In May, Kunal Bahl felt déjà vu, when the founder and CEO of India’s third largest e-commerce marketplace read reports that Snapdeal will survive only by merging with rivals Flipkart or Paytm; else, it will die a slow death.
It was like December 2011 all over again, when Bahl and his co-founder, Rohit Bansal, decided that their company, which sold deals online, would pivot to an e-commerce marketplace, on the lines of Chinese e-commerce giant Alibaba. The shift came when the deals business in India was burgeoning, with over 70 companies in it. “Articles said it’s a bad move... These guys will die… Who does a marketplace... everyone does inventory...” recalls Bahl.
Fast-forward six years. Only a few deals websites remain, contributing little to the country’s $16 billion e-commerce industry. All the big online retailers are marketplaces. Snapdeal’s name is taken in the same breath as Amazon and Flipkart.
Of late, though, Amazon has overtaken Snapdeal to move to the second place. Flipkart, the largest, and Amazon have taken a significant lead over it. Bahl’s prediction of last year, when he said Snapdeal would overtake Flipkart by March this year on gross merchandise value (GMV), which is the value of all goods and services sold without factoring in discounts, looks misplaced.
“Snapdeal has become a me-too company,” said an analyst with a Swiss financial services holding firm. “There is very little they offer that is different from Amazon or Flipkart.”
These are questions Bahl himself had been asking himself and his team – for the last three months. “Who is Snapdeal? What is its place in Indian e-commerce?”
The answers, he says, will be apparent to all in a month. Meantime, here is a sneak preview.
India has more than 300 million internet users, but only about half of them have regular, reliable, 3G-like connections. Of these only a third, or 50 million, regularly shop online. These are the affluent and savvy internet users.
The rest are in small towns, with wavering internet connections. The challenge is to increase the number of those who buy online regularly. Many of them will be in small towns and villages, who will use the internet for the first time, and do so on their mobile phone. Snapdeal will go after them.
The growth for e-commerce in India, Bahl says, will come with the next 200 million online shoppers. To tap them, e-commerce companies will have to look at gender, geography, socio-economic demographic, purchase frequency, and purchase pattern in terms of categories. “The melting pot of all this will tell who you should go after, where and how,” says Bahl.
Of course, it will not be easy. “If you are looking at the the next 200 million, you need to go beyond the metros. That will need language capability, interoperability, and much more localisation. Whoever does this will have to go back to their business model,” says Ashvin Vellody, partner at consulting firm KPMG.
JD.com, the second largest online retailer in China after Alibaba, has a customer that is 20 to 30 year old, urban, office-going, mostly male, buying mostly electronics. For Alibaba and its online market place, Taobao, the customers are 20 to 40 year old, working females, living outside the main cities, largely buying fashion, and products for home and children.
The Indian e-commerce market may also evolve with different companies catering to different segments, be it the working male, working female, stay-at-home mom, or college student? “If your target is large enough to magnify, you look at what they really want,” says Bahl.
Flipkart’s acquisition last week of fashion retailer Jabong, for which Snapdeal was also in the reckoning, gives an idea of Bahl’s plan. Over 90% of the fashion business in India is unorganised. Jabong is all about branded fashion. Bahl will spend the $100 million saved by not buying Jabong to build Snapdeal’s fashion business by focusing on the unorganised segment.
But, there are three things that Bahl can’t forego: experience, revenue and profitability, and growth. Snapdeal is already the fastest in shipping products to its customers, and also the quickest in refunds.
After last Diwali, it started focusing on actual revenue, instead of GMV. Bahl says Snapdeal’s revenue has been growing at 300% (between November 2015 and June 2016) “We are not a large public company that can fund itself in perpetuity. We should have the right financial trajectory, which will give us staying power,” Bahl says.
This is just the beginning of the new e-commerce battle, in which Bahl sees a new Snapdeal very different from what it is now. And, for that matter, very different from Flipkart and Amazon.