Group buying is an online retail service that aggregates demand from consumers to negotiate unbeatable discounts from merchants across restaurants, spas and other entertainment avenues. Aim of Group buying sites has been to bring customers together socially, in addition to harnessing the bargaining power of groups.
Groupon’s billion dollar valuation in 2010 created buzz all over the world. Indian entrepreneurs noticed the news with enthusiasm and in a short time number of group-discount based websites became operational.
Let us take a short dive in the fairytale rise of Snapdeal–
Started on 4th February 2010 by Kunal Bahl & Rohit Bansal, Snapdeal’s initial business model was quite similar to Groupon. They charged 35% upfront for every deal. Rest had to be paid directly to the merchant on delivery of service or good. Employees were given the job of getting discounts from merchants. Ambience of 0.8 million strong Gurgaon cyber city IT crowd too helped Snapdeal in jump start. IT crowd was the sweet target as it loved – lavish dinners, pair of luxury sunglasses and soothing spa.
By June 2011 Snapdeal was already well ahead of all other players in group buying market. It boasted 5 million registered users and a hefty 27% of Indian online deal market share.
Around 2011 end, Snapdeal founders realized that core deal was not as big a business as they used to think. They then started thinking about integrating deals, services and product sale onto one platform. In January 2012, taking cue from Alibaba they transformed their deal base into a product focused market place.
Here is FS Labs Analysis how Snapdeal build their business by acquiring diverse marketplaces:
1.Grabbon – June’2010. Snapdeal Business Model – Deal Sellers. Target – Expansion into 15 cities within 2 months)
Grabbon had been leaders of group buying segment in Bangalore. They shared their nature of work with Snapdeal. Their quality of execution and thought leadership in evolving the business model in India was of top notch.
Its founders were XLRI alumni with consulting backgrounds, Jackson Fernandez (Accenture) and Tony Navin (KPMG). Grabbon’s geographical presence made them apt choice for the acquisition for Snapdeal which started targeting southern part of India after this acquisition.
After acquiring Grabbon, Kunal Bahl had said that they would have the flexibility and resources needed to pursue their goal of building the next-generation platform for the Group Buying space in India. Snapdeal were present in 8 cities before the deal.
2. Esportsbuy – April’2012. Snapdeal Business Model – Online Marketplace for Products, Deals and Services. Snapdeal valuation – $200Mn, Deal worth – $10Mn. (Target – Unorganized Sports Retail Sale)
Esportsbuy was founded by Amit Monga (Amazon) and Prateek Agarwal (IBM) in 2011. Its turnover crossed $0.2 Mn within 1 year of service. It was a Delhi based startup which sold fitness and sports products online. Sports product & equipment selling was a niche segment and offered better margins.
By This acquisition, Snapdeal aimed to add a niche category in its product portfolio, which was not being sold by its competitors. Another reason for the acquisition was segment consolidation. As per experts, smaller websites were not able to gain customer loyalty and were not able to sustain highly competitive pricing hence they came looking for merger with big players. From Esportsbuy point of view, 5 times valuation was a good value proposition.
Within 2 months of acquisition, Snapdeal closed Esportsbuy and introduces new vertical for sports and fitness products on its website.
3. Shopo – May’2013, (Target – Niche Handicraft and Designer Items Online Sale)
Launched in 2011, Shopo was an online marketplace for Indian handicraft products. Shopo was backed by investors including Sequoia Capital, Sashi Reddi, SRI Capital and Seeders, among other angels. After looking for funding for more than eight months, its founders decided to sell Shopo to Snapdeal.
For Snapdeal it was another acquisition highlighting addition of niche vertical in its product portfolio. For Shopo, it was an opportunity to get showcased to a 20 million registered customer base of Snapdeal. Shopo sellers were supposed to get exposure to larger customer base.
Snapdeal re-launched Shopo platform in June 2015 as an interactive platform for online buying & selling. It facilitated sellers in setting up an online shop through a mobile app and charged them nothing. Buyers can strike a bargain from seller through online chat and sellers can make time bound offers and transact offline. It tries to replicate offline buying experience.
