optimization) got coined, he worked diligently to put in place a team, especially meant to optimize websites based on search engine guidelines. 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. That (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 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 & Brijesh, however, was convinced that in times to come, Internet was going to bring in true convergence, and if he could find an interim solution to these problems, IndiaMART would get a great first mover advantage. This belief led to the first set of innovations coming 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 the 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 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 IndiaMARTs paying customers. During this time, while Dinesh & Brijesh were busy building and growing IndiaMART, Jack Ma was busy making Alibaba, it was his second attempt, after having failed in making China Pages.

IndiaMART Page 4 of 28 From Indias 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 Indiaworld to Satyam Infoway for Rs. 499 Crore. A lot of hype started getting created 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. Dineshs 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 focused on his original belief and never scaled down his dream. Interestingly, by then, Jack Ma had raised a funding of $100 Million and had started advertising Alibaba.com on television in the USA. By now, China had already emerged as the global hub for manufacturing outsourcing. The dotcom Bust and Life after Y2K The late euphoria of capital inflow in dotcom firms towards the end of 1999 led to a financial bubble. All dotcom firms, which did not have sound monetization plans, had to close 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 US, along with a long war in the Middle-East, resulting in a global meltdown. By the turn of the millennium, three trends were clearly visible in the marketplace for IndiaMARTs 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 due to commoditizing of website design by a host of desktop publishing (DTP) service providers. This resulted in increased volumes of work at higher costs and lower margins. Second, IndiaMARTs 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. 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 located in Madhu Vihar - a suburb of Delhi.

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! reminisced Dinesh.

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 IndiaMARTs tiny office they were conducting a survey on dotcoms that survived the bust, and were in for a pleasant surprise after viewing the companys financial statements. They had unexpectedly run into a business that not only survived, but was also making profits. How could this be possible? And presto they ran a story with Dineshs photo on the cover page, making him a celebrity overnight. Dinesh, too, was surprised to find out that his 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 IndiaMARTs business through this turbulent time. Unfortunately, he had to stamp down his dream of pursuing MBA (he had enrolled himself with a business school in Delhi). In 2001, IndiaMART had around 1000 paying customers; Dinesh & Brijesh took upon themselves an ambitious 10x growth target in 5 years to reach 10,000 customers and expand to 5,000 product categories by 2006 was the aim.

IndiaMART Page 5 of 28 Just before the 9/11 terror attack struck United States in 2001, IndiaMART acquired a new office in NOIDA and shifted its operations there. Through the lean period of sales (2001-03), IndiaMART began expanding its customer base beyond Indias National Capital Region (Delhi and its suburbs). As their footprint expanded and customers realized increased order flows through the indiamart.com website, there was a continued renewal of their subscriptions. Contrary to a lot of dotcom companies of that era, IndiaMART explicitly focused on building its revenue through subscriptions (acquiring new paid customers as well as getting existing customers to renew their subscriptions), rather than worrying about number of page visits (or eyeballs) or enterprise valuation. Throughout this period of customer expansion, IndiaMART did not take an advertising or promotion route. Dinesh said:

Googles 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.

Amidst this stretched period of slow down, IndiaMART service pricing came under stress and it had to drop the prices to an all-time low of Rs.5000/- for one year subscription. As the customer base started to grow, Trade Offers a business classifieds service, was added to IndiaMARTs range of offerings. Anticipating the fact that buyers would prefer products over companies, the team had already started working towards transforming the online companys directory to a giant catalog of products. IndiaMARTs value proposition, partly driven by search engine favouritism, ensured that it continued to grow at around 30% CAGR, while other companies around it were shrinking. All through this period, IndiaMART continued to invest in Free Listing and Free Enquiry Forwarding. Many registrations had started to come to IndiaMART organically. 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 like India and China were sought after. The domestic market was 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. As international buyers came looking for suppliers from India, IndiaMART had a ready online searchable business directory that could be used to identify sourcing options, thanks to over eight years of painstaking effort. 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 having 10,000 paying customers. The subscription price, however, could be raised only to Rs.9000, up from Rs.5000 in 2003. As a result, despite achieving 10x 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 & Brijesh decided that IndiaMART should also target improving their ARPU from Rs.18,000 (in 2006) to USD 1,000 (or Rs.45,000) by 2009-10. 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 the marketplace had started to deliver 80% value only 20% enquiries were generated by customers 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.

