About Just Dial
Just Dial has a near monopoly business in local SME search. So, if you want to get in touch with a local doctor, florist, plumber, movers&packers, restaurant, travel agent, etc etc - Just Dial is the place to go to. Just Dial has 15 million SMEs listed on it, and gets about 120 crore search queries in a year. Just Dial earns its revenue from paid listings - a section of the SMEs listed on it pay Just Dial so that more and more of the searches are directed to them. At about 60x PE, it is fairly valued - considering that its current business can reasonably be expected to continue to grow at 35% for the next few years.
But the current business is under threat from changing customer expectations. Customers are not merely interested to get the contact info of a local SME. They also want to know what price would be charged by the local SME. They also want to transact (purchase/sell) with the local SME online. This threat is not immediate, but will start playing out after 3 years or so…
At the same time local SMEs are also under threat from ecommerce players like Flipkart and Amazon. As more and more purchases get done online, and with increasing penetration of internet on mobile devices - local SMEs are desperately in need to be able to sell online.
In this pot-boiler, Just Dial is entering with its own ecommerce strategy. Just Dial will leverage its existing relationships with SMEs to provide the SMEs with an ecommerce platform. In the process Just Dial will evolve from a search platform to a “search + discover price + purchase” platform.
The launch of ecommerce by Just Dial (including advertising / promotion campaigns) is expected in July 2015. Just Dial is earmarking about 100 crores for the advertising / promotion campaign - which is not a concern as they have about 1000 crore cash reserves. Already pilots have been done in many cities, with highly encouraging results (e.g. average ticket size is 17,000 Rs which is much higher than competitors. E.g. good traction in terms of people booking airline tickets, movies, etc). Just Dial is working on a total revamp of their website and mobile app - the revamped website and the new app will be available soon.
Success in the e-commerce effort will mean geometric growth, due to the super-blazing growth of e-commerce and increasing penetration of internet and mobile devices. It is not difficult to imagine stock prices going up 10x in 2-4 years if the ecommerce foray of Just dial gains traction and becomes successful.
Differentiated strategy / Competitive Advantage
What differentiates Just Dial from Flipkart, Amazon, Snapdeal? Why will they be able to compete?
Just Dial’s strategy is capital efficient (requires very little investments) unlike the massively capital hungry business models of Flipkart, Amazon, etc. The massively capital hungry models of Flipkart, Amazon are probably more suited for wealthy countries like US, Europe, and probably too capital hungry to succeed in India.
A customer purchasing through Just Dial, will be fulfilled by a local retailer / service provider. So, the delivery will be much faster. They are planning a hyper-local delivery within 2 km radius and these orders will probably be delivered in less than an hour. They are also planning same-day delivery for orders placed before 2 pm.
Just Dial has existing relationships with 15 million SMEs across India, which it can leverage. None of the others have such a network
For a local retailer to sell on the Just Dial platform - he should have his inventory (and prices) made visible to the Just Dial platform. For this, Just Dial would provide the local retailer a cloud-based mini-ERP software, from which Just Dial will earn subscription income. Once the local retailer adopts this software, he will be hooked up with Just Dial for the foreseeable future (e.g. like shops using Tally for accounting).
In the future, Just Dial will charge the retailer a small commission from local retailers for purchases done through its platform. Just Dial will be earning commissions on each sale, unlike the model of Flipkart, Amazon - where they make losses on each sale because of price discounting.
Just Dial will also hook up with Flipkart, Amazon, and all other ecommerce players. Thus, a customer transacting on Just Dial will be able to compare prices from local retailers with those of Flipkart, Amazon, Snapdeal, etc. Just Dial will thus be playing the role of an aggregator, while the others are not in a position to play that role.
While Flipkart, Amazon have started making noises about hyper-local delivery - Just Dial is way ahead of them as they have already developed the capabilities and finished pilot testing, and are very near to launching these services.
A key risk is that execution (of an excellent strategy) might be poor. Will especially have to wait for the revamped website, mobile app - as the current website and mobile app are not upto the mark.
Another risk is that JD ecommerce platform fails to get traction among customers - especially because of the hyper-competition in the ecommerce space.
Another risk is on how JD manages to achieve customer satisfaction. Since, purchases on JD will be fulfilled by local retailers, it is important that JD is able to differentiate between the local retailers who provide the best satisfaction to customers (JD has planned various review, rating mechanisms, JD Guaranteed type of sheme, etc. for this).
Another risk is the entry of aggregators like Google (Google is planning to implement the “Buy” button along with its search results)
Just Dial has an excellent and proven management - I haven’t heard any concerns about the management so far. Will be glad to know if there are any concerns.
Disc. Invested at lower levels.