Tuesday, October 28, 2014

For SoftBank, Snapdeal is 'India's Alibaba'

Indian retail player Snapdeal, which has coughed up $627 million (Rs. 3,824 crore) from Japan's SoftBank in the largest single tranche investment in Indian e-commerce, says it will use the money to invest in its technology infrastructure.

"It's not about the amount of money we have in the bank or the valuation, it's about how we spend it. We're a technology firm, we want to create a life changing experience for 1 million small businesses in India giving them a market-place to sell within a matter of an hour," Kunal Bahl, co-founder and CEO of Snapdeal, told NDTV in an exclusive interview.

Snapdeal already claims to have 25 million users and 50,000 merchants selling on its online platform.

Japan's SoftBank is the single largest shareholder in Alibaba.com, the world's biggest e-commerce firm. After this deal, SoftBank will now be the largest shareholder in Snapdeal too. "Masayoshi Son at Softbank must have seen in Snapdeal what he saw in Alibaba 15 years ago. Our philosophy of enabling small businesses to sell on our platform resonated with SoftBank," Mr Bahl told NDTV.

The investment values Snapdeal at over $2 billion (Rs. 12,200 crore), coming just four months after its rival Flipkart raised over $1 billion (Rs.6,100 crore) from a clutch of investors valuing it at over $7 billion.

Talking about the exponential valuation that Indian online firms are getting, Mr Bahl said, "Valuation is just a number. It is not a chase for more money, more valuation or more profits, the chase should always be how can we move the needle for the country."

Indian e-commerce will grow from $5-6 billion (Rs. 30,500-36600 crore) to over $100 billion (Rs. 6.1 lakh crore) in the next 7-8 years, Mr Bahl added.

"Our business model is very similar to Alibaba's...where Alibaba generated 5 billion dollars of EBITA last year. The notion that e-commerce companies don't make money is absolutely not true... Globally, the largest and most profitable businesses are pure marketplaces like ours," Mr Bahl said.

Online players like Snapdeal, Flipkart and Amazon have been engaging in marketing and price wars. Snapdeal ran a print media campaign offering promotional discounts to counter the much-hyped Big Billion Day sale by its rival Flipkart earlier this month. Flipkart was later forced to issue an apology to its customers for the glitches, which include prices being pushed up, cancellation of orders and inadequate product stocks.

Talking about the inability of online players to keep pace with rising demand, Mr Bahl said, "This year the growth in e-commerce was not foreseen by anyone including us. The growth has been nothing short of exponential. The infrastructure is lagging a bit vis-a-vis the growth in actual orders getting placed on e-commerce sites. It is a temporary phase... Give it a few months or a year. I am pretty sure all our third-party logistics partners will build up necessary capacities."

Mr Bahl featured in the Fortune list of '40 under 40' most powerful people in business, making him one of the most successful young entrepreneurs in the world. But, he says, he hasn't forgotten his roots. "I feel as paranoid about our business as I did when Rohit (Rohit Bansal, co-founder and COO, Snapdeal) and I first started from the basement of the furniture market in Delhi. We haven't forgotten where we came from. I tell my team it's important to be aggressive, thoughtful, purposeful but also very humble."