4. Doozton – April’2014, (Target – Fashion & Apparel online sale)
Founded in March 2013 by Pushpendra Singh – An IIT graduate, Doozton was a social shopping platform which aggregated fashion and lifestyle products from online fashion & lifestyle stores. Apparently it was We read ( Read here about Flipkart’s Acquisition trend) of fashion and apparel. It offered product recommendations to users based on their interests, gender and occasion for buying fashion and lifestyle products. Users were able to browse through fashion recommendations from their friends, Doozton community and the latest fashion trends.
This deal came at a time when Flipkart & Myntra were in discussion for merger. Doozton had tie ups with almost all fashion and lifestyle online sellers and directed customers to corresponding seller as per customer preference.
Snapdeal used Doozton platform for listing and suggesting fashion merchandise to customers in more artful and personalized way. With an aim of curbing the traffic to other competitors, it was definitely a big buy for Snapdeal. For Doozton, exposure to huge customer base of Snapdeal made sense.
5. Wishpicker – December’2014, Snapdeal – 30 million members, 50,000+ sellers, Delivery @ 5,000 cities and towns (Target – Intelligent Recommendation Based on Customer Data)
Wishpicker was a tech platform that used machine learning to deliver recommendations for gift purchases. Founded by Apurv Bansal and Prateek Rathore, Wishpicker’s technology helped users find gift options using information about their relationship with the recipient, the occasion, and his or her age and personality, or looking at the recipient’s likes on Facebook.
At a time when intelligent recommendation are gaining more importance as a measure to control inventory, Wishpicker’s platform helped Snapdeal in fine tuning their product category and planning the inventory as per trend of customer choice.
This was more of a technological acquisition which would equip Snapdeal with a better platform and capability for helping sellers connect buyers in newer ways.
Since last one year or so, Snapdeal had been acquiring or getting an exposure to third-party e-commerce enabling ventures.
6.Smartprix – January’2015, Snapdeal – 30 million members, 50,000+ sellers, Delivery @ 5,000 cities and towns (Target – In line with Amazon’s Junglee; Better Customer Experience and Successful Conversion)
Smartprix was an online comparison shopping that helped users compare different products and choose the best product according to their needs. It presented pricing information of the product on different online stores and provided review, ranking and recommendations. Product categories included mobile phones, tablets, laptops, cameras personal care appliances, accessories and books. It was founded by Hitesh Khandelwal and Abhinav Choudhary from IIT Delhi. It earned commission from affiliates on every sale.
Through this acquisition, Snapdeal tried to go in line with Amazon which owned Jungle for comparison of product. This strategy helps in showcasing more number of products to customers at the same time and helps in converting the customer’s visit into a successful event for E commerce seller.
7. Exclusively – February’2015, (Target – Serving Luxury Items to Public)
Exclusively started as a flash sales site but changed to a standard e-commerce model offering Indian designer apparel and accessories in 2011. The company used to ship products only to the US and UK catering to them Indian designer fashion and apparel items but by 2015 it had started shipping to destinations in India and other global destinations too. Exclusively was once part of Myntra courtesy an acquisition in 2012. Myntra had sold the company back to founders and had exited completely.
As per deal, Exclusively will remain as a standalone brand, with its existing team — including co-founders Sunjay Guleria and Mohini Boparai-Guleria — leading the charge to continue building its online luxury mall. Exclusively will be expanded this year to include international luxury brands alongside the home grown products.
This deal could provide a relief to the luxury lovers in India. At the time of deal there were only 3 physical shopping malls dedicated to luxury items. Considering the increasing purchasing power of Indian middle class and more inclination toward “Branded” shopping, this deal could act as a new turning point for Fashion and apparel online sale.
8. Gojavas – March’2015, (Target – Logistics Betterment)
Launched in 2013, GoJavas is a last mile delivery platform. At start of 2015 it was serving near 200 companies, delivered at 2300 pin codes and covered 105 cities. It had shipped 5 million packages in 2013-14 and was expected to ship 20 million packages in 2014-15. It served 0.1 million customers daily.
Logistics plays an important role for success of E commerce business and Snapdeal were not having any personalized delivery arm but were dependent on third party logistics firms.
With a plan to expand- selling 80 million packages per month- developing its own logistics service became all important for Snapdeal. It bought 20% stake in Gojavas in $20 Million to build a strategic partnership. Snapdeal said that they would now be able to make delivery within 4 hours in 8 selected cities and will focus on quality of service, timeliness of delivery and improving delivery cost.
