We should become most profitable e-commerce firm in India: Snapdeal's Kunal Bahl

New Delhi: Snapdeal wants to become the most profitable etailer in India, never mind the losses it has been piling up. The Delhi-based etailer is already eyeing a five fold increase in GMV to reach about $10 billion by December 2015 - which will likely put it ahead of competitors like Flipkart. As it looks to gain scale and expand through strategic acquisitions, Snapdeal’s ambitions could become a serious headache for other etailers, who are also eyeing scale and profitability at the end of it all. [caption id=“attachment_2116071” align=“alignleft” width=“380”]  Snapdeal co-founder and CEO Kunal Bahl. Image courtesy Snapdeal[/caption] Snapdeal has its sights firmly set on the path Chinese etailing giant Alibaba took. Alibaba turned profitable in the 11th year of operations and has since become the poster boy of etailers across the globe. In an interview to Firstpost, co-founder and CEO Kunal Bahl made it clear that Snapdeal wants to become the most profitable etailer in India. “Alibaba turned profitable in the 11th year after its inception and now generates over $5 billion in EBITDA. Given our business model is similar to Alibaba’s and has the same operating leverage as their business, we believe once our investments in technology and logistics infrastructure reach a satisfactory equilibrium, we should become the most profitable e-commerce company in India,” Bahl said. A story in The Times of India had earlier said Snapdeal could record a five-fold increase in losses going up to $250 million (Rs 1,500 crore) this fiscal. Bahl did not comment on the GMV (Gross Merchandise Value) target for this calendar year but company officials confirmed that $9-10 billion was indeed the target by December. Half of this would come from the electronics and home segment, $2 billion from fashion and the remaining $3 billion from other categories sold through Snapdeal. So it is clear from Bahl’s assertions and other statements from the company that Snapdeal wants to do more business than rivals and when it does turn the corner, it wants to make more profits than others. Ambitious target or is there a method to this madness, given that no etailer is making money right now and profitability seems rather far away? One way Snapdeal seems to be different from other etailers is capital efficiency - or so Bahl claims. In the interview, he pointed towards this when asked whether Snapdeal is again in the market for raising funds (it has already raised about a billion dollars till now and Japan’s Softbank is an existing investor). “We have seen huge interest from the investor community given our scalable and capital efficient business model along with the demonstrated results. Currently we are extremely well capitalised and don’t need to raise capital unless its for a strategic purpose. Other inventory led e-commerce companies in India are burning billions of dollars and hence probably need to go out in the market regularly to raise significant capital to keep the lights on. We have no such issue in our business.” He claimed Snapdeal was the most capital efficient e-commerce company in the country and total investment in it has been less than $200 million “since we started the business to get to the scale we are at currently. I am confident this is a fraction of what other inventory led e-commerce players in our industry would have invested to get to a similar or small scale”. So where has the remaining about $800 million been used? Well, $100 million is being used in a technology centre in Bengaluru and the remaining money has been used to do some strategic acquisitions (six done so far), in brand building and beefing up supply chain etc. Make no mistake though: Snapdeal may yet see more funds flow in as Bahl does not completely deny fresh funding - he has merely said capital would be raised for strategic purposes. Company officials say investor interest continues in Snapdeal. They also point out that as of now, all employees are focused on getting a million sellers on the platform and that profitability is a goal for the future. Snapdeal currently has just a tenth of this or 100,000 sellers on board. By the end of this year, it is targeting 250,000 sellers and a million in three years. Bahl said this year, “We expect more than 5000 of our sellers to clock over Rs one crore in sales through our platform, which will be an increase of five times over last year.” Technology is a primary focus area for Snapdeal as its scales up rapidly. Bahl said by March, the engineering team at Snapdeal will have 1,500 people. “At this (Bengaluru tech centre) we have set up a research facility which is working on developing cutting edge technology for enhanced customer experience. We will invest $100 million over the next three years in this technology centre,” Bahl said. As India’s etailers see quantum jumps in sales and mega investments flow in, the top two or three companies may be in a very close contest. What might tip the scale in the favour of one or the other may etailer well be how many first time entrepreneurs it generates, how many small towns it serves and how quickly it translates scale into profits.