Kunal Bahl says his mother had no issues with her son choosing entrepreneurship over employment but she failed to see what her son was up to all day in the early years of Snapdeal. While Bahl, hunched over his laptop, cranked up a new business plan or tweaked an earlier model - Snapdeal changed course six times in its four-year history - she wondered aloud if he was making a product, hawking a service or simply building castles in thin air. Then one day, she saw a picture of her son in Business Standard accompanying an interview. "She stopped complaining after that," Bahl tells me with a loud guffaw.
We are seated at Yum Yum Tree, the first floor restaurant in the slightly unkempt but bustling New Friends Colony market in south Delhi. This seems an odd place to meet a CEO for lunch; but Bahl is not your average corporate honcho. At 30, he runs India's largest online marketplace, Snapdeal.com, that he founded with school buddy Rohit Bansal in 2010, a venture that is within striking distance of a billion dollars in annual sales - no mean feat given that the largest offline retailers in India record about $2 billion in sales and they sell a lot of grocery, which Snapdeal doesn't. As I also find out during the course of the lunch, Bahl had started a detergent company while in college in the US and its products sold across all 4,000 Walmart stores there, even as he juggled three other jobs so that he could eat out as often as he wanted.
For the self-proclaimed foodie, Yum Yum Tree - it won the Mail Today award for Delhi's Best Oriental Restaurant last year - is among the best places in Delhi for sushi and Sunday brunch. "I think I could work here,'' he says and breaks into that belly laugh again. I urge him to get down to brass tacks and decide what he wants to eat. He orders all six varieties of dim sum displayed in the abridged version of the menu and some lemon iced tea to wash them down. "The sushi will run on the conveyor belt [along the central verge of the restaurant hall running past our table] and we can pick them as they come," he says with obvious relish. Saves time, works for me.
He seems to enjoy the spotlight but it hasn't been easy getting there, Bahl tells me. Take this: after finishing school, he worked really hard for two-and-half years to get into IIT but never got through. His friend, and now partner, Rohit Bansal did. "At 19, it really hits you when you spend a considerable amount of time on that one thing and you expect it to work and everyone around you expects the same and then it doesn't," Bahl says introspectively. So he did the next best thing - fly off to the US to do his engineering from the University of Pennsylvania, and then get himself a business degree from The Wharton School and complete an executive marketing programme at the Kellogg School of Management. For a brief period after that, he worked for Microsoft with the company's emerging markets business development team but was deported because of some visa issues. "I saw early on that my life is going to be a series of failures... but then failures help build character'' he laughs.
I get the feeling he is kind of happy wearing his many "failures" on his sleeve. Back in India in 2008, Bahl and Bansal began an offline coupon book business, Money Saver. After slumming it for a few months, they realised their first venture had no real future. So, they launched a mobile coupon service that was also quickly jettisoned because it failed to generate money. "We were just two guys with a PowerPoint presentation asking brands to come on board, but when they asked 'who are you', 'who are your clients', we had nothing to show."
Their next big idea was a discount card service, which did okay and helped them raise some money also. The real breakthrough came in January 2010 when some of their merchants suggested they launch an online version of the same thing. That's how Snapdeal was born on February 4, 2010.
"It was the worst site ever, half the transactions would fail, but it was a start nonetheless. Our target was 100 transactions a day in three months; we got there in three weeks. For the first time in our lives we felt if you give some input you get a proportional output." Their happiness was short-lived: Snapdeal was the seventh player in that space and within six months 50 other companies came in and… "so we were back to where we started: will we ever make money?"
The two went back to the drawing board and quickly came back with a new plan, got some good people, raised money and by mid-2011 Snapdeal had about 70 per cent market share in the coupon business. While business was getting better, Bahl feels the real turning point was his trip to China at the end of 2011. The coupon business was difficult to scale up and the China trip told him that to grow big they had to become a "marketplace". "We learnt from the Chinese experience that consumers attach huge premiums to variety, which is not available in offline stores for lack of space. The real estate cost as a percentage of gross revenue in India is 14 times that of the US," he adds.
But unlike many online marketplaces in India, Snapdeal chooses to not own any inventory. The issue has to do with the economics of the business model. An e-retailer who follows the inventory-led model needs to have at least 20,000 products in the warehouse if it displays 10,000 products online. Given that, inventory-led companies burn more cash. A marketplace has more operating leverage in that sense. So, Snapdeal sees itself as a platform for manufacturers to do business. "I sometimes say we are not an e-commerce company but we facilitate e-commerce,'' he says helpfully.
Another adaptation from the Chinese model is the payment system Trustpay, inspired from Alipay, Taobao's (operated by the Alibaba Group) online-payment model that uses an escrow system, releasing money to sellers only when buyers are happy with the products received. "This builds trust and that is something we learnt from the Chinese. But when it comes to last-mile delivery, they have a thing or two to learn from us."
Snapdeal doesn't take on the onus of delivery either; it has an innovative process in place to enable fast shipment at minimum cost which it calls "safe ship". "We have merchants listed with us on one side and couriers or shipping companies on the other. The moment a merchant receives an order and processes it, the safe ship connects him with the fastest and cheapest courier service available between the two pin codes. It is done at one-third of the cost that the seller would have incurred otherwise," he explains.
He makes it sound so simple: "You can't build huge warehouses, own and manage logistics all at the same time. So, the best thing to do is invest in a platform in which merchants can sell products at the best prices, and also have a good forecasting system in place to help merchants plan their inventory. Reaching the last mile is not difficult - we have an excellent network of couriers in this country - but it is more important to be closer to suppliers." That said, in terms of sheer numbers, India has a lot of catching up to do. In China, six per cent of the total retail pie is e-commerce. Korea is the highest at 14 per cent. In India, it is only 0.5 per cent. So you can see the opportunity here.
As I prepare to wind up Bahl urges, "Try the cheese cake, it's almost as good as you get in the US." By the time I finish my half of the cake, Bahl has polished off his ice-cream and the other half of the cheese cake too.
I can finally see why he started that food coupon business in the first place.