7Source : Directorate General of Commercial Intelligence (DGCI) website: dgciskol.gov.in/annualreport/book_3e.pdf

IndiaMART Page 6 of 28 2006 was the prime period for online classifieds business. Several companies in this space raised venture capital. Naukri.com became Indias 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 Cr in 2006 in form of Ad Equity from the Bennett Coleman Company Limited (BCCL). BCCL controlled a large share of popular media including leading dallies, The Economic Times and The Times of India. 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 of 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 & Brijesh found out the solution The Indian Red Tape, the best tool for establishing the trust profile. If one had to do business in India, it required several registrations and certifications (it still does). And 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 like Companys Registration certificate, Partnership Deed, PAN 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 IndiaMARTs TrustSEAL. IndiaMART launched TrustSEAL in partnership with the countrys premier credit rating agency, CRISIL. But, unlike other rating agencies, it was priced at less than one fifth of the prevailing market price at that time. The Competition IndiaMARTs 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, 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 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 overlapped in their listings. 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 20128. According to Forrester Research Inc., a market research firm, e-commerce sales in 2013 were estimated at about $1.6 billion9. However, exports declined 1.76% to $300.6 billion in 2012-201310. 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 billion11. As various models evolved and coexisted, the B2B opportunity in India began to attract attention from many players. Alibaba Group: The Alibaba Group, China's leading B2B e-commerce Company, was started to cater to small businesses. The Groups 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 - 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

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, Indias 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 11Chowdhury 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

IndiaMART Page 7 of 28 Computing for developing platforms for cloud computing and data management and Alipay to facilitate online and mobile payment solutions in China. Alibaba went public with its maiden IPO in 2007 at a valuation of US$10 Biliion, which grew past US$ 17 Billion within no time. Immediately after its IPO, Alibaba opened offices in India and started marketing its services to Indian Exporters. Later, they 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 account. Alibaba.com had local offices in Mumbai, Delhi, Chennai, Bangalore and Ahmedabad. Comparing the 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-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 issues12. Alibaba.coms unaudited financial profits for March end 2012 were USD53.8 million, with a total of 79.8 million registered users, 10.3 million storefronts and 753,955 paying members13. 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. 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, 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 multi lingual 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, Justdials revenues grew 28.3 % over the same period in 2012-13 to around Rs.271 crore, while its net profit rose 82.2 % to Rs.57 crore. The organization had a market capitalization of Rs.12,430 crores and ranked 99th in the 100 most valuable companies in India in 201414. 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. 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. Tradeindia received an average of 20.5 million hits per month. In 2013, the platform had a database of 27,44,394 registered users15. Tradeindias revenues were earned from listings which ran into several lakhs with charges ranging from Rs.3,000-13,000 annually. Global Sources Ltd.: 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

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 14 Business Standard, January 22nd 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

IndiaMART Page 8 of 28 suppliers to market their products to a number of buyers. It operated in three segments: online and other media services, exhibitions and other segments. Thomasnet.com: It was an information and technology company that connected manufacturing and industrial buyers and sellers. The platform had a news section which covered product news, information, business trends and analysis Some platforms also catered to niche products or services, like, for instance, the e-commerce Kolkata-based Mjunction Services, which ran 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 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 of traders, fabricators, re-rollers and end-users16. 2007 2010: Domestic Focus and Rapid Growth 2007-10 was an interesting phase in the evolution of Internet-based businesses in India, as well as IndiaMARTs growth strategy. Indian currency had appreciated significantly against US$ and reached to 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. A customer base of over 10,000 posed a fresh set of problems for IndiaMART. High dependence on low skilled manpower led of increasing number of errors in customer catalogues, 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 got down to doing what he did best re-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 two years and get the subscription for the third year absolutely free of cost. Three year lock-in helped in reducing customer churn. Premium listing was also contributing in improving the ARPU. To reduce human errors, template based mini-dynamic catalogue was launched. It replaced the custom made microsite, and the subscription price was increased from Rs. 9000. to Rs. 15000. From a customers perspective also, it was a good move, as the single page microsite was upgraded to a 5-page dynamic catalogue 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 catalogues. All 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 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. 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 step out and 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

