Funds-rich Snapdeal faces smart investment challenges

Rata Tata's investment in the company has just made the e-retail space in India more interesting. But where does Snapdeal go from here?

e4m by Abhinn Shreshtha
Updated: Sep 2, 2014 8:13 AM
Funds-rich Snapdeal faces smart investment challenges

Rata Tata’s investment in Snapdeal has just made the e-retail space in India more interesting, if there was any need for more excitement, that is. A rumour that had been floating around since early August, was finally confirmed last week when Snapdeal announced that Ratan Tata has made a personal investment in the company. Exact financial details have not been revealed.

Speaking about the development, Kunal Bahl, Co-founder & CEO, said, “This is a very proud and exciting moment for the entire Snapdeal family. An investment by a legendary and respected figure like Ratan Tata is an excellent validation of our focused strategy on building a long term enterprise and marks the start of a very important phase for the company.”

Some will see this as an endorsement for a company, that is among the top e-retail destinations in a country, where e-commerce is expected to be a 9-billion dollar market by 2016. Snapdeal, of course, has some pretty strong backers, including eBay, Intel, BlackRock and Nexus Venture Partners. According to the buzz in the market, it has raised more than 340 million dollars in funding. An immediate upshot of Ratan Tata's investment could be the company being viewed as a safe investment destination. 

The growth of Snapdeal speaks in its numbers with 600 per cent growth year-on-year for the last two years. It currently houses over five million products across 500+ diverse categories from over 50,000 sellers and employs 1,500+ members. The company has been talking about launching an IPO in the US for some time now, and this is expected to materialise next year. It recently forayed into real estate by partnering with Tata Value Homes, a subsidiary of Tata Housing Development. In an earlier media statement, Kunal Bahl had said, he expects the company to be profitable by 2015. It is easy to see why it would seem such an attractive proposition for Ratan Tata.

So what's next for Snapdeal? The problem in India, say analysts, is inventory management. Snapdeal, being a marketplace, does not have this problem. But upgrading and strengthening its supply chain will definitely be a priority.

M-commerce, which accounts for more than 50 per cent of all transactions on Snapdeal, is definitely another task. In fact, post raising 1 billion dollars in funding, Flipkart's Sachin Bansal had mentioned that mobile commerce and building technology platforms to enable sellers to sell online, would be the company's key focus areas. The challenge to Snapdeal could not be more direct. To overcome the combined assault from the likes of Flipkart, Amazon, et al, Snapdeal will have to continue to stay ahead of the technology curve.

But Snapdeal may not take the Flipkart route and spend aggressively at the cost of profit to capture the market. If news of the pending IPO is accurate, its interest would be more in cutting down losses. The strategy could be about investing smartly and in the right places - mobile, big data, platform development and supply chain- rather than gunning for market share.

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