The most exciting e-comm play in India

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One of the most exciting e-commerce stories to come out of India is neither of a large one nor of a loss-making one. This is a relatively anonymous company called IntraSoft Technologies Limited, which might have until as recent as a year ago privately considered that it was really going nowhere, until the tsunami of the third quarter (2014-15) finally convinced the promoters that the company was indeed headed for a payback.

This is the sequence of the company's financial performance: revenues of Rs 59.57 crore, Rs 59.63 crore and Rs 122.54 crore in the first three quarters of the last financial year with corresponding net profits of Rs 0.8 crore, Rs 0.9 crore and Rs 4.15 crore. A stock that was a mere Rs 48 nine months ago (December 2014) was quoted about Rs 435 last week.

The big story is that IntraSoft is a remarkable proxy of the American e-commerce market. The company's 123Stores.com, e-commerce subsidiary markets approximately 200,000 products through 11 large e-marketplaces (Amazon.com, Ebay.com, Amazon Canada, Alibaba's 11main.com, Sears.com New Egg, Rakuten and Bestbuy.com, etc.) that are sourced from 1,300 brands.

Why would Amazon want to vacate the direct marketing and fulfilment of a number of products and enter into back-to-back relationships with third party sellers (like 123Stores.com) while engage with product vendors. Simply because Amazon would rather focus on promoting its marketplace, engage with fewer vendors (leaving third-part sellers to engage with the larger vendor universe), reduce marketing costs and strengthen its ROI (return on investment). These 3P sellers help create a new revenue stream through transaction fees, a zero-cost earnings window for large e-marketplaces. The result is that over the last few years, a new business model has emerged whereby Amazon and other marketplaces focus on consumer interfacing and third party sellers work with vendors at one end and marketplaces at the other. The numbers: third-party sellers marketed a record two billion items on the Amazon site in 2014, which was 40 per cent of total items sold.

What makes IntraSoft interesting? One, 123Stores.com is the best seller in nine markets for close to 200,000 products (adding about 10,000 products each month), which means that it is the lowest-cost seller that delivers fastest and generates positive customer ratings (more than 97 per cent), resulting in the company being the preferred product provider in that market place (which saying something in the ruthless global space). Two, shipments increased from 254,670 orders in 2013-14 to 772,981 orders in 2014-15. Three, the company turned net profit-positive. Four, IntraSoft is focused on the US online retail space, marketing products through 11 prominent US marketplaces, which virtually means the almost-complete coverage of the US e-commerce space, the largest online retail market in the world. So 123Stores.com is the 13th fastest growing online retailer in the US, 392nd on the top 500 Internet Retailer list and 1,654th on Inc. 5,000 fastest growing US companies.

This would appear modest to some people (actually, it is not), except for the fact that one would expect such a company to grow virtually (bad pun) at 100 per cent every year for the next some years.

Suddenly that changes everything.