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Snapdeal vs. Flipkart! All gloves off! This is a Party to the finish!!

By Alok Rodinhood Kejriwal on 47 Comments / 8138 views

Check out this interview of Snapdeal’s Kunal Bahl in the Mint today.

Rodinhood interprets the interview for you: 

Kunal Bahl  – “It’s clear that the inventory-led model is dead. After sinking hundreds of millions of dollars of investors’ money, inventory-led e-commerce companies are discarding their model and replacing it with the marketplace.”

Rodinhood interpretation – Flipkart is dead!

Kunal Bahl– “The other option is carrying inventory—in a market where only 3% of apparel sold is branded and most of the supply side is controlled by small dealers.” 

Rodinhood  – Why is apparel being discussed here, in isolation?  What about books? I would believe the % of branded books (titles) sold by regular bookshops would be much higher? Are garments being used to prop the “raison d’etre” of “marketplaces” and their importance? 

Kunal Bahl – “Marketplaces and inventory-led businesses are like oil and water: they just don’t mix. Let’s say you’re a category manager. Till now, he’s been going to a particular brand and saying that we want to list your product, here’s a cheque for Rs. 5 crore. Now suddenly, you’re going to the same guy and saying, no cheque this time, just come and list on our site. It doesn’t work.

There’s a company in China called China Dangdang, which was the darling of the e-commerce industry at one point. They changed their business model from inventory to marketplace about 1 ½ years before going public in November 2010. As of today they’ve lost 70% of their market value. There’s an inherent conflict of interest between an inventory-led business and a third-party seller on the same platform. It’s a problem Amazon.com faces as well.” 

Rodinhood Interpretation – Flipkart’s new marketplace will fail miserably! 

Kunal Bahl – “My sense is that if you’re not selling stuff worth Rs. 50 crore a month, and if you don’t have $50 million in the bank, it’ll be very hard to survive this year. In the last two months, I’ve looked at 10 venture-funded inventory-led e-commerce companies which came to us to sell. These companies have raised anywhere from $10 million to $50 million each in capital. They were willing to sell for less than a tenth of what their last-round valuation was.” 

Rodinhood interpretation – WOW! This means that VC capital invested in the e-commerce space is now worth 10% of its original value (assuming that there is even an exit possible). This is MAYHEM for VCs who will have to deal with writing off a MAJORITY of 700 million US$ invested in this space??!!! 

Check out:

Kunal Bahl – “We don’t disclose our sales, but what I can say that products worth Rs. 2,000 crore will be sold on Snapdeal this year.” 

Rodinhood – Going by what Kunal said just a paragraph earlier – it means that if you sell Rs. 600 crores a year or less, you die. Now, if his own stated figure of his Company is 2000 crores, then let’s be a bit conservative and assume that Snapdeal sales will be 1000 crores. (That’s still selling 3 CRORES OF GOODS A DAY!) Also, the Company has raised tons of VC (102 million) so far.  So what does that make Snapdeal worth? Just about OK?!! 

Closing comments: 

I went around the office and asked 7 of my colleagues – Sanket, Dinesh, Anuja, Satish, Akshay, Sudipto & Amit if they had bought goods from Flipkart and Snapdeal. 

ALL of them had bought items from Flipkart. 

NO ONE – Not one had bought ANYTHING from Snapdeal!!! 

So, has Kunal conveniently forgotten that in the midst of marketplaces, oil, water, China e-commerce websites, long tails of suppliers, the % or branded garments retailers, etc, etc, etc, there is SOME BODY CALLED THE CONSUMER and something called BRAND LOYALTY!!!???!!! 

Wow! 

This is a party to the finish!

Flipkart is going to bleed money profusely while furthering its brand greatness and consumer loyalty; Snapdeal on the other hand will keep doing everything under the sun and moon and earth and have no one (at least I don’t know anyone yet) buy from them! 

Oh yes, and before we forget – after the parties are over and the guests departed and the hosts gone vamoose, there will be one lonely guest standing in the banquet rooms – The VCs, waiting to settle the tab!!! 

Consumers – Rejoice! The party just got better!! Just help yourself to the free e-commerce buffet (pronounced BOO-FAY) in front of ya!!

