Inventory based ecommerce model is flawed: Kunal Bahl, Founder, Snapdeal

snapdeal_funding.jpgSometime back, we wrote about how the e-commerce market in India is quickly pivoting to the marketplace model. Since then, Flipkart and a few others have also launched marketplaces. For the uninitiated, an online marketplace is a site where various sellers can display and sell their products.

Most recently, Delhi based marketplace  Snapdeal raised $50 million in its series C round led by eBay. In an interaction with NextBigWhat, Kunal Bahl, the Founder of Snapdeal shares insights. “Inventory led model has various flaws and now its crystal clear that marketplace is the only model to reckon with,” said Bahl who founded Snapdeal as a daily deals site in 2010.

Over the last few months, players like Pepperfry and Buytheprice have launched their marketplaces. Marketplaces serve two important functions. One: It takes away the pain of keeping inventory. Two: Makes it easy for foreign investment to come in as present laws do not allow foreign investment in online retail in India.

“Fragmentation in the retail market gives immense opportunity for marketplaces to thrive and become successful in Indian terrain,” said Bahl. Less than a tenth of the $600 bn Indian retail industry is organised.

Snapdeal pivoted to a product based marketplace model from its service based deal platform in mid 2012. Bahl sees this transition in the industry as inevitable as an inventory based model can’t have the variety offered by a marketplace. SnapDeal claims to have more than 10,000 sellers and hopes to notch up Rs 2,000 cr in sales this year.

However, Bahl warns that a transition from inventory model to a marketplace model can prove fatal if not done right. “It would be even fatal for any etailer while pivoting to a marketplace as it requires altogether different approach and execution,” he says.

The biggest challenge in marketplace model is that it has to rely on third parties for everything from inventory to logistics. While Bahl acknowledges this as a problem, he feels that its still better than keeping inventory.

On fund raising and ecosystem

When asked how Snapdeal intends to use the recently raised funds, Bahl said that the company believes in using technology to optimise business. “We will keep driving money in technology,” he said. The company also wants to bring nearly 30,000 sellers on its platform by the end of the calendar year.

So far, this year has been going good for ecommerce companies with around $100 mn in risk capital flowing into the sector. Companies like Vayloo Technologies (Lenskart, Bagskart etc), ShopClues, HealthKart, Zovi, LadyBlush and lately SnapDeal have raised follow on capital.

Bahl parts with a gem

You can survive in Indian ecommerce space only when –  if you have scale (at least 10-15K orders per day) or $50 million in bank account:)

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