‘SoftBank will add value to Snapdeal’

About 18 months back, Kunal Bahl, Founder and Chief Executive of Snapdeal, was dealing with a huge financial crunch. The company had just $100,000 (₹61 lakh) in its bank, not enough even to pay salaries.

A year and a half later, Bahl and his team have come a long way in convincing Japan’s SoftBank to invest $627 million after just three weeks of negotiations.

Two things happened in the interim that propelled Snapdeal to be among the top three e-commerce companies in India. The proliferation of mobile Internet around the middle of 2013 became a big driver for e-commerce in India.

“Sixty-five per cent of our orders are over mobile phones now. Fifteen months ago, it was just 5 per cent. So, we grew over 3,000 per cent in absolute terms in that 15-month period and our overall business grew over 600 per cent year-on-year, driven by mobile commerce,” says Bahl.

Snapdeal now has over 7 million products on its platform and 50,000 merchants, which is 10 times more merchants and five times more assortments selection versus any other marketplace, excluding media and books.

Bahl attributes his success also to the changing consumer behaviour in terms of online buying. “Users are now buying products online because they are available in accessible manner through a platform like Snapdeal,” he says, adding his next target is to reach 1 million small businesses.

“Right now, we have 50,000 small businesses on our platform. We want to get to 1 million and that to me will be the true milestone to achieve.”

Bahl reckons that the partnership with SoftBank will go a long way in achieving its target just like the Japanese company invested in Alibaba 16 years ago and helped it grow to a $170 billion business.

The confidence also comes from the fact that Snapdeal is being backed by a group of other investors, including eBay, Azim Premji and Ratan Tata. “We have investors who have long-term commitment to our vision and our business. So, we feel very confident about quality and the long-term goals,” says Bahl.

For Snapdeal, the additional investment, along with SoftBank’s technological expertise, will help it compete with market leaders Flipkart and Amazon.

The money will be used to ramp up its technology and supply chain management aimed at faster delivery of services. For example, it will have 100 fulfilment centres across 30 cities compared to the existing 40 centres in 15 cities.

Fulfilment centres are large warehouses from where products are shipped to consumers In addition, the company will open innovation centres across the country, including Hyderabad and Pune, where 1,000 engineers will be hired to develop more efficient processes, Bahl said.

Snapdeal will also look to make three-four strategic acquisitions in the coming few months, specifically in the area of mobile technology. “We are looking at both Indian and foreign companies, mostly in the technology space that can enhance our ability to deliver value to our consumers as well as great experience to our sellers. Probably by the end of the year, you will hear us making some acquisitions,” Bahl says.

Also in the works is an incubation centre to hone and harness start-up businesses in the mobile technology space and a possible listing of shares on the stock exchange.

But Bahl says the partnership with SoftBank is not just about money. “When we spoke to SoftBank, I saw a long-term partner in them that’s very relevant for this business over the next 10-15 years. Its more about the partner than the money.”

But the big challenge for Snapdeal and all e-commerce companies is to turn profitable. There were 900 e-commerce companies in 2012, now there are just a handful, which are getting some meaningful volumes. Bahl says he has revenue targets, but would not disclose it because of the dynamic nature of the business. “The market itself is growing so fast that one year ahead is little hard to predict. I have some sense on the numbers, but I will reserve for it now.”

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