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Snapdeal aiming to race past Flipkart by year-end

E-commerce company Snapdeal is aiming to surpass rival Flipkart’s gross merchandise value (GMV) by the end of this year, said a senior in the company. The Delhi-based five-year-old e-tailer is targeting $ 10 billion (about Rs 62,000 crore) in GMV. Sources said last week the Bengaluru-based seven-year-old Flipkart planned to double GMV to $ 8 billion by December.

By December, Snapdeal’s GMV will jump more than four times from about $ 2 billion now. “Electronics, one of the largest contributors to Snapdeal’s sales, is estimated to become a $ 5-billion business, followed by fashion at $ 2 billion. The remaining will come from other categories put together,” said the executive.

GMV in e-commerce means total sales value of the merchandise sold through the marketplace in a period. Most e-commerce companies refrain from sharing their revenues, owing to which the GMV run rate is often used to gauge their financial health. Revenues are a small proportion of GMV.

While Flipkart targets to ship a billion units a month and serve 100 million customers by 2018, Snapdeal is focusing more on its 40 million connected users, 70 per cent of which come from tier-II cities. Industry sources said Amazon India’s GMV was about $ 1 billion.

“Focus on tier-II cities, rather than just metros, worked for Snapdeal very well. In tier-II cities, e-commerce is a ‘need to have’, while for the tier-I and metro cities, it is ‘nice to have’,” said the executive.

Flipkart, the poster boy of Indian e-commerce, has been on a fund-raising spree in the past year, with its total cash infusion at about $ 2 billion. In the same period, Kunal Bahl-led Snapdeal has decided to stay conservative, raising about $ 1 billion, most of which came from Japan’s SoftBank ($ 627 million).

While Flipkart is reportedly going for its next round of funding, Bahl’s Snapdeal, the executive claimed, was “comfortably” funded till the time when it would turn cash-positive. “Well, there may be fresh funding if the company decides to go for more strategic partnerships. However, the company is yet to zero in on a timeframe for turning it into operating cash-positive,” pointed out the executive.

Snapdeal founders have preferred funding from strategic investors even at lower valuations, rather than from financial investors offering much higher valuations, said the executive.

Indian e-commerce sector is in a hyper-growth mode, mainly because of fast-growing numbers of smartphone users with internet access in the past year. On the other hand, 2014 was a major breakthrough for a handful of e-tailers, with investors infusing fresh cash at higher valuations.

Consulting firm Technopak estimates Indian e-tailing will be worth $ 32 billion by 2020, more than 10 times its value of $ 2.3 billion in October last year.

E-TAILER TUSSLE

  • Snapdeal expects to grow gross merchandise value (GMV) by about 4 times to $ 9-10 bn by December
     
  • Flipkart, on a fund-raising spree, aims to double GMV to $ 8 bnby December
     
  • Electronics and fashion businesses to be worth $ 5 bn and $ 2 bn for New Delhi-based Snapdeal in 2015
     
  • Snapdeal has crossed $ 2 bn in GMV, set to touch $ 3 bn by March-end
     
  • Flipkart raised close to $ 2 bn last year, Snapdeal $ 1 bn
     
  • Kunal Bahl-led Snapdeal also closing in on acquisitions to topple Bengaluru-based Flipkart, valued at $ 12 bn

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