For nearly 25 years, Dinesh Chopra lived with a locational handicap. Chopra sells computer parts, electronic gadgets and accessories from his outlet in Nehru Place—an assembly of several four-storey buildings. Although Asia’s largest computer market registers thousands of footfalls every day, only a fraction brave the filth and dilapidation to climb up. “I’m on the first floor and that’s my weakness,” says Chopra, director, Softek Surya. “I don’t get regular walkin customers.” But Chopra does not mind anymore. “Now, they land on my shop via online marketplaces,” he smiles. Softek is a registered seller on five online marketplaces, including eBay and Flipkart. “About 35% of my marketplace buyers are from South India, who have never seen my shop,” he says. His annual sales have rocketed from Rs 14 crore in 2010-11 to Rs 60 crore now; and 70% of it is from online marketplaces, which are adding “muscle to business”. Chopra is a prime example of online marketplaces—branded e-tailers who host sellers, and connect them to buyers for a commission—empowering a small business to scale up. An example of another kind of empowerment they are enabling is India Trend, which is in business only because of online marketplaces. Seven years ago, Parul Arora Mittal and her mother “tried their luck” by putting 20 pieces of jewellery on eBay. All were sold in a week. Today, Mittal’s small operation exports handmade, alloy-metal jewellery, via eBay. “We never had the resources to set up a physical store,” says the 30-year-old. Now, she has no reason to. “Since then, I have never even thought of a physical store. The online marketplace is my business place.” And their numbers are increasing. Amazon is the latest, launching its online marketplace in India in June. Globally, the world’s largest retailer earns 40% of its 2012 revenues of $61 billion (Rs 3,66,000 crore) by selling other people’s goods. Sensing the groundswell and business SATISH BATHIJA MX INFORMATION SYSTEM DISTRIBUTES COMPUTER PARTS, GADGETS AND ACCESSORIESHas 14 shop-in-shops and one standalone outlet. Joined online marketplaces in 2002, and is now on four of them. “Between 2005 and 2010, less than 10% of our sales were online,” he says. “This fiscal, we expect 35% of our business coming from marketplaces.” logic, this April, even Flipkart, India’s largest online retailer, started selling goods of other sellers—the online marketplace model—along with its own goods. “It’s the right time as we have now built the Flipkart brand,” says its co-founder & CEO Sachin Bansal, adding the online marketplace is the “right model for India”. PARUL ARORA MITTAL, INDIA TRENDS SELLS HANDMADE, ALLOY-METAL JEWELLERY Seven years ago, she “tried their luck” by putting 20 pieces of jewellery on eBay. All were sold in a week. Today, she and her staff of nine export jewellery, via eBay. “We never had the recourse to set up a physical store,” she says old. “Since then, I have never even thought of one. The online marketplace is my business place.” Such moves by e-commerce players is opening up a world of possibilities for small entrepreneurs like Chopra and Mittal. If it wasn’t for online marketplaces, says Rahul Khanna, managing director of Canaan Partners, a venture fund, “smaller retailers would never be discovered. They don’t have the brand pull, but it’s easy to ride on a marketplace brand like an eBay or an Amazon.” The consumer audience an India Trend or a Softek Surya is able to reach via online marketplaces is phenomenal. According to eBay, it has five million registered users. Flipkart says one million users visit it everyday. “Online marketplaces come with a ready customer base and provide a level-playing field for small and large retailers,” says Pragya Singh, associate director, retail, Technopak Advisors, a retail consultancy. “The reach for all is egalitarian,” adds Kunal Bahl, CEO of Snapdeal, which expects to sell goods worth Rs 2,500 crore on its online marketplace in 2013-14. Growth Unlimited The groundwork is being laid for an explosion in business by online marketplaces in India, in tandem with Internet adoption and on the trajectory that mature markets have already travelled. Sanjeev Aggarwal, managing director of Helion Venture Partners, a venture fund, believes that, today, 10% of India’s Internet population of 120 million shops