Snapdeal.com Ones to Watch Insight Deck - Jatin Patel
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RETAILER INSIGHT
Snapdeal.com
Ones to Watch Insight Deck
February 2015 Jatin Patel
planetretail.net
1 Associate Analyst
Contents
1. Introduction
2. Major Strategic Initiatives
Jatin Patel
3. Planet Retail View Associate Analyst
jatin.patel@planetretail.net
2
1. Introduction
Snapdeal, headquartered in Delhi, is India’s largest
e-commerce marketplace. The e-tailer offers a wide
range of products spread over 500 categories.
© Snapdeal.com
Snapdeal was founded in 2007 by friends Kunal Bahl and Rohit
Bansal. The company began life selling coupons online, later
expanding its offer to encompass daily deals, very much in the
mould of sites such as Groupon.
In 2010, to fully exploit the potential of e-commerce in India,
Snapdeal transformed itself into a marketplace platform. In doing
so, it went head-to-head with the Amazon of India - Flipkart.
Snapdeal focuses on categories generating the highest revenue
© Snapdeal.com
and margin like electronics, computing products and apparel.
Thanks to excellent logistical capabilities, Snapdeal is able to
reach customers in over 4,000 towns and cities across India.
Snapdeal is an interesting mix of a daily
deals and traditional marketplace model
In May 2014, Snapdeal announced it had raised USD100 million in – Groupon meets eBay, if you will. The
investment funding, adding to the previous round of equity e-tailer runs daily deals and huge festive
financing of USD133.77 million that was completed in February sales, such as this one for Diwali
(above). These sales typically generate
2014, with participation from Snapdeal’s existing investors GMV sales of over USD170 million.
including eBay.
3
1. Introduction
Although revenue is growing, losses are widening as Snapdeal
intensifies investment to ensure it remains competitive.
Snapdeal reported a loss of INR2.65 billion (USD44 million) for the Snapdeal is at risk of
year ended March 2014, against a loss of INR1.20 billion the previous being surpassed in sales
year. Losses continued due to further investment to ensure by Amazon, which in a
momentum in sales growth to fend off growing threats from rivals, short amount of time has
increased its product
including Flipkart and Amazon India.
inventory…
According to documents filed at India’s Registrar of Companies,
Snapdeal reported a five-fold revenue rise to INR1.68 billion in
2013/14. Despite this huge revenue jump, Snapdeal is at risk of being
surpassed in sales by Amazon, which in a short amount of time has
increased its product inventory, invested significantly in marketing
and offered deep discounting to maximise competitive pressure on
Snapdeal and Flipkart.
Snapdeal has been engaging in aggressive price promotions and cash-
intensive enhancements to its ecosystem. Substantial losses will be
inevitable as the business fights to gain and retain customers in the
increasingly competitive Indian online market. This is likely to
continue as Snapdeal endeavours to build its user base.
4
1. Introduction
Despite continued losses, Snapdeal raised almost USD1
billion in funding during 2014.
© brg.in
At present, Snapdeal has 50,000 sellers on its marketplace, and Snapdeal Founders conclude their funding deal
with SoftBank
25 million registered users. Over the last 12 months its gross
merchandise value (GMV) has grown over 600% to USD2 billion.
Mobile is exceeding this rapid growth.
Mobile has grown by 3,000% in the last year. Since 2013, the
proportion of sales via mobile has risen from 5% to 65% in
2014. Snapdeal estimates that over the next two years, over
48%
80% of orders will be conducted using mobile phones.
In October 2014 Snapdeal raised an additional USD627 million of Indian consumers currently
use their mobile for shopping
from Japan’s SoftBank to continue expanding its business both
organically and through acquisitions. This brings the total raised
by Snapdeal in 2014 alone to almost a USD1 billion.
50%
are likely to use their mobile for
shopping in the future
Q. Please indicate which, if any, of the following you have ever done using your mobile online. BASE: 887
5 Q. What proportion of your [insert category] shopping do you do using the following ? BASE: 1597
2. Major Strategic Initiatives
2. Strategic Initiatives
#1 Being a marketplace not a retailer
Snapdeal abstains from selling private labels and holding inventory. This is likely to remain
the case even if FDI restrictions on multi-brand retail are relaxed.
Snapdeal’s priority is customer acquisition and expanding its seller
base as competition in India intensifies.
Competitive pressures are mounting for Snapdeal, especially since
© Snapdeal.com
the arrival of Amazon, plus consolidation in the market which has
recently seen Flipkart acquire clothing site Myntra.
To compete effectively, Snapdeal is investing in technological
innovation that will attract more sellers to its platform. It is hiring Snapdeal aims to increase the number
1,500 software engineers from Silicon Valley to support these plans, of sellers to one million by the end of
FY2015. The company has introduced a
with the intention of establishing at least three new development Capital Assist programme to help sellers
centres across the country. get access to working capital for
expanding their business on the portal.
To increase margins, Snapdeal is looking to expand its presence in This will incentivise more sellers to
luxury categories - such as automobiles - where it feels it can create operate through the system, providing
greater product diversity for consumers.
a competitive advantage by generating higher margins to quickly
outpace rivals in terms of profitability.
Going forward, Snapdeal will look to improve its ecosystem across
e-commerce and m-commerce. The addition of both national and
international brands is a strategic priority, as is services provided to
sellers, such as better logistical capabilities and payment platforms.
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