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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