*********

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47 Comments

  1. Brilliant Post 😀

    I back Aloks Survey. No one in my company has bought from SNAP DEAL 😛 **SNAAPPPP**

  2. Just did a quick poll. Equal divide between Snapdeal and Flipkart customers amongst colleagues at work. 
    But here’s the bummer – all snapdeal customers have bought coupons, no hard goods. Flipkart customers have bought everything under the sun.

    Gauge for yourselves!

  3. why rodinhoods hate indian e-comm???

  4. I work in snapdeal and I am pretty sure.. this article is just one person view…  

  5. I hate anything that destroys money, careers and an industry image.

  6. I don’t buy at snapdeal because their logo and website looks shabby. Most of my friends who bought deals on snapdeal ended up knowing that their deals are floated.

  7. Interesting insights! 1999 was the year of the dot com bubble, 2013 seems to belong to the e com bubble. 

  8. Yes! i bought more from flipkart,even yebhi,zoomin but never from snapdeal 😀

  9. Completely agree with Alok!!

    India is a high cost of capital country (due to higher perceived risk) requiring trillion $ to just fix basic infrastructure. Tons of money cant be burnt evangelizing/ experimenting where we are so obsessed with gold/ property that most new age startups only have foreign VC money to count on (in case smart bootstrapping is not an option) for growth. Somebody pukes- it spoils the party & genuine guys suffer from loss of ‘VC investment-grade’!!  Local HNI angels will get restricted to some handful of angel groups. Already risk-averse parents will have high-profile failures to quote to prevent their bachchas from taking the plunge or joining startups.

    Also, Btw personally speaking- have just purchased 1 voucher from Snapdeal ages ago, but have made about a dozen purchases from Flipkart & Myntra combined.

  10. While pitching to a PR client once, I had asked him how much of stuff he believed that was written about in the newspapers. He mentioned something to the effect that he didnt bother reading newspapers as most of the articles were PR pieces.

    Seems like the case here too where Snapdeal’s PR firm must have done a good job getting a puff piece out. 

    That said, I too haven’t ever bought anything from Snapdeal… Guess too much of in your face advertising is a putoff 🙁

  11. I don’t want to make this discussion personal or anything.. just healthy discussion..

    so everybody here saying they haven’t bought anything from snapdeal… same case I havn’t played any game on 2win portals,, I even don’t have a single friend who has heard about 2win . .. does it mean Alok sir is not making money.. just making news….???  

    2win has good customer base, making good money in gaming industry and growing exponentially.. same case with snapdeal and flipkart.. Do you guys think ebay is not making any prior analysis for investing in any indian company?? 

    Adding One more thing, media is biased or used as a marketing tool by most of the ecomm .. same case applies here..

    Just  don’t judge a book by it’s cover.. go in little deep.. 

  12. Errrr…. I don’t go on media and announce that ANGRY BIRDS IS DEAD :-)))))

    Now, don’t tell me you haven’t heard of ANGRY BIRDS?! :-))))

  13. Answer is there in the article.. if inventory model is best in industry then why flipkart is moving to marketplace???

    3-4 years back everyone was playing angrybirds , using Orkut, having nokia mobile phone…

    now its temple run,facebook and samsung… why??? why market changes itself.?? the same customer neglects the product and pick other one??

  14. Oh… So flipkart is nokia / orkut and snapdeal is ? Samsung? !! Cool. Nice to see a motivated employee!! (Ps – watch out for apple (a la Amazon) 🙂

  15. Words of Warren Buffet ” you can not chew the gum on the internet”. He never invested in the e-com / IT sector. 

    Indian condition / taste is different you can not buy everything on shopping website. Future of e-com will be Endcom.

  16. I have never bought a single product from E-Commerce Website till date. Reason ?? I want to physically check the product before paying for it. It is not about quality, but about personal gratification about handling the product. It is about spending some time in the market.

    Moral: E-Commerce model has to be adapted to suit Indian Customer Mindset.

