Source: The Times of India
Published on 12th May, 2014
Kunal Bahl and Rohit Bansal, co-founders of online marketplace Snapdeal, have been the typical nimble-footed entrepreneurs not wary of changing business models. In a span of three years, they had traversed three different types of businesses and still not hit a home run. “But creating success was paramount for our venture,” says Bahl, “which is what kept us going.”
At the end of 2011, the two Delhi lads decided to move away from a fairly successful daily deals site – some called them the Groupon of India – to becoming a marketplace selling products ranging from mobile phones to televisions. The move was fraught with risks at a time when most e-tailers were inventory-led, but going the marketplace way really jump-started Jasper Infotech, which runs Snapdeal.com, into the big league. Today, Snapdeal locks horns with e-commerce biggie Flipkart, is nearing a billion dollars in sales, and targeting a USpublic float over the next year or so. But the turnaround was not easy.
Money Saver to Snapdeal
Bahl and Bansal started off in 2007 with Money Saver, a physical coupon book business that offered discounts to consumers across retail outlets. Bahl, having returned after graduating from Wharton, and Bansal, armed with an IIT-Delhi degree, found it tough to get their distribution in place, pushing them to transition from a physical format to mobile couponing. “We were not able to move the needle as offline businesses are very tough to scale up,” Bahl, 32, says. The two kept going till the idea of starting a daily deals site struck them in January 2010. By now, they had already changed business models twice and then a third one beckoned.
That’s when the change of name happened – from the Money Saver avatar to Snapdeal. They began as a local merchants’ marketplace where restaurants, spas and salons could list their services. Within a year of its launch, it had over 10 million subscribers.
Vani Kola from Kalaari Capital, one of the early venture funds that invested in Snapdeal, says, “If you don’t adapt and attempt to take big leaps, you will be a footnote in history at best. We never doubted them as entrepreneurs, else we wouldn’t have been their first investor.”
Daily deals to marketplace
Bahl says, “In order to build a large company, we had to command a bigger share of the consumer’s wallet. The two of us had a very important decision to make: Should we stick to what we were already good at or start selling products through the marketplace, which was a different business altogether?” Bahl, says, at a time when
He is not only fighting domestic major Flipkart but even online retail’s juggernaut Amazon in a three-way battle for supremacy of the fast-growing e-commerce market touted to touch $8 billion in size by 2016.
It has been more than two years since the pivot (an industry parlance for change in business model) from doing daily deals to becoming a marketplace. Today, Snapdeal boasts of over 5 million products from more than 30,000 sellers across the country. “We have seen a 600% growth in the last one year,” Bahl claims.
Over 50% of sales on Mobile
Comparisons to Alibaba, in news for its much-ballyhooed US IPO valuing it at around $200 billion, have been rife. Going public just like its Chinese peer is something Snapdeal could explore after gaining substantial size. “We’re building for the long term and, given our rapidly increasing scale, IPO is looking like a foreseeable path. It is likely to happen in the next 12-24 months,” Bahl says.
Flipkart, too, has said an IPO is in the pipeline but a timeline has not been drawn up by its two founders Sachin and Binny Bansal.
Earlier this year, eBay increased its stake in Snapdeal to around 20%, leading a $134-million investment at a valuation topping $800 million, igniting takeover talks. Bahl says that’s an unlikely scenario.
Operationally, Snapdeal has been expanding its reach and categories, making acquisitions, introducing services commerce by launching an education marketplace and strengthening last-mile delivery systems.
Mobile is another key focus area for the e-commerce player, just like its rivals, which contributed 5% of the overall transactions until eight months back, and is now over 50% of all transactions.
Source: The Times of India