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SoftBank might pour USD 100 million into Indian marketplace Snapdeal

Written by Priya Pradeep Published on   3 mins read

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Snapdeal is betting big on India’s tier 2 and 3 market to realize greater ambitions.

Indian online marketplace Snapdeal which recently claimed to be the third largest e-commerce company after Flipkart and Amazon India, is in advanced talks with SoftBank as well as a few new and existing investors to raise USD 100 million.

If Snapdeal manages to pull this off, it would be its first major funding exercise after more than three years, according to sources who disclosed the developments to local media Economic Times.

Snapdeal has roped in American multinational investment bank, Bank of America Merrill Lynch as its adviser, and is holding discussions with both local and global investors. Its valuation has been pegged between USD 800 million to USD 1.2 billion. The e-tailer has posted a current net revenue of USD 140 million.

“Snapdeal is not going to compete with Amazon and Flipkart on marketshare and type of products being sold. They are selling the Bharat story to investors,” the report quotes one of the sources.

The erstwhile unicorn company now competes with Paytm Mall and ClubFactory as it now focuses on tier 2 and 3 markets and lists pocket-friendly products instead of going after branded category. Recently, it claimed it has surpassed its close contender ClubFactory to bag the number three position. According to market intelligence firm SimilarWeb, in the last 12 months Snapdeal has got a lead of over four times and has got as many as 848 million visits compared to the Chinese fashion e-commerce company.

Touted as the ‘comeback kid’, Snapdeal has bounced back after massive restructuring and change in business model. In early 2017, Snapdeal was India’s third largest e-commerce site. However, it lost its way soon amidst stiff competition and in July 2017, talks for a USD 950 million merger with rival Flipkart also broke down.

In 2018, its founders Kunal Bahl and Rohit Bansal, formulated the Snapdeal 2.0 revival plan. The company sold its business units that impeded its growth, like warehouse management firm Unicommerce eSolutions, wallet business Freecharge, and logistics arm, Vulcan Express. It trimmed its workforce majorly to cut expenses.

Snapdeal then attuned itself to the needs of the value-conscious buyers in India. More than 80% of its users from its 400 million buyer base, now comes from tier 2 and 3 cities in India, which is the fastest growing segment in Indian e-commerce. Snapdeal has seen a lot of traction in this time period gaining 60,000 plus new seller partners who have contributed to over 50 million new listings. At present the company has more than 500,000 registered sellers, who have more than 200 million listings on the marketplace. The turnaround was a result of it getting closer to its customers, having a deeper collaboration with its seller partners, and its alignment of its technology platform with its core objectives.

“Snapdeal’s steady focus on the mass segment of the e-commerce market in India has led to a sharp increase in its reach and popularity across the country,” reported SimilarWeb in an October 2019 release. In the last year alone, the traffic to Snapdeal’s web and mobile platforms has grown by 61%. The e-tailer claimed a massive growth of 52% this Diwali over last year’s festive sales volumes. Now, nine out of every 10 orders serviced by Snapdeal are from non-metro towns across India.

Indian e-commerce market’s growth potential can quadruple to USD 150 billion by 2022, on account of rising disposable incomes and greater internet penetration, as mentioned in a  report by Indian technology trade body Nasscom and consulting firm PwC India.

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