Snapdeal Leading India’s Online Marketplace

The recent $200 million investment in India’s e-commerce player Flipkart has sparked big interest in the country’s online retail trade. According to market research, India’s e-commerce market grew from $2.5 billion in 2009 to $14 billion last year. The country has more than 10 million online shoppers, and that number is growing 30% annually. Online giants, including Amazon and eBay, have taken several steps to enter the country’s fast-growing market. For now though, the indigenous players are the ones enjoying the first mover’s advantage.

Snapdeal’s Offerings
New Delhi–based Snapdeal is among the leading e-commerce sites in the country. It was founded in 2010 by high school friends Rohit Bansal and Kunal Bahl. Snapdeal is often referred to as India’s “Amazon and Groupon all rolled into one.”

The company began as a deals site which sold discounted service offerings. Unlike traditional daily deals, most of these services were offered on discount for an entire year. These offerings helped Snapdeal build much-needed online traffic in India. Soon, merchants expanded from offering services on discounts to wanting to offer products for sale. Thus Snapdeal came to becoming among the leading online marketplace in the country selling products across more than 200 categories. Recently it tied up with India’s leading two wheeler manufacturer, Mahindra & Mahindra, to sell two wheelers on their site.

Snapdeal is the largest e-retailer of watches, sunglasses and jewelry category sales in the country. The Dataquest/Sapient E-commerce Survey of 2001 ranked them as the leading e-commerce site in the country. They have more than 20 million registered users of which 14-15 million access the site monthly to shop for more than 5,000 brands and 250,000 listed products offered by more than 50,000 registered merchants. Snapdeal has expanded its presence in more than 5,000 cities in India and sell an average of over 25,000 units per day. It is continuing to build this wide portfolio and expects to grow to 25,000 brands and 20 million products within the next couple of years.

Snapdeal’s Financials
Today Snapdeal is no longer a leading daily deals offering site. Deals account for a mere 1% of revenues. The company earns its money from its marketplace offering by charging a commission on sales. Unlike most other marketplace companies that charge a listing fee from merchants, Snapdeal has chosen to keep that free. The commission rates range from 5% to 15% and average in the low teens for the year.

The company does not publish financials, but in a recent interview, co-founder Bahl talked about doing annual gross merchandise volume (GMV) of $300 million during the current year. The company plans to grow to $1 billion GMV by the year 2015. It is, however, still not profitable and for now is focusing on building the scale of operations.

The high-paced growth has attracted investors to the company, which has raised $103 million in three rounds of investments so far. The investor list includes Nexus Venture Partners, IndoUS Venture Partners, Bessemer Venture Partners, eBay, Intel Capital, Ru-net, and Saama Capital. The latest round of funding was held earlier this year, when eBay along with others invested $50 million, valuing Snapdeal at nearly Rs. 1,000 crores (~$165 million).

India is still not very open to allowing 100% foreign investment in retail operations. International players have to partner with local players to be able to sell goods in the market. Players like Amazon are finding it difficult to establish their presence in the market and are testing waters with limited option sites that allow them to be retail aggregators. But others like eBay which are pure marketplace offerings have managed to establish a bigger presence. Their investment in Snapdeal is seen by analysts as a good move to get access to Snapdeal’s user base, logistics, and distribution network.