B2B marketplace Indiamart has introduced an escrow service, in partnership with ICICI Bank, for its buyers and sellers, allowing for buyers to release payments to sellers only upon delivery of goods. This, Indiamart founder Dinesh Agarwal told MediaNama, “is a part of a broader plan of getting into the entire gamut of financial services with the market place.”
“There are two big areas,” he continued,”payment facilitation and trust is one, and the second is related to credit. On payment facilitation, there is a trust deficit related payments facilitation, which is the escrow business. The second is payment enablement for sellers. On credit, there is seller financing and the other is buyer credit. These are the four items that help a marketplace become more successful, and bring stickiness.”
Indiamart claims 3 million sellers, of which 120,000 are paying subscribers, who pay the company a listing and login fee. While some of these features are traditional B2C marketplace features, and B2B services sites like Elance also have escrow based payments services, Indiamart took its time. Agarwal said that in 2008, their focus was on the export market, thus enabling international buyers to identify Indian producers and sellers. At that time, they shifted their focus to the domestic business, and today, he says that 80% of its business in domestic, whereas it was just 20% in 2008.
“We didn’t want to launch anything until we hit 100,000 paying customers, because we had to become a dominant player in the domestic market. In export, it was 10,000 (paying customers) were fine because there are only 50,000 exporters. In a 10 million SME market, if you don’t hit 100,000 you don’t become a dominant players.” Agarwal says that Indiamart’s core value proposition now is that if you’re a seller, “we’ll get you more buyers” and if you’re a buyer, “we’ll get you 10 suppliers within 24 hours. That’s the core requirement for business buyers, across 80,000 categories.”
The reason behind the launch of the credit system is that the company wants to ensure buyer fulfilment, and increase seller stickiness. “A lot of people discover services on Indiamart but they don’t buy.” The idea behind the escrow launch is to ensure buyer fulfilment (and hence improve propensity to buy) and increase seller stickiness. “We will take care of the liability. That’s a big decision from an organisation perspective. I’m setting aside $1 million only for the next 6 months. We’ve done close to 1000 transactions, with 99% cases going smoothly, without a hitch. We’re taking care of the buyer discovery, KYC (Know Your Customer), seller discovery and KYC. The seller may be our customer for many years, or might be repeat buyer. We have data, to assess. We’re currently offering it for up to Rs 5 lakh.”
Alibaba and Paytm
Indiamart is expanding its services for users at a time when its old foe Alibaba is making moves in India, albeit on the B2C side, with Paytm Mall. Agarwal isn’t worried about them though: “They’re completely B2C focused as of now, and they haven’t been able to grow their B2B business in India. With Paytm and Paytm mall, they’re focused on B2C. Their B2B has been lying here for 8-9 years and hasn’t been growing at all.”
Next up is the plan to enable a payment gateway for sellers on the platform. “The more moats that I can add to the buyer and seller transaction”, Agarwal says, “the more defensive and solid it becomes.”