SoftBank-backed e-commerce firm Snapdeal—which is expected to file draft documents for a USD 250 million IPO in the next few weeks—is planning to enter the offline retail space in a bid to create a deeper presence in smaller Indian cities.
The company will open over two dozen brick-and-mortar stores next year, beginning with the first one in January, a report by local media Moneycontrol said.
Snapdeal is venturing offline at a time when companies like eyewear firm Lenskart and beauty and fashion startup Nykaa have a track record of turning profitable over the last two years after adopting an omnichannel approach. With an upcoming IPO, it has become imperative for the 11-year-old company to pave a clear-cut path to profitability.
With its offline foray, Snapdeal has joined a slew of consumer internet companies that are going omnichannel to fuel growth and capture a larger market share. For instance, online grocery startup Bigbasket, which was acquired by Tata earlier this year, is in the process of opening 200 self-service physical outlets by 2023. Similarly, beauty marketplace startup Purplle recently told KrASIA that it would open its first offline store in January 2022 as it aims to expand its market share.
Unlike its bigger rivals, Amazon and Flipkart, Snapdeal has been focusing on an asset-light approach over the last several years, under which it outsources capital-intensive operations like warehousing and logistics to third-party providers. The New Delhi-based company may adopt a similar strategy for its offline business as well.
Snapdeal is looking to partner with retailers who will take the initiative to set up stores, while the company will help them procure products and goods from its power brands—the brands that Snapdeal launched a year ago by partnering with select sellers, the report said.
Snapdeal currently operates about a dozen power brands across categories, including apparel, fashion accessories, footwear, home and kitchen, health and wellness, and personal grooming. These brands aim to cater to customers who want features and functionality at affordable prices rather than premium brands. Furthermore, Snapdeal is likely to use these stores as centers from where users can collect, return, and exchange products they have bought online, the report added.
Reportedly, Snapdeal gets over 80% of its business from tier 2, tier 3, and tier 4 cities at present, where it is looking to strengthen its foothold. In the world’s second-most populous country, despite massive digitization, e-commerce still accounts for a very small portion of the country’s USD 810 billion retail industry.
As per a report by Bain & Company published in August 2021, COVID-19 provided a massive stimulus to India’s e-retail penetration, accelerating it by 12 months to reach approximately 4.6% in the financial year (FY) ending March 2021.
Since the pandemic hit India in March 2020, 30–35 million new customers began transacting online, taking the total online shopper base to 140 million by the end of FY 2021, the third-largest globally, behind China and the US. Still, less than one-fourth of India’s internet user base of 625–675 million is shopping online, which means the market remains “massively untapped.”
The number of online shoppers in the country is projected to reach 500 million by 2030, as per another recently released report by industry lobby Mobile Marketing Association India and media agency GroupM.