Advertisements

India’s Snapdeal seeks to follow Alibaba playbook

June 22, 2014 7:56 am

India’s Snapdeal seeks to follow Alibaba playbook

By Avantika Chilkoti in New Delhi

Mysterious signs reading “Mission 500” dangle from the ceiling in every room at Snapdeal’s headquarters in New Delhi, describing a quarterly target set by senior management as the online marketplace strives to step up its recent rapid growth.

Kunal Bahl, co-founder, will not be drawn on the specifics of that goal, but says that one predecessor some time ago, “Mission 100”, involved a push to raise monthly sales from Rs250m ($4.2m) to Rs1bn in three months.

Though the online marketplace is just two and a half years old, Mr Bahl suggests Snapdeal is set to emulate China’s Alibaba, thriving in India’s fast-growing ecommerce market as internet penetration rises and the country’s middle class gets used to shopping online.

“If people understand the Alibaba story. . . they will easily understand the Snapdeal story also because really it’s an identical [business],” the 30-year-old entrepreneur says.

Snapdeal, a website where retailers can list their wares, counts Ebay among its investors. It offers more than 5m products from some 30,000 businesses around the country, and annual transactions on its platform will soon exceed $1bn.

Rival Flipkart has already crossed that mark judging by its sales in February and is easily the best known player in the Indian ecommerce industry – but the group is fighting hard to stay ahead. Last month, Flipkart acquired Myntra, an online fashion store, and also secured $210m in fresh funding.

While Snapdeal is much smaller than ecommerce giant Alibaba, Mr Bahl met senior executives from the Chinese group on a recent visit to Hong Kong, and says he sees the company as a ‘mentor’.

“It was like I was talking to some much larger and much more evolved version of Snapdeal,” he says.

Like Alibaba, Snapdeal is considering an initial public offering in 18 to 24 months’ time. The group was valued at around $1bn in its latest round of financing earlier this year, and Mr Bahl says that figure could rise to $5bn by the time of a listing.

Senior executives at Snapdeal are considering an IPO at home, where the brand is well known, though new rules now allow Indian groups to list directly overseas.

“It’s a very bold expectation to be able to raise money through an IPO,” says Arvind Singhal, head of Technopak, a New Delhi-based retail consultancy. “For a business which is still in an evolutionary stage I’m not sure whether the local market would be ready.”

Global internet groups from Facebook to Amazon, which launched its Indian site last year, see significant potential for growth in India, where there are just over 240m internet users out of a total population of 1.2bn.

Online retail in India will grow from 0.4 per cent of the total retail market in 2014 to between 2 and 4 per cent of total retail by 2019, estimates Technopak.

A large part of new business will come from mobile users as smartphones become more popular and data services get cheaper in India. Sites like Snapdeal are adapting to serve that demand.

Snapdeal, which launched a broad marketing campaign in recent weeks and is focusing on developing its mobile service, says some 60 per cent of orders come from mobile users, up from just 5 per cent a year ago.

Unlike peers in developed markets, ecommerce businesses in India must also come up with creative ways to handle logistics issues. Mimicking Alibaba’s model, Snapdeal has opened 40 ‘fulfilment centres’. For a small fee, sellers can leave items at these warehouses for Snapdeal to package and coordinate deliveries.

“Nobody questions the opportunity of ecommerce in India now,” says Mr Bahl. “People are now saying that this is definitely going to become a $50bn to $75bn market over the next five to 10 years.”

 

Advertisements

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: