Snapdeal sets up wholesale unit, in shift from true marketplace model
New Delhi: Jasper Infotech Pvt. Ltd, which runs online marketplace Snapdeal, has set up a wholesale unit to buy products upfront, a significant shift from Snapdeal’s current strategy to act as an intermediary, according to three people aware of the development.
E-Agility Solutions Pvt. Ltd, the wholly-owned subsidiary of Jasper Infotech, will resemble a structure adopted by Flipkart and Amazon where closely associated entities WS Retail and Cloudtail, respectively, play a big role in selling on the e-commerce platforms.
Gurgaon-based Snapdeal is also eyeing Indian partners that could help create a seller on Snapdeal’s platform, said two of the three people on condition of anonymity.
The move will help Snapdeal have better control over its inventory and service levels, but will be a departure from a true marketplace model—something Snapdeal’s founder Kunal Bahl has always been proud of. Since 2011, Bahl has advocated a marketplace model over inventory-led online commerce.
“The new entity will be largely used to on-board fashion brands that prefer selling goods upfront to e-commerce firms. Also, fashion constitutes 20-30% of Snapdeal’s business and will help abide with the FDI (foreign direct investment) laws,” said one of the three people mentioned above on condition of anonymity. “The entity will also be used to fund vendors,” he added.
According to new rules, FDI in online marketplaces is allowed but the contribution of a single seller is capped at 25% of the site’s overall business.
Until now, Snapdeal had stuck to a true marketplace model connecting sellers with consumers even while Flipkart and Amazon had devised complex structures to create entities that can sell merchandise on their platform.
For instance, Amazon Asia and Catamaran Ventures have jointly formed Cloudtail India Pvt. Ltd in order to sell books, phones and exclusive Amazon merchandise on Amazon.in.
Similarly, Flipkart.com has a trustworthy seller WS Retail Services Pvt. Ltd, which was owned by co-founders Sachin Bansal and Binny Bansal until September 2012. A large portion of the stake in WS Retail was sold to a third party after the company ran into trouble with the Enforcement Directorate for its alleged control of its main seller.
Snapdeal did not respond to Mint’s emailed queries.
E-Agility was incorporated in November 2015 and lists Jasper Infotech and Vishal Chadha, senior vice-president (marketing) at Snapdeal, as owners, according to documents filed with the Registrar of Companies. It also includes Anand Suryanarayanan, Chadha, Saurabh Nigam (vice-president, human resources, Snapdeal) and Ashish Chandra (Snapdeal’s group general counsel) as directors. Mint could not independently verify Suryanarayanan’s designation.
Snapdeal, which has slipped to No. 3 after Amazon and Flipkart, is pushing hard to regain market share by repositioning its brand and by improving customer service levels.
Earlier this month, Snapdeal announced a branding overhaul by launching a new logo and TV campaign. It has also committed to spend close to Rs200 crore in advertising and marketing during September and October.