16 See: http://www.metaljunction.com/misc/aboutus#sthash.bUiOV0JN.dpuf

IndiaMART Page 9 of 28 domestic orders had started catering to local clientele, despite the drop 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 & Brijesh decided to raise capital and invest in products with an aim to establish its leadership position in the domestic market. IndiaMART raised US $10 Million from Intel Capital in 2008. While the revised business strategy was getting formulated, IndiaMART had already started re-modelling the online directory behind the scenes. In fact, the process was initiated long time back to transform indiamart.com from a company directory into a giant product catalogue. Until then, IndiaMART offered only a two-liner business description to Free Listed companies, and its product catalogue was derived from its paying customers. Dinesh decided to offer a full-featured business catalogue to all free listed companies as well and suddenly the product catalogue started to grow in leaps and bounds. The sales team evaluated on a regular basis if clients benefitted from the domestic focus. The move helped IndiaMART in retaining its preferred positioning in Google, as even with its changed algorithm, Google continued to find high quality content to show to its users. Googles locally relevant searches helped IndiaMART garner a huge share of domestic B2B (business-to-business) trade. Investments made by BCCL in 2006 and Intel Capital in 2008, significantly aided the growth intent. Following these investments, IndiaMART built a professional board filled with independent directors, including well-respected business leaders like Sarayu Srinivasan (Intel Capital), Nachiket Mor (ICICI), Deep Kalra (MakeMyTrip.com), and PN Vijay (Investment Advisory). This reconstituted board helped IndiaMART significantly in disciplined financial reporting. Increased internet awareness and its usage as a marketing tool implied that many SMEs were using IndiaMART as their chief source of buy leads. More and more SMEs who used free listings as a trial converted into paid subscribers on the IndiaMART platform, resulting in IndiaMART achieving around US$ 750 ARPU in 2009. By 2010, IndiaMART had 14,000 Paying subscribers and had achieved its ARPU target of 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 its Board, a plan which was based on rapid customer acquisition. It was an audacious move, after staying profitable for 12 consecutive years, IndiaMART was 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 two years, Alibaba, IndiaMARTs closest and biggest competitor, had started to reduce its focus from the Indian market. It was clear that it aimed at only those companies which were focusing on Exports from India apparently it did not show any intent of serving Indias domestic B2B Businesses. IndiaMARTs Do-it-for-me approach, as against Do-it-Yourselves approach of Alibaba, coupled with the large differences in Internet adoption within Indian SMEs and Chinese SMEs, turned out to be the biggest roadblocks in Alibabas path. 2010- 2012: Rampant customer acquisition 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 initial round of funding, and had also started advertising heavily in the traditional media to create awareness about their businesses. 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, as 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

IndiaMART Page 10 of 28 ensure that a sales person officers (commonly referred to as Feet on the Street) should not travel more than 30 minutes to meet a customer. Attractive incentive plans were 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 went up to 80% of IndiaMARTs volumes due to these rampant customer acquisitions. Within a span of two years, the rate of customer acquisition had climbed to 2500 customers a month, from around 400 customers a month. IndiaMART had spent Rs.40 Crore in a year in branding and customer acquisition process. 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. 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 got from their customers through the IndiaMART platform. Part of the problem was attributed to the production department, which was responsible to work in partnership with the suppliers to ensure high quality 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 an increase in 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 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 went down from US$742 per month in 2009 to US$500 per month in 2011. This coincided with the period when eCommerce businesses were rapidly gaining ground in India companies like 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 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 in anyway, 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 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 USA. PNS service came with several bundled advantages. Whenever a buyer called on the suppliers 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 tracked a huge value for SMEs considering they did not have any organized 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 buyers search. Also, there was a cut down on 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 investment was justified.

