Delhi-based e-retailer Snapdeal is confident of becoming the market leader in India's rapidly-growing e-commerce market by the end of this fiscal year through March, co-founder and CEO Kunal Bahl told CNBC early Wednesday.
According to data by Morgan Stanley, Snapdeal is currently the second-biggest player in India, with a market share of 32 percent. Rival Flipkart, the poster boy of Indian e-commerce, is holding on to the lion share of 44 percent, while U.S. behemoth Amazon accounts for 15 percent of market share.
"[Flipkart] had a [headstart] of $500 million and 10,000-person, but it doesn't seem like that any longer. We are quickly covering ground there. Also, a lot of the investments we made in infrastructure and other platforms like consumer-to-consumer (C2C) and payments are paying huge dividends," said Bahl, who was speaking to CNBC at the Morgan Stanley Asia Pacific Summit in Singapore.
"Our market share is only climbing year-on-year. Three years ago, our market share was zero," he added.
India's e-commerce sector has grown by leaps and bounds in the past few years, on the back of improving telecommunications infrastructure and as Indian consumers grow increasingly comfortable with shopping online.
A report by the Associated Chambers of Commerce and Industry of India along with PricewaterhouseCoopers expects the sector to log a compound annual growth rate of 35 percent and cross the $100 billion mark in value by 2019. The study, released in December 2014, put the industry at a current value of $17 billion.
To step up its game against bigger rivals, Snapdeal has been on an acquisition spree, while earmarking huge investments into technology such as making browsing faster on its app and website. The move was essential, according to Bahl, with "30 percent of buyers still using 2G networks."
In terms of buyout opportunities, the online marketplace which bills itself as India's version of
Alibaba, has targeted start-ups in the broader mobile and data analytics space as it attempts to create a complete ecosystem. Recent acquisitions include payments and mobile recharge startup Freecharge and digital financial distribution platform RupeePower.
"We are inspired by what Alibaba has built but we have adapted the business model for India, like we invested heavily in supply chain much earlier on than Alibaba because we feel that infrastructure in India isn't that great so we have to front-load those investments ourselves. We have been very acquisitive because we feel that it's hard to do everything really well organically so it's great to get entrepreneurs on board in areas of investments that we think are going to be critical for our business," Bahl, who co-founded Snapdeal with his schoolmate Rohit Bansal, said.
Despite the shopping spree and huge investments, the chief executive believes the company he co-founded in 2010 as a daily deals website, remains on track to become profitable in two to three years.
"It's really important to invest in capabilities such as supply chain, warehouse and last-mile infrastructure because if we don't, what are we really building? India did not have a decent logistics company that could deliver large appliances so we actually had to build the last-mile fleet that could deliver large appliances [such as] refrigerators and air conditioners to the houses of customers and that's yielding huge results because customers who are buying these high-value, bulky items online are increasing," he told CNBC.
"So I stand by that statement I made some time back that it will take us 2-3 years to get to profitability."
Amazon.com Inc. is facing off against local rivals bankrolled by global venture capitalists. Among them: Flipkart Internet Pvt., valued by investors at $15 billion; Jasper Infotech Pvt.’s Snapdeal, valued at $5 billion; and One97 Communication Ltd.’s Paytm, backed by China’s Alibaba Group Holding Inc.
The largest companies are racking up tens of millions of dollars in losses monthly, investment bankers and industry executives say, the result of markdowns, subsidized shipping and spending on infrastructure and technology as they seek a competitive edge in the world’s second-most-populous country.
Technology executives and investors who accepted the cash burn when they were trying to push Indians to shop online for the first time now find it hard to justify. India’s e-commerce market is expected to hit $11 billion by year-end, according to
Goldman SachsGroup research, large enough—investors say—to be sustainable without discounting and sales.
India is big but relatively poor. Per capita income is about $1,500 a year. Total e-commerce sales in India last year were $4 billion—roughly equivalent to four days of online shopping in the U.S
Million-dollar burn rates in India aren’t viewed with the shock that they should be,” saidBejul Somaia, managing director of the India operations of U.S.-based Lightspeed Venture Partners LLC. Burn rates are a measure of how much cash is being spent to fund operating losses.
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