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Infibeam will expand logistics, setup data centers to focus on its seller services

https://en.wikipedia.org/wiki/Logistics#/media/File:Modern_warehouse_with_pallet_rack_storage_system.jpg

Infibeam will setup new warehouses and data centers as well as an online advertising platform for merchants, the company said during its maiden earnings conference call, post listing.

There aren’t any other ecommerce companies listed in India, and “the common understanding is to compare the company with other marketplaces”, Vishal Mehta, founder of Infibeam said. So Mehta, whose company turned profitable in 2016 and listed, elaborated on how its B2B and B2C business models work, to try and differentiate his company from everyone else.

In an environment where valuations have been hit, and path to profitability is being questioned, Mehta threw in a “when most companies in the e-commerce segment burn cash or report losses…” jibe. Some points made in the conference call:

1. Buildabazaar scalability: Infibeam earns fees for Buildabazaar by charging an initial setup fee and a monthly fee or a transaction commission from merchants. Merchants are offered subscription plans, and provided with data analytics, and assistance in terms of marketing and sales, to help close a transaction. Infibeam says that the scalability for this business model is very high, because it allows them to “acquire merchants without losing money and thereby growing the revenues from services, yet remain profitable and cash positive. ” Buildabazaar, Mehta continued, allows merchants to provide offers across marketplaces, including Infibeam.com, saying that setting up a branded store and selling on another marketplace isn’t an either-or. Infibeam had 53,633 registered merchants on both Infibeam.com and Buildbazaar in FY16.

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The company had reported that sales in the software and ecommerce related ancillary services segment (Builbazaar) posted profits of Rs 57.04 crore for the financial year ended March 31, 2016 (FY16), up 42.5% from Rs 40.01 crore in FY15.

2. Merchants want integrated services: The Buildabazaar platform comes with “red ERP solutions, which can be implemented across merchants globally.” Infibeam contends that merchants have gotten more demanding, and “respond better to an integrated solution provider compared to consortium offering multiple special providers.” Infibeam includes third party services such as a payment solution provider, “designers, loyalty solution providers” and couriers for merchants to pick from. This is sounds similar to the shopify business model. Note that Services for Infibeam are around 31% of revenue, up from 23% a year ago, and 10% two years ago. EBITDA margins in services are 52%. According to Mehta, revenue from Buildbazaar helped the company to grow its services revenue by 54% to Rs. 102.8 crore in this financial year, compared to 66.8 crore in FY15. The software and ancillary services segment also improved its performance, posting a net profit (profit after tax) of Rs 9.25 crore for FY16, as compared to a loss of Rs 10.11 crore in FY15.

Infibeam also integrates inventory from suppliers, like manufacturers, who want to sell only to businesses. It allows merchants create their own storefronts, and reactively purchase inventory from these suppliers.

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2. The .ooo domain name strategy: Mehta says that becoming the top level .ooo domain name registry allows Infibeam to acquire a merchant on one end, and bring users on the Buildabazaar platform. “It is important to note that under this strategy the company acquires merchants for service segment without burning cash for acquisition.”

MediaNama’s take: Sounds like Net4India pitching hosting and email when you register a domain name. Are there any merchants on the .ooo domain name? We don’t see how “The domain registry business places Infibeam in an extremely strong position wherein it would have the ability to earn revenue also in the future,” but time will tell.

3. Infibeam will spend Rs 37.5 crore over the next three years to set up 75 centers which combine warehousing and logistics, to offer logistics as a service to merchant. As of March 31st 2016, it had six warehouses and 12 logistics centers. The new centers are expected to generate a return-on-investment within 36 months of starting.

4. Wants its own Mobile advertising solution: Infibeam plans to buy software from an unnamed third party for providing a “mobile ad framework”. this will be purchased “over a period of next three years,” and will allow merchants to merchants to advertise across other merchants on Buildabazaar. Using their own framework will allow Infibeam to “capture margins inherently running which actually go to the (third party) advertisement framework today”. Infibeam expects its own framework to drive incremental revenues within 24 to 36 months.

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    © 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