    However, I often check the prices on E-Commerce portals before buying electronics, apparels etc. , only to bargain with retailers and often I end up with negotiating a better price with the retailers. My observation is that the pricing of Flipkart is lowest( in most cases) among all major online stores and  this is what drives more e-commerce traffic to Flipkart. 

    Moral: Online pricing is cheapest and competitive but it is hard to maintain desired profit margin at such prices, until you have heavy number orders per day.

  17. errrr if I want to buy books that I know and buy regularly?

  18. Well, I prefer reading books in stores like Reliance Timeout/Crossword before actually buying them. It gives me the freedom to discover whether the book would be really helpful to me or not. 

    But frankly, there are very less percentage of books we really know about and willing to buy instantly. There can be exceptions and that often happens in case of Novels or Spiritual books . Here I am talking about books generally.

  19. What about people living in tier 2 cities, where they don’t have crosswords..

  20. Simple!!…. They would do what is best for them. They cannot afford all luxuries what you get in Tier I cities. They are neither so much Internet savvy as people in Tier I cities. 

    Let me clear that an Indian Consumer is not against any Business Model. He would choose what is best for him. If the day comes when I find E-commerce better in terms of facility (not just price), I wont hesitate to switch to it. That’s why I earlier wrote that E-commerce needs to adapt to Indian Mindset. 

    Also, in special cases when I know about the book or adamant to buy, (for e.g. when Chetan Bhagat releases his new novel), I would prefer to buy from that store (online or physical) which gives me the best price. 

  21. And Ankit, since you mentioned that you work for snapdeal, let me escalate this to you that I am pretty frustrated with the pop under ads of snapdeal on various websites. It completely spoils my online browsing experience. There are hundreds like me who hate it. You cannot earn customers by bombarding them with ads and emails. Try to win their faith. Probably its time to pay close attention to consumer behavior. 

    I know you are only an employee and may not at all be responsible for this, but please try to echo this in the ears of concerned people if possible.

  22. This is what I call break-up analysis. Super views sir. Though I am the one who has bought stuff from snapdeal, I back your survey too. My experience with snapdeal was not bad, but only regret I had with them was they send the products in 3-5 days time while flipkart delivers next day itself. And snapdeal doesnt give any bookmarks with the books :(. That ways I will comment Homeshop18 does better :))

  23. 🙂 bookmarks :-)))

  24. Ankit I buy your point about Tier 2 city folks being equally capable & more in need of using e-commerce. But dont buy your & Kunal’s (I’ve met him twice, shared same PR agency sometime back & know he’s a smart marketeer) point that Flipkart is like Orkut/ Nokia & hence its pivoting to marketplace. I think they are as much relevant (or perhaps more than you) as a service.

    Not that I endorse Flipkart’s way of doing business, but I guess a marketplace idea has more to do with managing the FDI ban in retail ecommerce. Almost all e-com guys like Flipkart need rokda to carry on the “party”, so this seems like a survival strategy to legally enable more $$$

    And Ankit please lets not say that ‘Oh XYZ has invested in us so we’re a cash-cow since they must have done smart diligence on us’ when Kunal himself is giving 10 examples of hard-nosed VCs having gone terribly wrong & lost over 90% value of their e-com investments!!

  25. In indian ecommerce space only Ebay is profitabable with real cash profits now if we break down the ebay revenue we can see its major revenue comes from product listing and not actual sales commision also cost of acquisition has reached near to zero also value proposatation it offers to customers is much high as compaired to any other ecom players due to its market place model as per i know ebay has much greater brand loyalty then any other site due to its strong Brand Presence built from many years in business now the sites like  flipkart  if  pivot to becoming a market place model will be only competing in Ebays landscape where Ebay is a market leader with 95 % market share this will only lead  Burning of more VCs fuel with a jet After Burner result most will bleed out and die some will become Sick and wil be aquired by ebay at much less of valuation price .
    But ebay will continue to remain market leader what so ever …

  26. Spot On assessment..

  27. Too Much noise in eCommerce, Its consolidation time. Flipkart has brand name ,reputation and good infra for logistics  should rope in other portals under its umbrella with its VC money 🙂 Rather than drilling more into categorization.

