You are here: Home » Companies » News
Business Standard

Snapdeal looking at building infra over profit

It is estimated that the sector will start making operating profits by 2020

Arindam Majumder  |  Kolkata 

Though e-commerce is being touted as the “sunshine sector” in Indian business, one of the major players, Snapdeal, is now looking at building its infrastructure over profitability.

“If we want to turn profitable, we can do that in two quarters. But, as of now, our focus is on building infrastructure for the sector, through logistical support and warehousing to the sellers,” said Kunal Bahl, co-founder and chief executive officer. Infrastructure renting to sellers happens on a no-profit-no-loss basis.

Snapdeal, founded by Bahl and Rohit Bansal in 2010, could be looking at a total annual gross merchandise value (GMV) of $9-10 billion (Rs 54,000-60,000 crore) in 2015.

With several rounds of funding from investors, including Ratan Tata, eBay, Temasek and Premji-Invest, the company has emerged as one of the fastest-growing online marketplaces in India. It has about 40 million registered users and about 1.5 lakh sellers transacting on its platform. According to Bahl, Snapdeal has a market share of 35 per cent.

“Look at Alibaba in China; they turned profitable in the 11th year. Now, it generates over $5 billion yearly. Our business model is similar to theirs,” Bahl said.

While there have been debates over whether the e-commerce business is sustainable or not, a recent report from UBS said investor concerns about e-commerce being a bubble in India are misplaced. The report said according to its estimates, the sector will start making operating profits by 2020.

An analysis of the supply chain of offline retail by category shows that there is adequate margin for e-tail in future. The inherent operating leverage and a 700-basis-point discount, as a percentage of GMV, should lead to operating profits in 2020.

Consulting firm Technopak estimates Indian e-tailing will be worth $32 billion by 2020, more than 10 times its value of $2.3 billion in October last year.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, May 22 2015. 00:35 IST
RECOMMENDED FOR YOU
.