CASE STUDY ON GROWING SAGA OF E – COMMERCE GIANT SNAPDEAL IN INDIA WITH SPECIFIC REFRENCE TO INDIAN E- RETAILING INDUSTRY

Varun Kesavan, Research Scholar, Palakkad, Email Id – varunkesavan@yahoo.com

INTRODUCTION

India has an internet user base of about 243.2 million as of January 2014. [1][2] Despite

being third largest user base in world, the penetration of Internet is low compared to

markets like the United States, United Kingdom or France but is growing much

faster, adding around 6 million new entrants every month. [3] The industry consensus

is that growth is at an inflection point.[4]

In India, cash on delivery is the most preferred payment method, accumulating 75%

of the e-retail activities.[5] Demand for international consumer products

(including long-tail items) is growing much faster than in-country supply from

authorised distributors and e-commerce offerings.

As of Q1 2015, seven Indian e-commerce companies have managed to achieve

billion-dollar valuation. Namely,  Flipkart,  Snapdeal, InMobi,  PosterGuy,[6]

Quikr,OlaCabs, and Paytm (wing of, One97).[7]

Market size and growthIndia's e-commerce market [8] was worth about $3.8 billion in 2009, it went up to

$12.6 billion in 2013. In 2013, the e-retail segment was worth US$2.3 billion. About

70% of India's e-commerce market is travel related. [9] According to Google India,

there were 35 million online shoppers in India in 2014 Q1 and is expected to cross

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100 million mark by end of year 2016.[10] CAGR vis-à-vis a global growth rate of 8–

10%. Electronics and Apparel are the biggest categories in terms of sales.

According to a study conducted by the Internet and Mobile Association of India,

the e-commerce sector is estimated to reach Rs. 211,005 crore by December 2016.

The study also stated that online travel accounts for 61% of the e-commerce market.

[9]

By 2020, India is expected to generate $100 billion online retail revenue out of which

$35 billion will be through fashion e-commerce. Online apparel sales are set to grow

four times in coming years.[10]

India's retail market is estimated at $470 billion in 2011 and is expected to grow to

$675 Bn by 2016 and $850 billion by 2020, – estimated CAGR of 10%..[11]According

to Forrester, the e-commerce market in India is set to grow the fastest within the

Asia-Pacific Region at a CAGR of over 57% between 2012–16.[12]

As per "India Goes Digital",[13] a report by Avendus Capital, the Indian e-commerce

market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel

constitutes a sizable portion (87%) of this market today. Online travel market in India

had a growth rate of 22% over the next 4 years and reach Rs 54,800 crore ($12.2

billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore

(US$800 million) in 2011 and estimated to grow to Rs 53,000 crore ($11.8 billion) in

2015.

Overall e-commerce market had reached Rs 1,07,800 crores (US$24 billion) by the

year 2015 with both online travel and e-tailing contributing equally. Another big

segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions

daily by operator websites.[citation needed]

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A new sector in e-commerce is online medicine, selling complementary and

alternative medicine or prescription medicine online. There are no dedicated online

pharmacy laws in India and it is permissible to sell prescription medicine online with

a legitimate license.[citation needed]

Online sales of luxury products like jewellery also increased over the years. Most of

the retail brands have also started entering into the market and they expect at least

20% sales through online in next 2–3 years.[14]

Key drivers in Indian e-commerce are:

Large percentage of population subscribed to broadband Internet,

[11] burgeoning 3G internet users, and a recent introduction of 4G across the

country.[12][13]

Explosive growth of Smartphone users, soon to be world's second largest

Smartphone user base.[14]

Rising standards of living as result of fast decline in poverty rate.

Availability of much wider product range (including long tail and Direct Imports)

compared to what is available at brick and mortar retailers.

Competitive prices compared to brick and mortar retail driven

by disintermediation and reduced inventory and real estate costs.

Increased usage of online classified sites, with more consumer buying and

selling second-hand goods

Evolution of Million-Dollar start ups like Jabong.com, Saavn, Makemytrip,

Bookmyshow, Zomato Etc.

