In early 2020, the management of SKF India was discussing how it would distribute its ball-bearings and components online. Should it opt for big platforms like Amazon and Filpkart? Or, do it themselves?

SKF India is a component-manufacturer that caters to automotive and industrial customers in India. It clocked Rs 2,707-crore in FY 2021 revenue, and has more than 455 distributors and three factories.

The management decided to build a technology platform in-house, even though its core competence is manufacturing. It would build and operate an online marketplace called emarketplace.in.skf.com.

“The biggest challenge we face in the market is about the authenticity of our products,” Mitra asserts. “There are a lot of people who try to make counterfeits.”

This was a decisive factor to run and manage its own online marketplace because it could not assure quality to its customers by selling through third-party online platforms, unlike its competitors.

In the days before the COVID-19 pandemic, SKF India would sell its components to distributors, who would then sell to end-customers, ranging from the auto industry to steel manufacturers and paper mills.

"Earlier, we hardly knew where this product was going," Mitra says. "Now, we are able to capture this data, which helps us make more intelligent decisions in terms of the segments we need to focus on."

SKF India is integrating distributors to the online marketplace. So far, it has brought Gurugram-headquartered Vashi Electricals onto the platform, which gives it access to more than 9,000 pin codes.

In effect, when customers place their order on the SKF India marketplace, they get redirected to Vashi Electricals, which completes the transaction, and manages the last-mile delivery of the components.

Currently, the e-marketplace delivers more than 1,000 products to around 9,500 pin codes. SKF India wants to scale that to 19,000 pin codes. “The long-term target is to get into more micro-markets, where speed of deliveries is critical,” Mitra says.

It will add more distributors locally or work with fourth-party logistics companies to ensure that the last mile delivery happens quickly and across India.

SKF India's warehouses cover major regions, such as Gurugram in the north, Jamshedpur in the east, Bengaluru and Chennai in the south. Its manufacturing facilities are in Pune, Haridwar, and Bengaluru.

“Our distributors are widespread—even they don't reach some of the pin codes we want to reach through our online store,” said Manish Bhatnagar, Managing Director of SKF India, told analysts during the earnings call of the first quarter of fiscal year 2022. But, the e-marketplace is a "great way to reach more customers, increase our share. It's also a fantastic way to reduce counterfeiting.”

The e-marketplace is helping the ball-bearings manufacturer to gauge the demand from end-customers.

The earnings of the top three players—Schaeffler India, SKF India, and Timken India—are likely to grow between 23 percent and 40 percent in this period, driven by technological differentiation, the report added.

Digital sales and future-ready workforce are two of the six focus areas for SKF India. For now, it is innovating to improve the experience of end-customers.

The company is also relying on technology to move towards fee-based models. "We are really trying to move to a model where we are so sure about the analytics that we do," Mitra says.

SKF India is providing condition-based monitoring, in which it is using internet of things (IoT) devices, gathering data, and using that to predict failures before they happen.

Under the fee-based model, SKF India is not billing a steel manufacturer for the number of bearings it buys, but for the amount of steel it produces. It's output-based pricing!

SKF India is promising improved efficiency of machines to its customers with this performance-based business model, as they won't bill if the plant has a failure.

It has already signed a pay-per-ton performance contract with the Steel Authority of India (SAIL) for a period of five years. SKF's solution raised SAIL’s plant utilisation by approximately 40 percent, according to the Edelweiss research report. "For SKF, pay-per-ton has increased the share of its bearings business from 0 percent to 100 percent with SAIL," it added.

However, for this model to work, SKF India's customers need to have a certain business maturity. “This is something that has to be done only with the partnership of the customer,” Mitra says.

When the pandemic started in March 2020, SKF India was yet to piece together its online marketplace blueprint. Little did its management know that the blueprint would result in better planning and forecasts for its factories—and lead them to an output-based pricing model for customers.