Snapdeal to invest up to $200 million on logistics in next 1 year

The firm has picked up a minority stake in logistics firm GoJavas

Online marketplace major Snapdeal will invest $150-200 million (about Rs 940-1,250 crore) in the next one year on expanding its delivery operations as the competition in the booming Indian eCommerce market heats up.

The city-based firm has also picked up a minority stake in logistics firm GoJavas, which is the former logistics arm of smaller rival Jabong.

"It is very important to have strong delivery capacity. In the next 2-3 years, we are looking at a 10X growth, which means that by that time, we will be delivering about 80-100 million packages a month... We will invest $150-200 million in the next one year on logistics," Snapdeal co-founder and COO Rohit Bansal told reporters here.

As part of the expansion plan, Snapdeal has acquired a "minority stake" in GoJavas, he added.

Bansal, however, declined to comment on the details of the deal.

Sources said the deal is pegged to be between Rs 150-200 crore.

At present, Snapdeal does not have a captive delivery arm and relies on third-party logistics.

"GoJavas will continue to run as an independent company, working with its existing clients. However, as part of our strategic alliance, we will work on launching differentiated products in the market," Bansal said.

As part of the partnership, Snapdeal will look at making deliveries in four hours from the time the order is placed and the details are being worked out.

GoJavas, which works with eCommerce firms like HealthKart, Jabong, Yepme and Lenskart, covers over 2,500 pin codes in the country.

"The key to the logistics play would be quality of service, timeliness of delivery and cost. Players which can get that right will be the leaders, especially as margin pressures starts to build with the market maturing," Ashish Choudhary from GoJavas said.

Founded in 2010, Snapdeal has over 25 million registered users and more than 50,000 business sellers on its platform.

Snapdeal, which raised about $one billion last year, including $627 million from Japan's SoftBank, has been scouting for acquisitions in mobile technology and supply chain space.

The company's co-founder Kunal Bahl had indicated that the target companies would be across sizes, ranging from less than $1 million (about Rs 62 lakh) to $100 million.

It has invested in setting up fulfilment centres to smoothen its delivery operations.

At present, it has 50 such centres across 20 cities and plans to expand this to 75 in 30 cities over the next few months.

Snapdeal counts global eCommerce giant eBay, Temasek, Myriad, Tybourne, Blackrock Inc and Premji Invest among its investors. Tata Sons Chairman Emeritus Ratan Tata also made a personal investment into the company.