As disposable incomes steadily rise, young Indians are preferring to access services from within the comfort of their homes. Numerous ventures are jumping onto the opportunity, giving consumers the convenience of ordering food, renting apartments and planning holidays online.
Such online ventures also face fewer operational challenges and require lower investments than e-tail sites, such as Flipkart and Snapdeal, as they carry no inventory of their own and typically only function as links between service providers and consumers.
“We like to think of ourselves as the nursery of Indian ecommerce,” said Pranay Chulet, 40, chief executive of online classifieds site Quikr, which is backed by investors like Warburg Pincus, Matrix Partners India, Norwest Venture Partners and eBay. “The growth on the services side has mostly been overlooked as most of the discussion in recent times has focused on online retail.”
Chulet’s company, which links users with service providers and retailers, is aiming to earn $100 million (over Rs 620 crore) in the next three years. Founded in 2008, Quikr sees about 30 million unique visitors a month and earns revenue through premium listings, advertisements and lead generations. But the actual transaction takes place offline without any intervention from it.
Across the Rs 62,000-crore Indian ecommerce sector, providers of online services have shown more longevity than most others.
Even during the dotcom bust in the early 2000s, it was companies like travel site MakeMyTrip that showed more resilience. Also, most blockbuster initial public offerings have come from online services firms that survived the period of turmoil. InfoEdge, which runs jobs portal Naukri, online classified site JustDial and MakeMyTrip are cases in point.
“It is in the past two years that we have seen tremendous growth. We are growing 100% every quarter,” said Sumit Jain, 28, who cofounded real estate portal CommonFloor in 2007. The company is targeting to earn $25 million (over Rs 155 crore) in revenue in the next two years. This burst of growth can be attributed to the companies filling a specific need and doing away with middlemen. “These companies provide customers with choice and make them feel empowered,” said Pragya Singh, an associate vice president at advisory firm Technopak.
Prashanth Prakash, partner at Accel Partners, said “these companies tend to solve a very compelling and immediate need.” Accel has invested in online retail firms, such as Flipkart and Myntra, as well as online services companies like BookMyShow and CommonFloor.
“They don’t need to hold inventory or worry about logistics, many service plays are more capital efficient and that is attractive to investors,” said Prakash. In 2013, non-product commerce firms received over $140 million (over Rs 870 crore) across 32 deals. The margins are better too. “Whatever you sell, a large part of it goes to the bottom-line in a classifieds business,” said Vivek Madhukar, chief operating officer at Times Business Solutions, which operates portals such as TimesJobs, SimplyMarry and MagicBricks. “In comparison, ecommerce portals are often selling products at below cost.”
While the firms do not need to spend heavily on supply chain and logistics, they do invest into technology and information gathering. CommonFloor’s 500-strong employee base is skewed towards technology and operations.
“We are an information marketplace and in India getting quality content is tough,” said CommonFloor’s Jain, who raised $7.5 million (over Rs 45 crore) in July from existing investors Tiger Global and Accel Partners. CommonFloor is free for its individual users but business users like builders and agents pay a fee.
The user experience online is also important, especially as there is no product being sold. “We constantly work on our online interface and ensure it is easy for our user,” said Rohit Chadda, 30, managing director of Foodpanda, which links customers with restaurants online and through the mobile.
The company, which does not handle food deliveries, has created a tech platform that is installed in most of the 2,500 restaurants that are part of its network to ensure speedy fulfillment of customer orders. However, entrepreneurs said the hiccups pale in comparison with the potential.
Smartphone user numbers in India are expected to reach 450 million by 2020, according to a study by industry body Technopak. These users, most of them below the age of 35, are expected to drive growth for the online services.
“Mobile is the future for services ecommerce. A customer will want to place the order for his dinner while he is on his way home and that he can do only with mobile,” said Chadda of Foodpanda, which operates in 14 cities. Already, over half of Quikr’s users and a fifth of CommonFloor’s access the platforms through handheld devices.
It has also led to the emergence of players that cater to a niche category, especially in travel. While ticket booking sites like Makemytrip and Cleartrip paved the way, the category now has companies that provide services as varied as last-minute hotel room bookings to mobile-based tourist guides.
“We could have gone the aggregator way and started a business of travel aggregation of bus or air tickets and tour operators. But that’s a commodity business,” said Deepak Wadhwa, 30, cofounder of two-year-old WeAreHolidays. The startup creates customised travel itineraries for as low as Rs 49. Besides planning, the company, which has about 200 paying customers a month, also does bookings for an additional fee. For these entrepreneurs the potential for online services is endless. “Look at the benchmarks. Job search has almost completely shifted online and so has matrimony,” said CommonFloor’s Jain. “There is no reason why other services cannot.”