Commission Based Business

Doing business has always been interesting and one of the most attractive businesses is commission based business. You sell one product, keep your margin aside and let the parent company handle everything else. The most established commission based / lead based businesses are Just Dial, Sulekha and India Mart, Flipkart, Snapdeal and Shopclues (Indian Context) to name some. These do not sell any product directly or do not produce anything.

Flipkart, Snapdeal and Shopclues Model

These companies started as ecommerce stores with limited number of products which later converted them into Market Place. Now they do not sell anything. They provide a selling platform for vendors (WS Retail which was initially with Flipkart, no more belongs to them).

The Market Place Model

As first step Dealers / Vendors have to complete registration formalities including sending or uploading all document copies required to complete the process.

After that vendors have to upload their products on the portal. To manage these products all these websites have dedicated website panels for vendors.

Product catalog for the vendor is ready to go live and products in digital form are published on the portal which can be seen by customers online.

Most of the companies do not charge anything for registration as vendor. But later they charge anywhere between 15 to 20% of the product cost per sale (this percentage sometimes gets bargained depending on the unit sales commitment by the vendor). This cost also includes delivery charges.

This 15 to 20% amount later makes the company grow and expand.
All marketing and brand building activities happen for the market place only and if a vendor need to advertise or promote a product on this portal he/she has bear advertisement cost.

In case of any dispute with the customer

In most of the cases all major market places have return policies and this cost is again imposed on vendors for delivering poor quality and the customer remains with the marketplace or brands like Flipkart or Snapdeal.

All warrantees are provided by the vendors.

Just Dial, Sulekha and India Mart

These brands are not very different from each other in terms of nature of work for the end customer. The only difference is in the user interface and data collection model. At the end every one of them is same.

Leads based model

All these companies allow free registration on their portal for companies, customers and manufacturers etc and create profile along with product catalog and some of the times contact details are replaced with their information. They promote their portal and ask customers to place their requirement with a promise to revert with potential companies that can fulfill this requirement.

The earning source

They approach companies with a promise to increase their sales by providing customers. These leads are paid and companies sign up a contract with them for this service. Average potential customer name or a lead price is around 150 to 200 Rupees depending on the contract and it is sent to 12-15 different companies. So each customer requirement generates them 2500 to 3000 rupees.

Who is making Profit?

Companies like Just Dial, Indiamart and Sulekha are making profit for sure because they are not dependent on deal closure.
Customers are getting 12-15 companies list that can fulfill their requirement (sometimes this becomes irritating as well but that is part of business).

In case of Listed Business (who is getting these leads or requirements) it depends because with every potential customer they get 10 competitors.

So no matter what the circumstance are, these companies will get take their commission (share) away with each customer requirement or each sale and with each day passing they are becoming bigger and bigger.