Online bargain | Outlook Business
Home  /  Enterprise  /  Trend  / Online bargain | JAN 19 , 2013

Soumik Kar

Trend

Online bargain
Quikr and OLX are aiming for a slice of a hot and growing e-commerce vertical: used goods

Veena Venugopal

"Online classifieds' job is to make the buyer and the seller meet" —Pranay Chulet, CEO, Quikr 

Preeti Misra has been looking for a sofa for a few months now. But so far, she has not visited a single furniture store. She scans listings online with an eye for things sold by itinerant travellers and on the move embassies, based on their location in Delhi and usernames. Misra, whose daughter is only three, is likely to have a few more years of spills and stains and does not want to splurge out on brand-new furniture. “These deals online are the best. They are people with good taste who have used the furniture for a couple of years and you can buy it at a quarter of the price of a new one,” she says. So far, in her quest for a sofa, she has ended up buying silk curtains, an oil-filled heater for winter and a nearly new set of learning toys. “Even two years ago, if you had suggested that I buy used furniture, I would have thought you were insulting me,” she says. “Not anymore.”

That’s true. Switch on the television and you are likely to run into an advertisement for Olx India or Quikr, two of the fastest growing online classified companies. “More and more people now prefer online classifieds over the more traditional print classifieds. This is due to various factors. Online classifieds give you enhanced reach and faster responses. The ads are active and open for a long time and the cost of placing one is negligible, often free,” says Amarjit Singh Batra, CEO, OLX India, the Argentina-based classifieds site that launched its operations in India in 2006. Since OLX unleashed its TV campaign in 2011, it has seen a 2.4 times rise in traffic.

Quikr, the Indian startup that made its debut in 2008, has about 5 million listings on its platform and claims nearly 24 million individuals and small businesses across 83 cities access the site every month to sell, buy, rent or find products and services in a variety of categories. OLX has around 8 million unique visitors and enjoys 35% market share. “There are two sides to every transaction. The buyer and the seller usually come from different walks of life. For example, a person buying a used car is from a different demographic than the person selling it. Online classifieds’ job is to help these two people meet when the chances of them meeting without a market such as this are quite low,” says Pranay Chuhet, co-founder and CEO, Quikr. Apart from the usual suspects of automobiles and electronics, online classified sites are a treasure trove of products and services. You can buy anything from a pair of shoes that have been bought on an impulse to security gadgets for your home. The listings are especially strong for items that people are unlikely to use for a long period of time. This means things such as baby cots and toys, costumes for theme parties and exercise equipment can be yours at the click of a button and a couple of phone calls. Some are almost new, some are slightly used, but all are super cheap, when compared with a brand new piece. 

In fact, some of the new things also have their genesis in these sites. Javed Alim runs a furniture store in Delhi’s Mehrauli-Gurgaon Road. He starts his day, he says, by scanning the listings of furniture in these sites. Lots of people sell furniture in very decent condition; Alim buys them, spruces them up — changes upholstery or fixes some defects — and sells them in his showroom. “Or we just use the basic frame. Quite often, our own furniture comes back to us, we fix it and sell it for new,” he says.

A rush of clicks

The Indian classifieds market is very

niche compared with its counterparts

in the developed markets

Globally, the classifieds market is pegged at $100 billion. The size of India’s online classifieds industry is about ₹1,100 crore, which is expected to grow to about ₹3,100 crore by 2016, implying a CAGR of 22%, according to a report by Edelweiss. But unlike in the US where Craiglist is the biggest classifieds site, in India there are dedicated websites for each vertical. (See: A rush of clicks) India has a growing number of internet users but the number of people willing to transact online is low. People are worried about what they are buying; they would like to see it, touch it and, with vehicles, take it for a testdrive. Since the actual transaction listed on these online classifieds sites takes place offline, it gives users a sense of comfort and familiarity. Chennai-based Sulekha, for instance, enables 25 million transactions a year and receives over 23 million visits a month. “We are evolving into a need-based site,” says Satya Prabhakar, founder and CEO, who claims the company has consistently been operationally profitable and has grown in excess of 70% over the last two years.

