NEW DELHI, India — As Japanese billionaire Masayoshi Son, whose company bought US telecom company Sprint last year and who has more than a third share in Alibaba, bought into Indian etailer Snapdeal on Tuesday, everyone stood up to take notice.
“It means the coming of age in a sense of ecommerce in a much bigger, global sense and the real potential of ecommerce in India,” said Ravindra Jain, an independent analyst in New Delhi who tracks the retail sector.
Snapdeal, one of the three biggest ecommerce players in India, along with Flipkart and Amazon, got that big fillip with a $627 million investment from the Japanese technology giant SoftBank Group. And, right after, half a dozen analysts echoed Masayoshi Son’s words: that Snapdeal had the potential to be the Alibaba of India.
Scalability and growth are certainly on the cards: the company follows a marketplace model similar to Alibaba in China, in which an individual retailer can sell to customers through Snapdeal, plans to grow these sellers from the present 50,000 to one million in the next three years.
Earlier this year, Snapdeal revealed its intentions to strengthen its fashion focus, with plans to cross the $1 billion mark for this segment by the next financial year. The company already has a strong standing in the value segment and made a strong move towards the premium end with a partnership earlier this month with the Fashion Design Council Of India (FDCI), the apex body of fashion in India. This partnership with FDCI will bring designer wear in the market before the festive season giving customers a wider range of options and a bigger market for fashion designers.
The leaders in the fashion ecommerce segment in India currently are Flipkart and Jabong. Flipkart acquired Myntra, a fashion focused etailer in May and announced its intentions to invest $100 million to expand its apparel segments. This investment in Snapdeal is expected to spark off a more aggressive growth for apparel sales for these companies as well as for a host of smaller etailers in India.
The size of the online retail sector is estimated at $3.5 billion, a fraction of the $500 billion retail market in India, but is expected to grow fast, to six times this amount by 2021. Apparel is expected to be a fast growing component.
“Overall, electronic gadgets claim the highest share followed by apparel and books,” a report by research company RNCOS noted. “ But it is likely that few years down the line, apparel and accessories will take over the top slot from electronic gadgets. In addition to this, home decor and furnishing will mark an increase in its share.”
Softbank owner, Masayoshi Son met prime minister Narendra Modi in New Delhi on Monday — and said that his investment in Snapdeal along with $2 million in Ola cabs was only part of the plan to invest $10 billion in India over the next few years. Analysts agreed that both the meetings and the investment showed that the government is serious about encouraging growth in business as the prime minister promised in his recent trips to Japan and the US.
Snapdeal founders Kunal Bahl and Rohit Bansal said that the clarity of the business model made it easier for investment to come in; there were no plans to change the marketplace model, to stock inventory or to introduce private labels.
Snapdeal has also raised additional money from existing investors, the company said. EBay has been an ardent suitor for the company and analysts expected it to get ahead of the market and take ownership. In February, eBay led a second round of funding of about $133.77 million, adding to the earlier round of funding in mid-2013 of $50 million, also led by eBay. Other investors in Snapdeal include Blackrock Inc, Temasek Holdings Pvt Ltd and PremjiInvest.