Why Snapdeal is the Dark Horse of the Indian e-commerce space?

For context, Snapdeal is an Indian e-commerce company, based in New Delhi, India. The company was founded in February 2010 by Kunal Bahl and Rohit Bansal, alumni of The Wharton School and Indian Institute of Technology Delhi respectively.

With the Government’s focus on digitizing India and the Reliance Jio wave in full action India's mobile Internet penetration has seen a 100% jump in users in only four years between 2015 and 2019 from From 320 million to 600 million. This number is expected to surpass 1.1 billion by 2026. One of the direct impacts has been felt on consumer shopping behaviour, with an increasing number of shoppers engaging in e-commerce. 2020 & 2021 added pandemic to the mix, and the growth of e-commerce business sky-rocketed. Before you counter and say it's primarily a metro or big-town phenomenon, think again. Tier 2, 3 & 4 towns are emerging hotspots for the "India Economy" and have been one of the fastest-growing segments in e-business. The success of players like D-Mart, Vishal Mega Mart & V-mart is a testament to the economic potential of the Indian economy beyond the metros. But, can physical commerce serve this vast market alone? Certainly not.

"We believe brick-and-mortar modern retail cannot adequately bridge the gap between what value consumers need and what they have access to. This is because of the sheer complexity of rolling out stores in remote regions of the country and the lack of high-quality retailers in this segment in India. E-commerce is becoming more relevant, prominent, and important compared with modern retail in many

Tier 2+ towns." — reads a recent report by Kearney, further stating that as high as 65% of India's top 854 towns had fewer than two branded retailers. This is not surprising if you have been following Snapdeal’s comeback story. Their unique focus on the value conscious market has helped them pull off an amazing resurrection since 2017-18. The Snapdeal promoters took a bold bet by declining Flipkart’s offer to buy Snapdeal but it seems they have pulled it off quite well. You go to any Tier 2+ town in the country and you can clearly see the impact that Snapdeal is having over the buying patterns of young lifestyle shoppers.

Talking about lifestyle shoppers; the growth of value e-commerce industry is evident in the lifestyle retail market, 70% of which comprises the value lifestyle retail segment — for the value-conscious consumers. Imagine a young Varun Dhawan buying the latest fashion online to impress the Alia in the small town of Jhansi, Ayushmann Khurana ordering Kriti Sanon international love stories to get her mind off her own Bareilly ki Barfi novel or Akshay Kumar in Lucknow buying an angry Huma Qureshi a washing machine! Budget focused customers in value e-commerce, especially, in the lifestyle segment are middle-income young families driven by a few factors:

  1. Discovery based shopping
  2. Quality & discount led buying
  3. Aspirational & trend-led choice
  4. Brand-agnostic mindset

The Kearney report states that the value e-commerce segment in India is expected to grow from $4 billion in 2019 to $20 billion in 2026 and $40 billion in 2030. The value lifestyle retail market in India is expected to grow from $90 billion in 2019 to $156 billion by 2026 and $215 billion by 2030.

Today, 70% of this value retail demand comes from tier 2+ cities and towns, with an expected increase over the coming years owing to the growing Internet adoption and trust in online shopping. This phenomenon has led to the birth of a new Bharat.

One e-commerce marketplace that has reinvented itself to lead this segment of value lifestyle e-commerce for Bharat is Snapdeal.

"The e-retailer's laser-sharp focus on the needs of value lifestyle customers — a relevant, curated assortment of durable lifestyle products at affordable price points assisted by technology and a robust supply chain — has enabled the rapid growth of a unique consumer base from tier 2+ markets," notes the Kearney report.

And, the brand's focus on affordable price points consistent quality, low shipping cost easy-to-reach, multi-lingual and multi-channel app, customer service experience and personalised recommendations driven by analytics has helped keep its position as a leader of this attractive segment.

Both the online and offline models in value retail have their advantages and challenges. While space constraints and limited inventory restrict the offline models, e-commerce platforms must work to build trust among Bharat consumers. The e-commerce brand that has been able to garner this trust is Snapdeal.

It's fascinating to witness Snapdeal standing on the anvil of unlocking such a vast market, given that it was considered dead and buried till a couple of years ago. Snapdeal is the very architect of the 'Value e-commerce' business model. They have leveraged their strong understanding of consumers to create a robust platform offering excellent quality, huge assortment, best prices and prompt service. This journey has been arduous and has its tenets far beyond what is visible on the Snapdeal website or mobile app. Snapdeal's journey of the last three years is a model of optimising costs across the value chain, especially fulfilment costs and marketing, to ensure that they can serve the value-conscious buyer. This frugal approach has helped Snapdeal create a very differentiated business model from other ecommerce marketplaces. They have focused on a massive chunk of the overall market that others ignored, given the price sensitivity of this customer segment.

It's surprising to note that while the whole start-up eco-system has been buzzing with D2C brands and private labels, nobody mentions Snapdeal. Even though they have built over ten power brands across popular categories like apparel, fashion accessories, footwear, home & kitchen, health & wellness, personal grooming, etc. This is not the only under-celebrated aspect of the Snapdeal journey. Their logistics function is a major source of their efficiency and customer appeal. Serving 2500 cities, covering 96%+ pin codes of the country is a result of a deep-rooted focus on technology, partnerships and breaking down of the traditional single carrier approach to different first mile, mid-mile and last-mile approach.

Snapdeal's Indianized working style, positive unit economics, zero debt, zero inventory and zero CAPEX business model will likely retain their top spot in the value e-commerce category. From an anecdotal perspective, Snapdeal could very well be the digital version of D-Mart, which has been an enormously successful business from all counts. Snapdeal could be an even more compelling financial success given that they don't have to deal with the high overheads of physical stores.

Let us know your thoughts on Snapdeal’s positioning and business strategy, what do you think lies ahead of them?

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