In plain sight

Posting an ad is often free to the user. However, if you want your ad to stand out, it helps if you pay a little money. So, most online classifieds companies channelise a revenue stream from what are called premium listings — where the user has paid some money so that his ad is displayed prominently. Over and above this, since these sites generate large traffic, online advertisements are also a source of cash flow. Sulekha, which claims to have over 100,000 paid listings, maintains that free listings will be the way forward. Batra of OLX agrees and points out that the core site will always be free and that the site’s current monetisation avenue is only the text ads provided by Google. Globally, OLX offers featured listings that allows users to get prominent placement. It however, has yet to introduce the feature in India. In contrast, Quikr charges money from advertisers and also earns through featured listings. Recently, it introduced premium listings in Mumbai, Gurgaon and Pune.

While all sites spend money on developing technology that keeps the site clean and maintains the quality of listings, going forward, the key differentiator is on the mobile. Quikr has a missed call feature, where a user gives a missed call on a 1-800 number. A representative calls you back and takes down your requirement, then feeds you relevant listings. This captures the ease, convenience and reach of online classifieds, without you having to go online at all. So if a user has given a missed call and said he was looking to, say, buy a used Hyundai Santro car, the representative would scan the listing for the car in the region and feed these to him. If you have listed to sell your Santro and paid for a premium listing, yours will be one of the first responses he receives. He e-mails you, you meet and if you agree, shake over the deal. 

While some focus on more direct methods of sale, the likes of Sulekha prefer the traditional route. “Our growth is led by advertising, coupons and a strong focus on e-commerce,” says Prabhakar.

Next is what

Now that online classifieds has helped us break our reluctance to buy used goods online, the next step is to make it easier. The real action is likely to shift to mobile phones. India is now what is called a mobile-first economy. This means that newcomers to the web are accessing it first on their smartphones. Mobile internet is growing at a much faster pace. “This makes mobile apps a key lever for acquiring internet users,” agrees Batra. 

He adds that mobile internet users account for over 50% of internet accessing population and mobile traffic has surpassed web traffic. With increased mobile penetration, it has become easy to reach out to new users who rely on their handsets to browse the internet. Currently, mobile users account for 5% of the traffic on OLX and the majority of this traffic is from its app, which also runs banner ads on the top and bottom of each page. In contrast, Quickr’s Chuhet does not view the mobile as a monetisable avenue. “In the long run, you create more value by getting more users to post content. In the short run, the mobile would be about engaging users as opposed to making money,” he says.

Directing traffic

While OLX refused to reveal its revenue numbers, clearly there is a valid business proposition in its model. The faith shown by venture capitalists is testament to this. In fact, Nexus Capital Partners, which had invested $5 million in OLX in May 2009, exited the very next year when South African media giant, Naspers, bought the site for $100 million. Suvir Sujan, co-founder and managing director of Nexus, was quoted in VCCircle saying that the firm had made “multiples on its investment”. Similarly, last May, Quikr raised around $32 million (₹176 crore) in its fifth round of funding from investors such as Warburg Pincus, Matrix Partners India, Norwest Venture Partners and eBay Inc. While exit is still some time away, Chuhet is clear that his priority is to scale up the business. “You can throttle a good thing, and just worry about getting revenue in too soon. We want to have that room for breathing. The opportunity for someone such as Quikr is humongous in India, especially because pure online commerce has not taken off the way it should have,” Chuhet had said in a media interview.

And that change is happening for sure. When Jagan Rao shifted out of his parents’ home in November, he found rare copies of comics that he used to collect as a child — Amar Chitra Kathas and others. He listed them online, with an expected price of ₹100 per copy, but wasn’t really hopeful of finding any buyers. “Two days later, I got a couple of calls. But because I was in a meeting, I didn’t answer them. Then the buyer sent me a message saying he was willing to pay ₹150 each. By the time I reached home in the evening and responded to the message, he had gone up to ₹200. I never thought these comics would be so valuable to anybody,” he says. That’s the online advantage: there is always someone who will find your junk valuable. 

Here's your chance to read the latest issue of Outlook Business for free! Download the Outlook ​Magazines app now. Available on Play Store and App Store
On Stands Now