There will be more consolidation in the market: Kunal Bahl

Q&A with CEO of Snapdeal.con

The consolidation in the nascent Indian e-commerce industry is gathering pace, as the sector faces challenges in raising fresh funds. Snapdeal.com, the online horizontal marketplace, on Friday announced the acquisition of assets of Shopo.in, a niche marketplace for Indian designer and handicraft products. Kunal Bahl, co-founder & CEO, Snapdeal.com, spoke to Sudipto Dey on why the current phase of M&A wave in the e-com space will only gather steam. Excerpts:

This will be Snapdeal’s third acquisition since its inception three years back, after picking up Grabbon (in 2010) and eSportsbuy (2012).  Is this one of those investor-pushed deals?

This deal falls in kind of a sweet spot for us, and Shopo fits the bill for us philosophically, as they go after a niche audience. We have the largest assortment of products at best price and more sellers than any other site. Interestingly, there is no overlap among 1,000-odd sellers who sell Indian designer and handicraft products in Shopo, and our existing base of 10,000 sellers.

This offers more choice to 20 million users on our site. Also existing Shopo customers will enjoy the benefit of better customer support, and our world-class technology platform. We will migrate Shopo’s entire product assortment and sellers to Snapdeal. Personally I am very bullish on the Indian art forms as a category.  

But questions are being raised about sustainability of e-commerce business models...

Globally the only profitable e-commerce companies are the ones following the marketplace business model. Take the case of eBay or Alibaba. However any niche player in the marketplace (like shopo) needs to be very well funded to scale up the business.

I don’t believe in the inventory-led business model. In fact in India businesses based on the inventory-led model have not got funded in the last twelve months. Also there are issues around FDI in B-to-c e-commerce. The inventory-led model requires huge working capital, there are issues around pilferage, cash burn on account of unsold inventory, while the last mile adds complexities to the business.

In fact in the last three months we went through twelve propositions for buy out. We will see more consolidation in the market.

You have reportedly raised around $100 million over several rounds from a clutch of investors over the last two-three years. Any sense of when do you expect Snapdeal to become profitable?

We don’t share investment or investor information. Our strategy has been to supply local and sell national. There are 50 million small busineses in India, and only 5,00,000 of them have website, and barely 10,000 are e-commerce enabled. So there is huge headroom for growth and get these businesses online. Currently, Indian e-commerce business is estimated to be worth anywhere between $1billion-1.5billion.

This is likely to grow to around $40billion over the next seven-eight years.   

At Snapdeal we are looking at a sales turnover (value of goods sold) of $1billion in 2015. In 2013, we should be doing around Rs 2,000 crore (about $400million) of sales. We hope to be profitable in the next 18 months.