Snapdeal buys stake in logistics firm GoJavas, promises delivery in just 4 hours
Online marketplace major Snapdeal today picked up minority stake in logistics firm GoJavas as it looks to further strengthen its delivery operations in the country.
Online marketplace major Snapdeal today picked up minority stake in logistics firm GoJavas as it looks to further strengthen its delivery operations in the country. The two have signed a strategic agreement for last-mile delivery.
Snapdeal co-founder Rohit Bansal said this is the first ever investment by Snapdeal in the logistics segment and that the company is looking to invest $150-200 million in logistics this year.
Snapdeal, which has more than 60,000 sellers on board and more than 40 million registered users, has been dependent on third party services such as Blue Dart, GoJavas, Ecom Express for handling deliveries in the country. With Tier 2 and 3 cities expected to contribute to more than 350 million e-tailing shipments in 2018, exceeding the demand from traditional retailers, it only makes sense for Snapdeal to acquire a logistics company so it can develop a network of branches and delivery points that will be able to service high-growth cities.
Launched two-and-a-half years ago, GoJavas' first client was Jabong, the online fashion and lifestyle retailer. Today, it serves 200 companies, delivers in 2,300 pin codes and covers about 105 cities. The company shipped five million packages in 2013/14 and expects to ship 20 million in 2014/15. It currently serves companies including Healthkart and Yepme among others. The startup spans over 107 cities and serves around one lakh customers on a daily basis.
After the acquisition, Snapdeal said it will be looking at delivering orders in just four hours in 10 cities.
The company has already invested in setting up fulfilment centres to smoothen its delivery operations.
Currently, it has 50 such centres across 20 cities and plans to expand this to 75 in 30 cities in the next few months. Snapdeal counts global eCommerce giant eBay, Temasek, Myriad, Tybourne, Blackrock Inc and Premji Invest among its investors.
According to consultancy Technopak, the $2.3-billion (Rs 13,800 crore) e-tailing sector will touch $32 billion (Rs 1.92 lakh crore) by 2020. But for this, the logistics sector - the link between e-tailers and customers - has to keep pace with the rate of growth in e-commerce. As has been witnessed in the past, cargo air capacity constraints delay deliveries especially during festive periods such as Diwali when orders tend to peak. Due to this logistics service providers need to augment road and rail transportation of consignments.
Given this, Snapdeal's acquisition is not surprising. Flipkart, its closest competitor, already has a separate logistics arm i.e. Ekart while Amazon is also said to be in talks to acquire a majority stake in logistics company BlueDart.
The Delhi-based e-commerce firm, which raised about $ 1 billion last year, including $627 million from Japan’s SoftBank, has been scouting for acquisitions in the mobile technology and supply chain space. It is open to at least five to six acquisitions this calendar year in the areas of mobile tech, big data and logistics.
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Alibaba was valuing the Indian firm in the range of $4-5 billion as against a valuation between $6-7 billion sought by Snapdeal
The GoJavas partnership has also enabed four-hour delivery service for Snapdeal exclusive launches and returns by customers to be picked up within 90 minutes in 50 cities.
He emphasised that Snapdeal is well funded for the next "couple of years" before throwing a bomb shell: "We have not even touched the SoftBank money till now....we don't have to raise capital because its fashionable....we have stopped taking investor meetings for now".