Snapdeal Faces Heat As Sales Growth Slows
The startup's gross sales, excluding discounts and product returns, rose just 90 per cent in the year ended March 2016 from 301 per cent in the previous year
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Kunal Bahl and Rohit Bansal started Snapdeal in 2010 as an online deals site but soon it became a major rival to online marketplaces Flipkart and Amazon India. But today questions are being asked if Snapdeal is sandwiched between the two larger rivals and if there is place for a third player in the marketplace at all.
According to a presentation by SoftBank Group, Snapdeal's largest investor, Snapdeal's gross merchandise value (GMV), which exclude discounts and product returns, grew just 90 per cent in the year ended March 2016 from 301 per cent in the previous year, a slowdown of more than three times - an indication that Snapdeal is facing severe heat from its larger competitors and investors.
But it's too early to deduce anything yet as India is in a unique situation where so many e-commerce players are competing together, said Abhishek Goyal, founder of Traxcn, a company that tracks startups. "The cards are still open, we will have to wait and watch," he told BW Businessworld.
A Snapdeal spokesperson said in an email response, "Our shipment volumes have grown rapidly and in the period Jan-March 2016, our shipment volume was 1.96 times of the volume in the same period last year. In a growing market, we have not only increased our shipping volumes, but also our share of the market. Further, in the past one year, we have tripled the number of sellers from 100,000 to 300,000 and also tripled the assortment available on our platform to more than 35 million products."
The spokesperson added that all growth initiatives of Snapdeal are aligned with their vision of having 20 million daily transacting users (DTUs) on their platform by 2020.
Snapdeal has raised roughly $2 billion from the likes of SoftBank, Kalaari Capital, Alibaba Group Holdings, Foxconn Technology Group, eBay, and Nexus Venture Partners.
Rival Flipkart has till date mopped up 12 rounds of equity funding worth a total of $3.15 billion. Recently, two of its mutual fund investors, Fidelity Rutland Square Trust II and VALIC Co, marked down the valuation of their holdings in Flipkart by 20 per cent. Amazon's group CEO Jeff Bezos has committed $2 billion of investment for the company's India operations.
Snapdeal's slowdown in GMV comes at a time when investors are increasingly getting worried about e-commerce businesses in India as none of them are profitable yet. With 3-5 years being the typical time frame when private equities (PEs) usually expect companies to be profitable, time seems to be running out fast for these startups. The situation is even grimmer for Snapdeal as it has to battle stiff competition from its larger rivals.