IndiaMART Page 11 of 28 By March 2012, IndiaMARTs 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. 2013-14: The Turning Point Inadequately equipped processes and team, high cash burn, high customer churn diminished value delivery. Above all, due to crowding of non-serious suppliers on the platform, the buying experience was getting impacted most of the performance indicators were signalling caution/ bad times ahead. IndiaMARTs leadership needed solutions for managing 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. Till then, IndiaMART had relied on internally equipped resources, as they 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 their weakness they needed more talent and lateral hiring was the only recourse. IndiaMART started looking out for people to join them at all mid & senior levels of management. The cash burn had reached above Rs.4 Crore a month, but Dinesh was not very worried about high burn rate, it was one area that he was quite familiar with and was confident to bring it under control within 3-6 months time. 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 step in this direction. The team that had swelled to over 5000 employees was brought down to about 3000. Dinesh managed to bring the cash burn in control 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 refusing paid listing to these customers. (See Exhibit 5: Supplier content SLA signoff for production team to make artwork). IndiaMART introduced a four-category classification system to rank the supplier content (see Exhibit 6: Supplier Ranking Scheme 2013 and Exhibit 7: Supplier Ranking Metrics), 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 setup. The OVP team ensured that the customers 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, due 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 in full (See Exhibit 8: IndiaMARTs customer acquisition process). A series of product innovations were implemented in quick succession to improve the value delivery to suppliers. Till then, IndiaMART used to impose a limit on the number of products that a paying member could showcase in its catalogue. IndiaMART removed the cap on number of products. It was raised to 400 (virtually unlimited) for SMEs. This enhanced the value proposition of the catalogue, especially for the customer, and also gave a big fillip to the marketplace. This rationalization contributed to significant increase in the ARPU numbers as well (see Table 1: ARPU trends (2004-13)).

Table 1: ARPU trends (2004-13)

By this period, a surprise benefit of the PNS service came in the form of buyer success ratio IndiaMART was able to track and measure the calls that were getting answered, and also started educating its customers on the importance

IndiaMART Page 12 of 28 of attending these calls which was later linked to their position in listing on marketplace, compelling most of its members to start taking IndiaMART Buyers calls. IndiaMARTs 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 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 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 put in place 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 buyers marketplace. Anyone could see the full requirement, except the contact details of the buyer. Thus, was born IndiaMARTs 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, i.e. one gets to know about the requirements only after the lead lands in 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 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 has remained unchanged until February 2014. Very soon after its introduction, there were over 100,000 active buying requirements on the IndiaMART platform. With the formation of the buyer market place, IndiaMART gave the sellers on the platform an opportunity to source material for the products that they make through 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 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 which an ARPU of US$ 503. Its revenues primarily stemmed from subscription to list on its online directory of suppliers stood at Rs.127 Crores (in Mar 2013), up from Rs 36 Crores in 2010 (a CAGR of 52%). Due to heavy spending on infrastructure and people, IndiaMART made a loss of Rs.8.8 Crores for the year ending March 2013. (See Exhibit 9 : IndiaMART Financial Information). In the meantime, IndiaMARTs employee count also grew from 1412 employees in Mar 2010 to 2689 employees in Mar 2013 (this was after the rationalization and trimming of rampant customer acquisition spree) bringing with it a rising employee cost (see Table 2: Employee count).

Table 2: Employee count Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Employee count 1412 3714 2916 2689 2800

In order 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 taken very seriously. The servicing team was instructed to do a complete 360 review of customers catalogue, whenever a ticket was raised.