9. Unicommerce & Rupeepower – March’2015, (Target – Logistics Betterment+ Digital Market Place)
Founded in 2012 by three graduates from Indian Institute of Technology, Delhi—Ankit Pruthi, Karun Singla and Vibhu Garg—Unicommerce offered SaaS (Software as a Service is a software distribution model in which applications are hosted by a vendor or service provider and made available to customers over a network, typically the Internet) based solutions to manage inventory, delivery and other aspects of ecommerce. It helped small merchants and e-commerce firms manage orders from the time they are placed till when products are delivered.
Snapdeal picked majority stake in RupeePower, a digital marketplace for loans, credit cards and other personal finance products for an undisclosed amount. Through this acquisition, Snapdeal will be adding a financial services marketplace onto its site, which will offer financial products like personal loans, educational loans, credit cards, auto loans, home loans and extended warranties amongst others.
Snapdeal claimed that this marketplace will allow financial services companies to reach out to consumers in smaller cities & towns and market their products & services to a targeted audience, which may led to higher conversions as compared to traditional offline channels.
Every day 75 million mobile recharges are done in India by a section of India’s 800 million mobile phone subscribers, out of which currently only 3 million recharges are done online.
10. Freecharge – April’2015, Deal Value – $450 Millions (Target – Converting M-commerce Customers into E-commerce Customer)
Freecharge is India’s leading mobile commerce platform where users can pay their mobile, DTH and utility payments across most major operators. Freecharge provides online facility to recharge any prepaid mobile phone in India. The amount paid by the user for recharge is returned in form of shopping coupons of some of the top retailers in India, thereby making the recharge virtually free.
Online recharge and E commerce are like cousins. Freecharge’s subscriber base is one of the biggest reason behind this acquisition. Consider the move of Paytm : They started as mobile recharge platform provider, once the customer base swelled they added ecommerce in their portfolio. Reasoning behind this being the common demography of customer base for mobile recharge and ecommerce online sale. Free-Charge came with a trove of payment data on the estimated 10 million users on its platform. Besides, buyers are transacting on mobile devices in ever greater numbers, meaning that Freecharge users become potential customers for Snapdeal.
11 Reduce data – April’2015, (Target – Logistics Betterment)
Reduce Data’s focus is to assist brands and advertisers through leveraging artificial intelligence, real-time data and other tools. Revenue generation from ads has been the target of E commerce giants considering the revelation by Alibaba that they had generated around 55% of their sales from advertisement in year 2014-15.
Acquisition of Reduce Data by Snapdeal is the company’s latest push into strengthening its advertising business. This will assist the sellers of Snapdeal to retarget users with custom ads tailored to individual visitors, as well as get real time data on their impressions to provide better ROI .The acquisition will help Snapdeal to build a discovery platform and tools for brands and over two lakh sellers on the marketplace.
12. Letsgomo & MartMobi – May & June’2015, (Target – Betterment of Mobile Platform)
After acquiring Freecharge, Snapdeal became the largest M commerce company. Strengthening its mobile platform became utmost priority for them.
Founded by Manav Kamboj and Vikas Banga, Letsgomo Labs helps companies with end to end mobility solutions like building mobile strategies, conceptualization of applications and mobile sites, implementation and hosting.
With over 150 clients, MartMobi enables seamless connectivity with the customers’ existing back-end systems in addition to a real-time analytics engine to improve conversions and user engagement.
With 75% of sales coming through mobile based platform Snapdeal has been targeting to provide better service experience to customers. These two acquisitions are in line with this thinking.
This brings to a closure to the “Acquisition Spree” of Snapdeal which is quietly running to fill in the shoes of Chinese Giant – Alibaba.
What will be the Next Potential Acquisitions by Snapdeal
Snapdeal has now established into a leading player of Indian E retail sellers. To consolidate its position, it must be broadening its horizon from time to time. FS Labs has listed down few prospective areas where Snapdeal could make next acquisition-
- Grocery Delivery.
- Better last mile delivery.
- Better warehousing / Inventory management solution.
- Mobile wallet service provider.
- Customer Relationship Management Platforms.
There are more areas which will be added to E retail market and will pose a new challenge in front of giants of the market. Till then, happy reading.
Stay tuned for more analysis.