    Waiting to watch how market place goes 

    My soft corners to Vc’s :- Cheapest tissue paper up for sale in Flipkart!

  28. E-com shopping is done for various reasons, few are minimum efforts, convenience, low pricing, latent savings in terms of fuel costs, vehicle wear/tear, parking charges, health(by not inhaling all those traffic smokes), time, surprise gift to someone who is otherwise always around you to name a few.

    yes, we would miss physical touch exp, but thats it. a v small price to pay i guess

    i sell online on various  platforms, one of the most prolific town from where i receive a lot of orders is Jharsuguda. many, rather most wouldnt have even heard the name. a few would also imagine it to be a place without electricity and water. but trust me when i say that this place gets us more orders than Cuttack, bhubneshwar or any other city in the same state where it belongs.

    Online shoppers are a v small %. but they are growing v rapidly. not saying would compete offline sales meaningfully in the forseeable future, but then who knows. FB wasnt there a few years ago. today you wont find one who isnt on FB. Things can be really v unpredictable.

    i remember reading an article sometime back when a renowned technology expert said that it would be a miracle and a great pivot point if  mobile phone makers can make one within 1000 rupees even with minimal features. he would be smiling at himself when he sees dual SIM, Camera, colour mobile phone for 699/799 being sold at so many places. seriously no one can stake claim to be one knowing all and future. 

  29. Awesome Post! Ultimately Niche based Inventory Model Companies will lead. Alok, You mentioned “the Company has raised tons of VC (102 million) so far” .. Is not it $102 Million? 

  30. HomeShop18 acquired a Coinjoos(Books Niche ecommerce) and thats the reason they have good service for books.

  32. I think everyone missing few more advantages of online shopping. 

    You can compare the product in its category

    You can instant ( and accurate ) product knowledgespecs which retailer might not give as most of retailer don’t have good product knowledge themselves and they are more keen on just making the sale.

    You can check the review of product from fellow buyers which is more helpful than asking retailer for reviews on the product.

    BTW, I am regular buyer from FlipKart and have tried snapdeal as well. I know lot of people in my team who buy lot of stuff online. I use bigbasket for glossary shopping and their quality is too good. 

  33. If we look at the success or potential success of bluegape (no inventory), then that is interesting too. Fulfillment based on custom ordering (near custom ordering)  Agree – Brand proposition has a stronger play in people’s mind then anything else.  One should capitalize on the brand which takes time and develops.

  34. I bought a laptop from snapdeal – and some local restaurant/ leisure deals. I actually quite like snapdeal. I have bought books and electronics from Flipkart as well – but I usually find that Snapdeal has cheaper price for most of the stuff listed on both websites. 

    Of course, I don’t see any point in the attack launched on Flipkart – what purpose does it serve?

  35. Ankit, as long as people consume physical goods, and producers don’t directly deal with the end consumer, the inventory model can’t die.  This is simple physics.  

    Kunal is running a FUD (Fear, Uncertainty, Doubt) spin to support his company valuation.  Or worse he genuinely believes it (poor fella).

    Its true, the inventory model locks in capital and your margin is squeezed.  That’s why they are moving to market place model.  Amazon has done it successfully.  Flipkart is following that route and they’ll eventually roll out outsourced fulfillment for the marketplace.  They already own a superb delivery infrastructure.  For the Chetan Bhagat Oat of Vayaputras launch they delivered 50k books on the day of the launch.  Snapdeal has a long way to go before they can even dream of doing that.

    Inventory model is not dead.  It can never die at least till we all become yogis and give up our attachment to physical crap.  🙂

  36. Thats Oath of Vayaputras.  :))

  37. Agreed. I have just ordered once with Snapdeal (Hair Gel, MRP 120 – Bought at Rs 20 with free shipping using coupon) and Flipkart is a regular business with big orders (gadgets). Wonder how they sell 25000 products a day.

  38. Oh heck and not Chetan Bhagat.  Amish Tripathi! How could I make a bonehead mistake like that!!! 

  39. Yeah I do agree with you Alok, people invest blindly on anything. I can’t understand still Indian people mind while they invests!! 

