Is the $100 bn online services market the way to go for Snapdeal?

Is the $100 bn online services market the way to go for Snapdeal?

Author | Madhuwanti Saha | Monday, Jul 11,2016 7:54 AM

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Is the $100 bn online services market the way to go for Snapdeal?

Snapdeal recently expanded its marketplace to include more services like flight and bus ticket bookings, hotel reservations and food ordering with its partnerships with Zomato, Cleartrip, UrbanClap and redBus. All of their services can be conveniently accessed from their platform. With this the e-commerce major is foraying into the USD 100 billion market for online services, as yet untapped by any other e-commerce player. It claims to be the first e-commerce marketplace to introduce services on its platform.

Currently, Cleartrip, redBus, UrbanClap and Zomato are available on Snapdeal’s services section for flight and hotel bookings, bus ticket bookings, personal services and food ordering respectively. Customers will also be able to avail exciting offers on these services on Snapdeal.

It’s clear that the online marketplace’s aggressive strategy comes at a time when growth in product sales is slowing across the country's ecommerce industry. It’s working on new revenue streams, expanding net revenues and reducing costs as it’s clearly seeing the buck is in services more than product sales. Earlier this year, the company introduced recharges and bill payments on its platform which had been made use by more than a million people.

According to media reports, the founders have mentioned that they have over $500 million in the bank and are positive about turning in profits in next two to three years. They had spent frugally on marketing and ads, with fixed monthly spends of less than $1 million according to reports. Their only major expenditure was Freecharge’s Indian Premier League (IPL) sponsorship.

The company is backed by Japan’s SoftBank, the Alibaba Group, Taiwan’s Foxconn Technology Group, American e-commerce firm eBay and Tata Sons chairman emeritus Ratan Tata, besides venture capital and private equity investors such as BlackRock, Nexus Venture Partners, Intel Capital, and Kalaari Capital.

Rohit Bansal, co-founder, Snapdeal, said, “Online service is an industry potentially worth $100 biliion by 2020 and is poised to play a huge role in driving habit commerce in India. The introduction of services on Snapdeal is a big leap forward in catering to nearly all the consumption needs of our customers. We are thrilled to partner with Zomato, Cleartrip, UrbanClap and redBus to bring to our users the best of choices for food, travel and personal services. We will continue to add leading service providers from other categories in our journey to offer a single point access to the widest range of services. We are confident that the introduction of services on Snapdeal will bring us closer to our goal of 20 million daily transacting users by 2020.”

Currently these services are live on their app. Bansal explained, “Most users in India carry smartphones which have limited phone memory space. The launch of services is an extension of Snapdeal's ecosystem which aims to fulfill all consumption needs of its customers. Services is a big part of consumption, and therefore, this launch makes Snapdeal a go-to app for all the consumption needs.”

Snapdeal which started as a daily deals platform in 2010 expanded into an online marketplace in 2011. The online marketplace with 300,000 sellers with its reach over 6,000 towns has got into real estate with its partnership with real-estate developers Puravankara Projects, and JLL India, a property consultancy firm, to sell apartments. This makes it evident that Snapdeal is looking at considering every need of a customer. Its current worth is $6.5 billion lower than Flipkart’s 9.3 billion.

Over the years, it has become aggressive with its acquisitions from Grabbon, Smartprix, Shopo, Exclusively.in to GoJavas and the most talked about FreeCharge (which is acquired for $400 million). Now it’s been reported that it’s on its way to acquire online fashion retailer Jabong.

The move of product integration from Snapdeal comes at a time when Snapdeal and Flipkart are under threat from Amazon, which is fast increasing market share. American e-commerce major Amazon announced an additional $3 billion investment in India last month, leaving no stone unturned to dominate the Indian market. In fact according to reports dislodged Snapdeal to become the second-largest online marketplace by shipments, becoming the only major player to increase its share of shipments in the market from a year ago.

One has to wait and watch how Flipkart and Amazon will work out a strategy to compete with Snapdeal’s recent tie-ups.

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