Inventory based model is dead

Jun 03 2013, 20:09 IST
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SummarySnapdeal is one of the first e-commerce companies in India to turn to a market-place model that is now the toast of the sector with the likes of market leader Flipkart also trying this business model.

Snapdeal is one of the first e-commerce companies in India to turn to a market-place model that is now the toast of the sector with the likes of market leader Flipkart also trying this business model. The company which is planning to clock sales of R3,000 crore this year and $1 billion by 2015, will have 30,000 sellers in its market-place by the end of this calendar year. Kunal Bahl, co-founder and CEO of Snapdeal, in an interaction with Anand J tells that the inventory model for e-commerce is dead and the companies must be acting only as a marketing platforms.

What is happening in the e-commerce sector right now?

The e-commerce sector is going through a lot of flux right now. Eighteen months back there were new companies starting every week. Now same number of companies are shutting every week. From euphoria, industry has moved into consolidation. About 18 months ago we started building the market-place model that is unique in a way, we can scale up easily. Now most of the e-commerce is moving from inventory led to this model. Along with deals, companies started listing their products and services on our website. We did not say no, because at

the end of the day, we are just a marketing platform. We provide reach to

merchants, giving an opportunity to supply locally and sell nationally.

We wish to grow the size of India’s retail market, which has innumerable local brands that are great products, but don’t have the reach. We help them with technology, logistics, managing customer support, merchandising and so on.

Why do you think that inventory model will not work in India?

Inventory based model is basically dead. Now they are building businesses from scratch. After sinking hundreds of millions of investors money, they

are moving to market-place model.

Inventory model is not financially

viable because of the inventory risks of crore of rupees, thousands of people

in the logistics area, have significant

operating costs. Globally, there are

not many successful inventory model

e-commerce businesses. We don’t need any working capital for inventory.

We are spending less money because of automation, even as we are growing.

How exactly does a seller benefit from a market-place?

For instance, if a brand has 1,000

unsold T-shirts, finding a single buyer is

difficult. And sending them to 150 retail outlets across the country is also

inefficient. So, our market-place

will solve these issues and still

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