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India's retail market is estimated at $470 billion in 2011 and is expected to grow to

$675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 10%...[citation

needed]According to Forrester, the e-commerce market in India is set to grow the

fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16. [15]

As per "India Goes Digital",[16] a report by Avendus Capital, a leading Indian

Investment Bank specializing in digital media and technology sector, the Indian e-

commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011.

Online travel constitutes a sizable portion (87%) of this market today. Online travel

market in India is expected to grow at a rate of 22% over the next 4 years and reach

Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated

at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000 Crore

($11.8 billion) in 2015.

Overall e-commerce market is expected to reach Rs 1,07,800 crores (US$24 billion)

by the year 2015 with both online travel and e-tailing contributing equally. Another

big segment in e-commerce is mobile/DTH recharge with nearly 1 million

transactions daily by operator websites

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SNAPDEAL’S PENETRATION INTO INDIAN E – RETAILING INDUSTRY

It is never easy to start a business. You need to work on your ideas, find capital

and investors and then you need to work hard to get results. Ask those who have

succeeded, they tell you it is the best feeling ever when an idea takes off to

places. Snapdeal set a niche for itself in the sphere of e-commerce in India.  In

2010, when Kunal Bahl and Rohit Bansal wanted to start their own business,

they chose an offline couponing business and named it Money Saver. 15000

coupons were sold in three months and it was time to take the business to the

next level.

It was after they met investor Vani Kola that the venture really took off. The first

meeting did not go well but after another round of discussion, Vani Kola’s venture

capital firm decided to invest in Snapdeal. Initially started as an offline business,

Sneapdeal went online in 2010. It was a bumpy ride in the first few months.

Mistakes were made, but lessons were learnt. It is this kind of hard work and

diligent attempt to offer the best to the customers that gave Snapdeal its initial

success.

However, the biggest decision of the founders came in November 2011. Inspired

by the success of Alibaba.com, Rohit and Kunal wanted to create something on

similar lines. The deals business was shut down and an online marketplace was

opened instead.It was a make or break decision. Snapdeal had a huge market

share in the deals business at that time and starting something new was very

risky and the move surprised the investors too. At that point of time, eBay was

the only marketplace in India.

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It was a decision that was not for the short term. When Rohit Bahl managed to

gain the nod the board, the present form of Snapdeal took shape. The very fact

that Snapdeal is valued at a billion dollars today is a testimony to the vision of its

founders. Currently, more than 50,000 sellers sell around 5 million products on

Snapdeal. The company’s phenomenal growth in a short span has been a

remarkable journey. The company began to concentrate on building scale and

improving speed. When eBay invested in Snapdeal, they brought immense

experience to the table.

Snapdeal is one of the fastest growing e-commerce companies in India today

with the largest online market place. In just two years, the company went from

scrapping their group coupon business and starting an online marketplace to

become a billion dollar company. Its year on year growth is almost 600%.The

average age of the workforce at Snapdeal is 25. Their values – Innovation,

Change, Openness, Honesty and Ownership drive them to press for greater

success. The company’s growth had been phenomenal but it is their continued

effort to bring the best to the market and their zeal to succeed as the best B2C

(Business to customer) marketplace is what sets them apart.  Great ideas might

be important for a business, but it is the confident implementation of those ideas

and the right effort which are more important. It is action and not mere thought

that gives results.  

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KEY MANTRAS OF SNAPDEAL ARE AS FOLLOWS

1. Never start a venture or business by one self.

2. Entrepreneurs need to be active in recruiting.

3. Getting back feedback of business and feedback from people who are external to

the company.

4. The feedback on company mainly what it Is standing for

5. It is tremendous to be a shameless entrepreneur.

6. Building strong brand by following cultures.

7. Building strong homogeneous cultures.

8. Building a right business in India the sense of vision objective and the usage

9. Selling the products according to customer’s needs and wants.

10. Creating a strong brand into the life of customers.

11.Providing and doing servicing the society in the form of CSR activity.