IndiaMART Page 13 of 28 Several similarities could be drawn between the year 2001 and 2013 however, this time, one key difference emerged. In 2001, Dinesh & Brijesh were single-handedly managing multiple roles, whereas in 2013, he had a strong leadership team in place 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 grew significantly, riding on the back of platform success matrices. Customer churn had improved, the sales team started exhibiting greater vigour, and there was a sense of urgency amongst all. At the same time, several eCommerce companies (Snapdeal, Flipkart, and many more) were receiving huge VC funds. Post its successful IPO flushed with funds, Justdial had started spreading its presence beyond Tier-2 cities. Dinesh could see several challenges ahead, however, the immediate need was to ramp up its customer acquisition rate and get the organization back on track to achieve the target of 100,000 paying customers. 2014 and the Way Ahead As on Feb 2014, IndiaMART had a pan-Indian presence with total 60 offices and employing over 2800 employees. It attracted 10 million visitors per month to the website and had over 49,000 paid subscribers, 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: cataloguing 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 & 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 scratch. Brijesh took this challenge upon himself, 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 & consumables. Within five months of Brijesh giving a concrete shape to the idea, Tolexo had built Indias 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 & Brijesh believed that Tolexo would help IndiaMARTs value grow by about 100x in the next three years. As IndiaMART entered the financial year 2014-15, 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 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 came from mobiles.

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Table 3: Trivia on Indias smart phone market 94% of India Smartphone users access the internet on their phone Almost 80% of Indians have performed a financial transaction on the phone Most popular activities online 98% emailing 76% Searching or buying 69% download music 62% search jobs 61% social networking 59% searching or buying travel products 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 In keeping 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 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 mobile 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 gets that information immediately and didnt 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. 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. 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.

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 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 suppliers response to the buyer queries, buyers order placing, and suppliers confirmation of order fulfillment.

Given the power of the mobile site and App, it also brings the question of what functions be enabled

through mobile. Replicating the IndiaMART site on the mobile, while technologically feasible and strategically tempting, might turn out to be counterproductive. A vast number of infrequent activities that happen on the IndiaMART site such as catalog uploading, content editing, and adding new products and services might be possible on mobile, but may be better off 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. Did this challenge call for a separate team that was capable of responding to this mobile opportunity, or would IndiaMARTs 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.

Ranking of suppliers: re-prioritization The reduced screen-size of the mobile phones and tablets required providing only the appropriate search results for any category of suppliers. Currently IndiaMART displayed suppliers in the order of their package subscription and within each package are (say platinum), suppliers appeared in a random order. A mobile user would want no more

IndiaMART Page 15 of 28 than 5-10 search results but with a greatly increased relevance. Consequently, IndiaMART had to develop a mechanism of ranking the suppliers. Given that the primary source of revenue currently is 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 in itself debatable. 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 for and display results from that area. This logic would work best for services that inherently valued local search (like JustDial), that greatly benefited from clustering of suppliers. In the case of a B2B platform like IndiaMART, this clustering could have serious implications. While certain areas could be home to a large number of suppliers, certain others would 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 A way 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. That would require large financial 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 their 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) amongst its clients (suppliers and buyers). 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 importance of issues like 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 past purchases in relation to the products in their catalogs. 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 may be required. Reducing supplier churn Once acquired, suppliers/ buyers might not continue their engagement with IndiaMART, and therefore might 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 reducing the supplier churn, it was important that the platform provided sufficient number of relevant business leads, and invested in appropriate supplier education. Managing employee attrition Employee attrition was another challenge facing 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. 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 got back to his office quickly.

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Exhibit 1 : IndiaMART Site details

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Exhibit 2 : IndiaMART service offerings & deliverables

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Exhibit 3: Supplier Signup form

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Exhibit 4 : Proforma invoice used by FOS to collect data from suppliers

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Exhibit 5: Supplier content SLA signoff for production team to make artwork

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Exhibit 6: Supplier Ranking Scheme 2013

A Rank B Rank At least 1 Photo Product At least 1 Photo Product

At least 1 Extended Profile No Extended Profile

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 Testimonial Testimonial

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Exhibit 7: Supplier Ranking Metrics

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Exhibit 8 : IndiaMARTs customer acquisition process

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Exhibit 9 : IndiaMART Financial Information

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Exhibit 10 : Internet User Statistics, India (2012)

Source: Ethinos digital Marketing

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Exhibit 11 : Concept of Buy Leads

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Exhibit 12 : Pricing of services on IndiaMART