Shilpa Gupta and her colleagues have caught the online shopping bug. Each morning the human resources staffers for an Indian newspaper try to guess whose purchases will arrive that day. Increasingly, their packages arrive from Snapdeal.com, one of India’s fastest-growing e-commerce sites. The three-year-old startup has caught the attention of EBay (EBAY), which recently led a group that invested $50 million in the 1,000-employee New Delhi company.
Snapdeal operates as an online marketplace for about 10,000 small merchants, most with little tech experience, that rely on their host for help with shipping and billing. That sets it apart from India’s leading e-commerce site, FlipKart, which stocks and sells its own inventory and whose revenues topped $100 million in 2012, according to consulting firm Technopak. Snapdeal Chief Executive Officer Kunal Bahl says his site has 20 million registered users and gets a million visitors a day.
New Delhi-born Bahl, the son of a plastic molding entrepreneur, earned degrees at the University of Pennsylvania and Northwestern University and worked at Microsoft (MSFT) before returning to India. He and childhood friend Rohit Bansal launched Snapdeal in early 2010, planning to sell deals, similar to Groupon. They changed course a year later because of customer and merchant interest in a product marketplace, Bahl says.
India is one of the world’s most promising and problematic Internet markets. While Snapdeal benefits from the nation’s protectionist retail laws, which limit competition from EBay, Amazon.com (AMZN), and Wal-Mart Stores (WMT), only about 10 percent of India’s population, or approximately 100 million people, are online. Barely 10 million Indians have high-speed access, according to research firm Gartner (IT). The recent proliferation of cheap phones and tablets has helped compensate for the country’s poor Internet infrastructure, bringing many consumers and small merchants online. Bahl says 15 percent of Snapdeal purchases are made via smartphone, and he expects that figure to double in 18 months.
Getting customers their orders has not been as easy. India has no national shipping company, and 85 percent of transactions are in cash. “The trust deficit is pointed out as the prime reason why people don’t want to shop or sell online,” says Bahl. Snapdeal helps sellers find cheap couriers, print labels, and schedule pickups, and it guarantees refunds to buyers for any reason.
EBay has revived its U.S. business, thanks in part to its PayPal payment unit, and has been looking to expand abroad. CEO John Donahoe recently told analysts he expects rapid growth in developing nations such as India. Says Bahl: “Our view is that they are a great partner, and I think there’s a lot we can learn from them.”
The bottom line: While online retail is just 0.2 percent of India’s retail market, it’s growing at 45 percent per year, and Snapdeal is well placed to capitalize.