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12.Enhanced call centre capacity by creation of jingle by an independent banks.

13.A Services Oriented Architecture: What has allowed us to run the business,

and grow ten times in two years, has primarily been the technology that we built.

Our entire technology infrastructure has been built in house. It’s custom-made.

That’s a mighty feat considering that we are a full-fledged e-commerce site. The

vast majority of this technology has been built in two and a half years by 120

engineers. One of the primary things that allowed us to do this is the architecture.

We have a fully distributed service-oriented architecture made up of mostly

standalone subsystems.

14.Engineers as Recruiters : One of the biggest challenges in building this complex

system very fast is building a team that is able to deliver. We grew from 20

employees to over 200 in a little over two years with a very young field of

engineers. Hiring in India is incredibly difficult because a lot of the good

engineers leave for Europe. So, we did a couple of cool things. First of all, we

have an HR team that specializes in technical recruiting, and are themselves

engineers. We also have managers who are very hardcore techies, a lot of them

are engineers too. That helps attract people because they look forward to the

learning experience, and they know they will make a real contribution to the

company. “We are able to convince people that once they join a company like

Snapdeal, as opposed to a very big multi-national company, what they are

building directly affects their life and the lives of people around them”.

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15.Engineers as Entrepreneurs : Every team member is encouraged to be an

entrepreneur. Teams do not own technology deliverables, they own business

metrics. Metrics as in how many clicks, in how many scrolls can people get to the

search results that they’re looking for? Things of that nature, things that directly

impact the business.

16.Stand-ups : We align business priorities in a very effective manner. One of the

key things that we have done to make it more effective is the interaction between

teams is very informal. All of the decision making in terms of technology, road

map planning, decision making, what needs to go in, what doesn’t need to go in,

how much you get from other teams – all of this interaction is very informal. A lot

of the meetings happen in the corridors. We stand there, make a decision in five

minutes flat, we make the call, then we move on.

17.Divide and Conquer : Each team has complete freedom on the technology

choices that they make in terms of adopting a technology that appeals to them. A

very small team, like two or three people, can rapidly explore a whole bunch of

technologies that are out in the market and then apply them with very effective

results.

FundingSnapdeal has received 7 rounds of funding:

Round 1: In January 2011, Snapdeal received a funding of $12 million from

Nexus Venture Partners and Indo-US Venture Partners.

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Round 2: In July 2011, the company raised a further $45 million from Bessemer

Venture Partners, along with existing investors Nexus Venture Partners and

Indo-US Venture Partners.

Round 3: Snapdeal then raised a 3rd round of funding worth $50 million

from eBay and received participation from existing investors – i.e. Bessemer

Venture Partners, Nexus Venture and IndoUS Venture Partners.[8]

Round 4: Snapdeal received its 4th round of funding of $133 million on Feb-2014.

The 4th round of funding was led by eBay with all the current institutional

investors, including Kalaari Capital, Nexus Venture Partners, Bessemer Venture

Partners, Intel Capital and Saama Capital all participating.[9]

Round 5: Snapdeal received its 5th round of funding of $105 million in May-2014.

The 5th round included investments by Blackrock, Temasek Holdings,

PremjiInvest and others.[10] The round valued SnapDeal at $1,000,000,000.[11]

Round 6: Snapdeal received its 6th round of funding in Oct-2014

from Softbank with investments worth $627 million in fresh capital. This makes

Softbank the largest investor in Snapdeal.[12]

Round 7: Snapdeal received its 7th round of funding in Aug-2015 from Alibaba

Group, Foxconn and Softbank with investments worth $500 million in fresh

capital.[13]

Round 11:One of the world's largest pension funds, Ontario Teachers' Pension Plan,

and Singapore-based investment entity Brother Fortune Apparel have led the 11th

round of funding in online marketplace player Snapdeal. The latest investment is

$200 million (Rs 1,367.6 crore) in Jasper Infotech-owned company.