  40. I typically turn to SnapDeal for buying products that are not available anywhere else, sometimes not in brick mortar stores as well. For ex, once I was looking for planting trays and pots. I have to go a few kms to get the right ones and again the brick mortar stores may not have the sizes and shapes I want etc etc. Another instance was when I needed a tower fan. None of the big/small retailers had it. I live near one of the hottest shopping areas, where almost everything under the sun is available or so I thought. It’s because these shops run on an inventory model and cannot stock everything under the sun. But with a marketplace approach, SnapDeal can. And that is the lure of their business model. If the whole of India starts buying online (an exaggeration but you get the drift), marketplace will reap rich dividends because instead of just 1 dumbo asking for a tower fan, there will be a thousand more.

  41. Actually, the Indian audience is slowly warming to the online shopping concept but there is also a ton of negative feedback because of the lack in customer service. Mostly, customers complain of getting defective products and also used stuff. A classic example would be the sale of BlackBerry models by a lot of ‘ecom companies’ which often are refurbished pieces brought from the US or Canadian markets.

  42. Snapdeal has raised $102 million so far. And how does this break up inside the company ! 

    Advertisements – ???? 

    I wonder if there is scope of more than a dozen websites in India doing e-commerce at a large scale. But hey – handing over Rs 5 crore cheque in advance, that took me out of blue. If I am to start a venture, I am not handing over any money to anyone, probably a bank guarantee should suffice, but no money without goods being sold to end consumers shall be given to any company. 

    It may take time but companies will realize the rules and they want to sell – don’t they !

  43. Hi Rodinhoods,

    Am late on this interesting debate… 

    From our Brand perspective Alessia74 We worked with both of them but found a very different profile at Snapdeal & appx 20% returns Vs FK which had a very small return..From a Sales perspective FK was 4x than SD which was astounding & the silver lining on the cake being the FK Commercials….We work on Outright Inventory terms & are now coming unto Market place @ FK to gain market share

    It is my belief after 18 years in the Offline business that The success of any online player would ultimately depend on the Quality of Brands -Categories & Products which can WOW the Customer consistently to Buy n rebuy with the same player…To maintain consistency the Online player would in turn depend on the relationships which can be harnessed with the Brands /Suppliers..

    So more POWER to US…:)

  44. I have checked out the SnapDeal site more than once, but the basic site design is so bad, it almost seems as if they want to discourage people from buying stuff there. 

  45. Like most of you at the time when this article was written I had never made a purchase on Snapdeal while I used buy atleast an item on flipkart every month. But today I have become a frequent buyer (atleast 5 times a month) and 80% is from Snapdeal. I do this because I find Snapdeal always much cheaper than Flipkart? Is it only me or everyone who replied originally has started to purchase from Snapdeal?

  46. If everybody wants to save time and hence shop online then I fail to understand what people will do with all the time saved (get stuck in the traffic jams to commute between work and home as there would be 100s of bikers with back-packs trying to deliver some goods which someone does not truly need but is willing to check out and then return in 30days) phew! :D. On a more serious note, on the basis of my little understanding of business and economy and inflation and unemployment, I am happy to understand from anyone who can logically explain to me “Where are the disposable incomes going to come from to splurge in this age of neo consumerism India seems to be galloping toward?” For last 3 years (before the general elections) I have not known of any company which had given an annual increment at a rate higher than the of the inflation in the country. People were happy to have not been fired, leave any kind of salary hikes. Plus have often found small business men (large numbers in India) complaining of receding profitability and increasing difficulty of doing business due to competition etc. So where is the infinite money to spend with Indians? In my opinion, ecommerce is a glorified form of socialism where there is redistribution of wealth between rich VCs and the poor Indians in the form of deeply discounted stuff delivered by the former to the latter at his home and convenience 😉 Once the discounts are over and the products become are priced at actuals (seller to earn reasonable profits)they would be unaffordable and the the Party will end. I see merit in some product categories and conveniences of online shopping etc and fully support the same. However not very convinced about the the merit and economic rationale of the such busineses on the whole.

  47. Very True, but what is the future of eCommerce in India? Everyone is racing without bothering about their customer. The service quality deteriorate day by bay.

    So what is the solution?

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