BuyThePrice CEO Ranjith Boyanapalli on switch to marketplace model, break-even & more

BuyThePrice.com, an e-commerce site owned and operated by Hyderabad-based MyZingo eCommerce Service Pvt Ltd, recently pivoted from e-com to a full-fledged marketplace (read here for more on that). The e-tailer had earlier raised an undisclosed amount in angel funding from Rajan Anandan, Rehan Yar Khan, Sunil Kalra (all part of Indian Angel Network) besides an unnamed individual. This was followed by its first institutional round (in February this year), where Naspers, a South Africa-based multinational group of media and e-commerce platforms that is listed on the Johannesburg Stock Exchange, through its arm MIH, invested Rs 8.5 crore ($1.7 million) in the company. While the company has not yet disclosed that transaction, sources close to the deal had confirmed the development to Techcircle.in. We had a quick chat with Ranjith Boyanapalli, co-founder and CEO, BuyThePrice, to get a better idea on the rationale behind the switch in business model and what the company is up to as it targets a break even by 2013-end. Edited excerpts:

Why and when did you switch your business model?

E-commerce was always portrayed as a low entry barrier business that had low capital requirements, but that is not the ground reality. E-com companies today are spending loads of money on customer acquisition and marketing and the economics of this is not very healthy, since you end up spending a large amount on acquiring each customer, which will actually take 3-4 years (assuming the customer is doing at least four transactions per year) to recover the cost that is spent on acquiring them. We decided it was better to become a bridge instead that enables small and medium size sellers to sell to a larger geography via the online route.

It has actually been close to a year since we held any inventory. We had started running a marketplace in stealth mode since late last year, but had not made it public knowledge, since we were still building the technology and the resources required to effectively operate a marketplace.

If that's the case, why did it take you so long to disclose the same?

We did not disclose it because running and managing a marketplace has its own technological requirements and we were in the process of building technology for the same. Also, at the end of the day, the customer is not bothered who the seller is, if they get their products on time and in a good condition.

So why disclose it at all?

For quite a few reasons, firstly, not disclosing the seller meant we had to handle data (on the site) like price changes and availability of stock, which was a pain since there were a number of sellers and the information was not being updated as quickly as it should have been.

Secondly, we looked at the consumer evaluation criteria and felt not all customers were price driven. There are customers who want faster delivery of products, others only want COD (cash-on-delivery), some only want cheaper prices, while some only want to purchase from a seller of their city. But without showing seller details, we were not able to offer all these to the customers.

Now, we can offer them a multi-value proposition since every product has offers from multiple sellers and each of the offers include price, shipping fee, delivery time, warranty, name of seller and their location. Basically,  giving the customer a variety of choice.

With so many marketplaces in place, how do you differentiate yourself?

We will do vendor evaluation and will remove them if they are not performing well. But the evaluation will not be only based on customer reviews, it will also be data driven. For customers, apart from customer ratings and reviews of sellers, we will also provide key data like returns percentage (the number of orders that are returned to the seller), cancellation percentage and percentage of delivery time promise kept will also be mentioned upfront so that customers can make informed decisions.

We are also building analytics for sellers, like for example, if 100 iPhone's were sold on BTP, we will send each seller data on how much share did they have of the total sales, so they can evaluate why they lost out on the remaining. We also give them suggestions like if you had priced the product Rs 300 lower or if they were shipping a day faster, the customers would have chosen them over the other sellers. So the goal is to provide value to both customers as well as sellers.

How much traffic are you getting as of now? What is the conversion rate?

We are getting around a lakh visitors on a daily basis, out of which 40,000-42,000 are unique visitors. Like any other site, it is a mix of paid (20 per cent), direct (30 per cent) and organic traffic (50 per cent). Our conversion per cent from organic traffic is 1.7 per cent, from direct traffic is 1-1.2 per cent and from paid its 0.8 to 1 per cent. The top cities for us in terms of orders are Delhi-NCR, Mumbai and Hyderabad.

The revenues are generated from charging a transaction fee for each transaction, as well as a logistics fee if sellers opt for it.

Who handles logistics?

Sellers can choose to deliver the products to the end consumers themselves, else we have also partnered with a number of logistics firms and offer the service to them. We provide packaging material to the sellers and schedule a time when the courier boy can pickup the packaged product from their shops for shipping.

Are you looking to raise funds, if yes then how much? Also, where do you plan to invest them?

We are looking to raise around $4-6 million. But you have to understand that raising capital today is not as easy as it was two years back, since the market is not as aggressive as it was around that time.

The raised funds will be used for a couple of things that include improving the quality of logistics being offered to sellers in the form of fulfilment centres (where sellers can get their goods packaged etc)  and getting physical sellers online ready (in terms of cataloguing, etc.). There are already quite a few online ready sellers and we also plan to get them on board onto the BTP site. The funds will also be used in building the technology for the marketplace, and acquiring new customers (by marketing).

As of now, we are headquartered in Hyderabad and have offices in Delhi and Mumbai with a team of 50 people. We will also spend on setting up seller signup offices (for business development) in Bangalore and Chennai.

What are the challenges that you face?

The challenge is to maintain a balance between the sellers. Since if only a few are driving all the sales on marketplace, the others lose interest over time and can leave. In addition to that, consumer loyalty is a very fickle thing. Gaining it takes a long time so that is a challenge. Then customer acquisition costs a lot, so figuring out a way to acquire new customers without spending a lot is also a challenge.

When do you see yourself profitable?

We are looking to break even by the end of next year.