online. In three years, he expects the user base to triple and about 35-40 million people to be buying from online marketplaces. Globally, the numbers being recorded by marketplaces are huge. According to Forrester Research, US company eBay saw goods worth $75 billion being transacted—termed gross merchandising volume (GMV)—on it in 2012. In China, Taobao (a consumer-to-consumer marketplace) and Tmall (a business-to-consumer marketplace)—both owned by the Alibaba Group—posted a combined GMV in 2012-13 of $163 billion. Elsewhere, Rakuten, Japan’s largest online marketplace, had a GMV of $15 billion in 2012. MercadoLibre Marketplace, the biggest in Latin America, had a GMV of $6 billion in 2012. In India, the whole of e-commerce (including travel, ticketing and e-tailing) is about $11 billion. But it’s expected to sprout wings, especially e-tailing, of which online marketplaces are a part. Technopak estimates e-tailing in India to increase from $1.3 billion in 2012 to $76 billion in 2021—a compounded annual growth of 57%. And, in doing so, attract new sellers like 30-year-old Kumar Sangamesh. This Bangalore-based software engineer quit his job at Cisco Systems to turn entrepreneur. His start-up, Brandznext, distributes health and body-care products of Khadi Cosmetics and Lively Bamboo. For two years, he sold via three outlets in Bangalore. This July, he registered on Flipkart, and is seeing one-fifth of his Rs 4 lakh monthly sales come from this marketplace. “That’s growing 40% a month,” he adds. Sangamesh feels reputed marketplaces are a solid launch pad for small brands like Lively Bamboo, a Pondicherry-based company. “Buyers are buying not only the product but have a brand premium attached to a marketplace where it’s being bought at. That helps push the product,” he says. How It Works It’s a mutual relationship: a bigger pool of sellers also helps the marketplace. “More sellers bring more choices and add depth to each category,” says Bansal of Flipkart. For example, till it added the marketplace model, Flipkart was stocking only black and white iPhone covers. “Since then, the choice has expanded to other colours and designs like pink, green, red, floral prints, etc.” There are, broadly speaking, three kinds of marketplace models, depending on how much control an e-tailer wants over a transaction. The first model is where a buyer deals with the marketplace and not the seller. When an order is placed on Jabong and Yebhi, for example, they order from the seller and are responsible for delivery. “We want to ensure a good customer experience,” explains Mukul Basana, co-founder, Jabong. But this means keeping inventory in its warehouses and running the risk of it staying unsold. The second model is where the marketplace is mostly a hosting platform, and buyers deal directly with sellers. As eBay does—it carries no inventory. “We don’t compete with sellers and don’t have a conflict of interest with them,” says Latif Nathani, managing director of eBay India. Lastly, there is the hybrid model, which Amazon follows in India. It offers buyers the option to deal directly with sellers or to enable their transaction. Anyone can be a seller on marketplaces, after being vetted by it for legitimacy, ability and customer orientation. Most marketplaces don’t charge any listing fee, but take a commission, of 1% to 15% of the sale price of a good. According to Nikhil Rungta, chief business officer of Yebhi, both large and small sellers use marketplaces as it helps them “maximise distribution”. Following his expanded presence on marketplaces, Chopra’s 400 sq ft shop in Nehru Place now resembles a small call centre. Some of his staff, of 40 people, is hunched over computers, posting orders on, and tracking from, marketplaces. “If the customer is happy [product availability and timely delivery], he will come again,” he says. “I have no overheads or air-conditioned showrooms to pay for or expensive real estate to invest in,” adds Mittal of India Trends. She has a staff of nine: two taking pictures and uploading them on the marketplace, two describing the item with keywords (like bridal necklace, measuring 16 cm, set in surgical steel), and five doing packaging and handling inventory. “I myself do the design and ship about 30 packages daily,” says Mittal, declining to share India Trend’s revenues.