92% of the US$600 bn market is unorganized. India is a hub of almost 50 mn small and medium businesses. The problem for the offline markets are high real estate costs, low product discoverability, limited assortment merchandising and low reach. Online markets account for only US$2 bn currently.
How online market places are helping? It is easier to figure out trends on online markets and prepare the products accordingly. Also, working capital position of the retailer can be a lot better given low product batches. Mr Bahl gave a specific example of the benefits accruing to one of his customers from low working capital and greater planning and production flexibility. The same company has now been able to successfully branch out into another product category.
SnapDeal lists the following as Six pillars of successful e-commerce business. (1) Merchandising, (2) traffic, (3) m-commerce, (4) supply chain, (5) payments and (6) customer support are key to a successful e-commerce business. Many of the offline retailers have tried setting up their own websites but these are of limited utility for various reasons.
Snapdeal—business model
Snapdeal follows a B2C model and does not entertain C2C. It focuses on businesses, which can generate repeat business. They look at the products of potential retailers to appreciate the scalability and reputation of the business. Snapdeal can and helps (1) manage logistics for its retailers, (2) streamline the payment process for buyers and sellers and (3) provide real-time analytics (pricing, service quality,
inventory management and sales benchmarking) to the retailer.
SnaDeal Scale and Reach
Snapdeal is India’s largest online marketplace with 2 bn page views in the past 12 months. The total orders through mobile phones are now as high as 30%. It is unlikely that Snapdeal will have 1 mn retailers. Snapdeal intermediates both payment and shipping and every order or payment has to go through Snapdeal’s platform. In case of Cash on Delivery, courier companies are responsible for either getting the product back or cash in case of a delivery. It will pay about Rs 2.5-3 bn to courier companies as service fees in the coming year.