Monday, December 22, 2014

How Snapdeal plans to beat delivery challenges

How Snapdeal plans to beat delivery challenges

Snapdeal is seeking to acquire a significant stake in a logistics company to overcome the delivery challenges in India's fast growing e-commerce market.


Online marketplace Snapdeal.com is seeking to acquire a significant stake in a logistics company or form a joint venture with one to overcome the delivery challenges in India's fast growing e-commerce market, two people familiar with the matter said. Snapdeal is flushed with funds, having raised $627 million (about Rs 3,845 crore at the then exchange rate) from Japanese internet, media and telecom conglomerate SoftBank in October. 

"They are keen to have something of their own but it is too late to build a network from scratch," one of the people quoted above said on condition of anonymity."They are considering all options, including a significant stake buy or a joint venture to have some control on quality." 

The second person, who also declined to be named, said Snapdeal is most interested to start with a minority stake with a right to buy the remaining stake later. "They want a company with a pan-India network with a significant presence in tier-II and III cities. They also want the company to have a good reverse logistics capability ," this person said. Snapdeal declined comment on queries related to their plan to get into logistics. 

But people close to the development said the thought is that once it takes over a significant minority stake, Snapdeal will invest in IT and synchronize it with its own platform over a period of time. Snapdeal does not want to run the company immediately as logistics is not its primary business and it also lacks service relationship in the unorganized logistics market, these people said. According to them, founder and CEO Kunal Bahl is driving the process. 

Snapdeal remains the only big e-tailer in India that does not have a captive delivery arm and relies completely on third-party logistics. Flipkart has e-kart and Jabong has GoJavas, which handle a significant portion of their total shipments. GoJavas has now been spun-off but still works for Jabong's deliveries. Amazon is also investing to build its own logistics network.

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