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Acquisitions

In June 2011, Snapdeal acquired Bangalore-based group buying site,

Grabbon.com.[14]

In April 2012, Snapdeal acquired esportsbuy.com, an online sports goods retailer

based out of Delhi.[15][16]

In May 2013, Snapdeal acquired Shopo.in, an online marketplace for Indian

handicraft products.[17]

In April 2014, Snapdeal acquired fashion products discovery site, Doozton.com.

[18]

In December 2014, Snapdeal acquired gifting recommendation site,

Wishpicker.com.[19]

In January 2015, Snapdeal acquired a stake in product comparison website

Smartprix.com.[20]

In February 2015, Snapdeal acquired luxury fashion products discovery

site, Exclusively.in.[21]

In March 2015, Snapdeal acquired 20% stake in Gojavas.com.[22]

In March 2015, Snapdeal acquired ecommerce management software and

fulfillment solution provider, Unicommerce.com .[23]

In March 2015, Snapdeal entered into the financial services marketplace by

acquiring a majority stake of RupeePower which provides a digital platform for

financial products to customers. Mr. Tejasvi Mohanram, the founder of

RupeePower would continue to be the MD&CEO of the company. [24][25][26]

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In April 2015, Snapdeal acquired mobile-payments company FreeCharge.com. [27]

In September 2015, Snapdeal acquired Reduce Data, a programmatic display

advertising platform. [28]

RECENT NEWS ON SNAPDEAL

Snapdeal to invest $100 m in Shopo

E-commerce major Snapdeal will invest $100 million (Rs.665 crore) in Shopo as it

looks to build up the venture into a one million seller-strong platform. Shopo is a

mobile-only platform, which aims to bring small and medium businesses (SMBs) that

cannot register on bigger e-commerce portals.

Business results

In the year 2012-13 Snapdeal had said that it expected revenues of

about ₹600 crore (US$91 million). Betting big on the growth of mobile commerce,

Kunal Bahl, the CEO, said at the time that 15-20 per cent of the sales on Snapdeal

came through m-commerce. Snapdeal.com expected the total sale of products

traded on its platform to cross ₹2000 crore (US$300 million) in the fiscal year 2013-

14 helped by its robust growth in the past two years and the growing popularity of e-

commerce in India.[29] In June 2014, Snapdeal announced that it had achieved the

milestone of 1000 sellers on its platform getting sales of over Rs 1 crore. [30]Snapdeal

is the fastest growing e-commerce company in India with gross sales over 3 billion

dollars annually.

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Awards and recognition

eRetailer of the Year & Best Advertising campaign of the year - Indian eRetail

awards 2012 organized by Franchise India in Feb,2012.[31]

Winner of Red Herring Asia Awards 2011.[32]

E-commerce site of the year at WAT awards that took place in Jan 2012,

Mumbai.[33]

Voted amongst the Buziest brands of India in afaqs's annual buzz-making poll.[34]

Trivia

In June 2011, Shiv Nagar, a village located in Muzaffarnagar district in Uttar

Pradesh, India, became SnapDeal.com Nagar (nagar means town), after

Snapdeal had installed 15 hand pumps for drinking water. The villagers voted to

name their hamlet after Snapdeal to express their gratitude.[35][36]

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QUESTIONS

1. What are the various challenges present for KELLOOG’S CORN FLAKES?

2. Which kind of technology can be adopted for SNAPDEAL in near future?

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REFERENCES

1. http://www.thehindu.com/todays-paper/tp-business/snapdeal-to-invest-100-

m-in-shopo/article7623047.ece

2. https://en.wikipedia.org/wiki/E-commerce_in_India

3. https://en.wikipedia.org/wiki/Snapdeal

4. http://successstory.com/companies/snapdeal

5. http://www.aerospike.com/blog/snapdeal-keys-ecommerce-success/

6. http://www.ibtimes.co.in/indias-top-e-commerce-firms-billion-dollar-

valuation-photos-635739

7. http://techcrunch.com/2015/08/03/snap-to-it/

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