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Penetration, logistics drive Snapdeal's push

The company claims to have 20 million registered users and wide reach in India

Anusha Soni  |  New Delhi 

Of late, there was a buzz that shopping site com had recently raised $75 million from Softbank, though the company didn't confirm this. The action here isn't limited to fund-raising.

Started in February 2010 by Wharton graduate and from IIT-Delhi, began in a basement; now, it employs 1,500. Initially, the company only sold discount coupons for local restaurants; subsequently, it expanded its categories and products. With about 10,000 sellers, claims it's making money with each transaction, significant when most are in the red.

The company claims to have 20 million registered users and wide reach in India. In the past quarter, it shipped five million products.

Chief Executive Kunal Bahl, who had earlier said the marketplace and inventory-led models were akin to oil and water, told Business Standard, "I completely stand by it." Bahl has reason to be proud - what he opted for a few years ago is now the trend. "Marketplace is a reality; in a country like India, you can't sustain the inventory model."

Suvir Sujan, managing director and co-founder, Nexus Venture Partners, an investor in the company, said Snapdeal had seen key pivots through the last three years, including the transition from a local merchant marketplace to a full-fledged e-tailer, offering a wide assortment of products and services. The marketplace model was suited to India, with thousands of small and medium shopkeepers, Sujan said, adding the format had its challenges, "given the high dependency on logistics infrastructure, sellers and customer experience". But with initiatives such as TrustPay (a buyer-seller protection service) and Safeship (a logistics platform for sellers to ship products nationally), Snapdeal overcame the hurdles perceived to be associated with the marketplace model, he said.

Through Safeship, introduced earlier this year, the company releases money to vendors once the customer confirms "she/he is happy with the product", a practice made popular by Chinese giant Alibaba.com.


Bahl emphatically points out that over the years, the investor's perception has seen many changes. "The men have been separated from the boys," he said, adding Snapdeal had raised funds almost every year from external investors, not existing ones. "eBay, Intel, ru-Net have invested in us; it validates what we are doing and, at the same time, keeps the company very humble." Today, the challenge for most is ensuring quality and timely delivery. In India, infrastructure, last-mile deliveries and courier services are all part of a fragmented logistics network, says Saurabh Goyal, vice-president (operations), Snapdeal. He adds Snapdeal is trying to develop "intelligent logistics" that index the best courier service in a particular area and connect it to the most efficient courier partner. The company says it caters to 1,500-1,600 cities through partnerships with 20 courier services and reaches 4,000 towns and cities through India Post.

"There is a price war going on," says Sankara Srinivasan, chief operating officer, Realty Compass. He adds these days, there is little differentiating leading e-commerce players and, therefore, it is very difficult to retain customers. "The war is about who would persevere, and you need deep pockets for that," he added. In the deal-driven market in India, Snapdeal's concept has seen positive results, though it has recorded ups and downs. The challenge is raising the ticket-sizes of deals, says Pinakiranjan Mishra, partner and national leader (retail and consumer products), EY. He said it was a matter of price and volume, adding growth in revenue was the most important aspect.

Most industry experts agreed Snapdeal had the domain knowledge, a reliable team and scalability of business to survive in the market. "I see them as a major competitor in the future, when only a few players will survive in the market," said an industry insider. Some feel Snapdeal's market share and penetration would help it secure the investor support required to survive.


First Published: Fri, September 20 2013. 00:48 IST
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