| CASE STUDIES |
Baazee.com: Under the hammer and over the moon |
Auctions might have seemed like a rich man’s game till recently especially if one were to go by the manner in which they are projected in Bollywood films. But with the advent of the Internet, the scenario as well as the general perception on auctions has changed dramatically. Auctions have now come within the common man’s reach, thanks to online market place Baazee.com.
What is on offer?
The dream project of two Harvard graduates – Avnish Bajaj and Suvir Sujan – Baazee.com has, in a way, redefined the auction business in India. Today, it has become the ultimate destination for person-to-person e-commerce transactions, where anyone can sell or buy almost anything in an exciting but secure auction format.
Baazee, through a world-class Internet auction infrastructure, has created an online market place that is free of middlemen and unconstrained by geographical boundaries. It promotes interaction between buyers and sellers where products can be bought and sold at prices determined real time. In other words, Baazee.com enables frictionless interaction between buyers and sellers.
Baazee also offers fixed price and classifieds trading formats and categories that are rapidly migrating to the platform – for instance, used goods, art and jewellery and travel. Typically these are categories where price discovery is essential or where there are perishable goods or high margins.
What inspired Baazee?
Inspired by the eBay model – a client of Goldman Sachs, and the company where Bajaj worked – Baazee.com was founded in March 2000. Talking about his inspiration, Bajaj says, “The inspiration for Baazee.com came from watching the success of a person-to-person trading community business model on the Internet worldwide, and most notably in the US.” While the retail market in India is getting organised recently, there is also a vast difference between the cities and the smaller towns of the country, in terms of access to consumer products. This fact turned out to be a boon for the online auction model of Baazee. Today there are people from the remotest parts of the country selling and buying products on Baazee. In fact, 40 per cent of the transactions on Baazee happen from smaller towns in the country.
How it all began?
Baazee had a planned and calculated entry into the online market place with proper investments. Starting with an initial investment of Rs 2.5 crore the online auctioners managed to raise additional funding of Rs 100 crore from investors. Bajaj says, “We were lucky as we managed to win investors over in a very short period and by May 2000 (four months after launch) we were very well funded.”
Getting in clients or visitors has never been a problem for Baazee. Since it had an online trading model, customers started homing in right from Day 1. In the last three-and-a-half years, the company has made significant strides in improving the experience for both buyers and sellers – whether businesses or consumers. Today, with statistics like more than 2.4 million registered users, 35,000-plus monthly transactions (with an average sales value of Rs 1,500 per transaction) and 32,000 potential buyers, Baazee is certainly a successful Internet business model. Today, this online auction market has more than 83,000 sellers auctioning products ranging from mobile phones and cameras to diamond jewellery and electronic products.
Where does the money come from?
Although Baazee started without any revenue model with selling and buying products on the site a free affair, it introduced a transaction fee last March. Though even now, its services are absolutely free for buyers, a successful seller is charged with a transaction fee. Fiscal reports suggest that annualised gross merchandise sales on Baazee are to the tune of Rs 90 crore.
The success of a P2P auction model inspired the Baazee team to try out a B2B and a B2C auction model catering to the needs of manufacturers and marketers. Says Bajaj, “The success of the P2P auction model made us realise that we can apply this model very well to business-to-business trading as well, and we have been fairly successful in helping large organisations save significant costs using our online trading model for procurement.”
Today, Baazee is active in the B2B business arena and has a number of large clients doing crores of reverse auctions and market making through Baazee, which lends further solidity to its financials. The company primarily focuses on horizontal procurement areas like freight, packing, printing and also on verticals like auto, engineering and banking.
In the B2C section, renowned brands such as Kenstar, Daewoo, Samsung are selling their inventories directly on the site. But these deals are routed through an existing Baazee trader since the manufacturers are unable to ship and service end consumers directly. The trader takes a very nominal commission (less than 5 per cent) but the bulk of the discount is actually passed on to the consumer. Just recenty, the online auction portal organised a music sale putting together a collection of original Indian and international music cassettes and CDs. This sale turned out to be mega hit as the site claims that there were buyers who purchased more than 75 to 80 CDs and cassettes in one go using credit cards. Pricing of the products has truned out to be the key motivator in the music sale. The sale offered CDs worth Rs 400 for just Rs 100 and cassettes worth Rs 125 at Rs 50.
How does Baazee talk to its consumers?
The advertising strategy of Baazee is quite focused and clear. The company has been advertising extensively on television, particularly on the STAR bouquet of channels (STAR India has invested around Rs 45 crore on the site). Its campaigns are primarily focused on establishing Baazee as a credible brand addressing e-commerce related barriers. Its latest campaign helped establish Baazee as a destination for key categories like mobile phones, electronics goods, photography equipment and jewellery. Apart from these categories, Baazee has managed to get itself a beachhead both in the form of categories as well as hot properties like 1-paisa auctions, bulk auctions and second-hand products.
Who are the partners?
Being a marketplace and a mass brand, Baazee has forged alliances with a lot of sites catering to different genres of audience. These include horizontal portals like Yahoo!, e-commerce sites like Indian Railways, news-based sites like HindustanTimes.com, Financial institutions like ICICI, HDFC and UTI.
To facilitate e-payments for online shopping, Baazee tied up with Global Trust Bank in May 2003 to enable registered customers of GTB Internet banking facility to make payment towards their purchases on the Baazee online store.
What does the future look like?
In the near future, Baazee plans to focus on giving a wider choice to the buyer both in terms of products and payment mechanisms (it has already started bank transfers as a means of online payment), and actively engage in reducing friction between buyers and sellers. It hopes to play the role of an intermediary that helps build a trustworthy and secure platform.
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