Ahead of its $250 million initial public offering (IPO) Softbank-backed e-commerce firm Snapdeal is all set to venture into the offline domain with the launch of partner stores across small cities of the country with an aim to attract and cater to ‘Bharat’, according to sources privy to the development.
The first Snapdeal partner store will be launched in January. The company plans to gradually expand the number to around 25 by the end of the next year.
Snapdeal will partner with existing or aspiring retailers for an asset light focused rollout under which the company will help retailers procure goods of its power brands through its very own sellers.
Power brands are Snapdeal’s brands which it launched a year ago in partnership with select sellers. The IP of the brand is owned by Snapdeal but licensed to third-party sellers as laws in India do not allow marketplaces to hold inventory.
Snapdeal runs a range of 11 power brands across popular categories like apparel, fashion accessories, footwear, home and kitchen, health and wellness and personal grooming.
These brands are designed to cater to value-conscious customers who want to pay primarily for the features and functionality instead of brand premium.
According to one of the sources mentioned above, Snapdeal which of late has expanded focus on non branded categories and non metros, currently gets over 80% of its business from smaller cities across the country. The omnichannel strategy will help it get further traffic and also act as a physical touchpoint for the brand. It will also enable the buyers to examine the merchandise before they make an online purchase.
Over time, the stores may also act as on-ground outposts for Snapdeal from where users can collect, return and exchange the merchandise they have bought online.
Snapdeal has also hired former chief operating officer of Iconic Fashion, Priyaranjan Kumar to lead this initiative. Before that he was part of the leadership team at Aditya Birla Fashion and Retail and was involved in the ramp up of the physical stores network under the Pantaloons brand.
While online retail in India is rapidly growing, it still accounts for less than 10% of India’s retail. Some categories and branded products have a deeper online presence, while others are even lesser than 5%.
Omni-channel approach in India allows e-tailers to cater to consumers who are still exploring online channels but conventionally do all the purchases offline. These are customers with hybrid habits who will take a while to get comfortable with online platforms.
According to IAMAI-Kantar ICUBE 2020 report, out of over 622 million internet users, around 96% use it for entertainment. 90% use it for communication, 82% to access social media platforms and just 28% to regularly shop online.
Many online firms such as Nykaa, Lenskart, FirstCry run omni-channel businesses and have multiple retail outlets spread across the country. However, Snapdeal would be the first online company to do so primarily for small towns instead of metro cities.
This happens at a time when the South East Asian e-commerce giant Shopee has entered into India with a huge focus on non-branded categories and value conscious consumer base. Moneycontrol on November 25 reported that the company which is running its pilot has already crossed 100,000 order volumes per day.
Another Softbank-backed e-commerce firm Meesho is also heavily betting on the non branded category with aggressive expansion and zero commission model.
In an interaction with Moneycontrol on November 6, Vidit Aatrey founder and chief executive officer said that the company benefitted by two big tailwinds -- cheap data from Jio which allowed a lot of people to come online for the first time, especially in very small towns and the pandemic which forced people to start using mobile phones a lot more because they couldn’t go out.
Snapdeal did not respond to queries for this story.
In September, Moneycontrol reported that one of the existing investors of Snapdeal was exploring a secondary transaction for a partial exit from the company which could be valued at $30-50 million.
Bank of America, Axis Bank and JM Financial are assisting Snapdeal for the IPO which counts investors like Softbank Nexus, Alibaba, eBay, and Blackrock.
The company is likely to issue the draft prospectus in the next few weeks.
Disclaimer: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.