‘Staying away from discounts has worked well for us’
More than 80% of our buyers are from small towns, says Bansal
Three years back, e-commerce marketplace Snapdeal revamped its business to focus on the non-branded, value commerce segment. Rohit Bansal, in an interaction with Devika Singh, talks about adopting a discovery-led model to appeal to small town consumers, refraining from offering discounts and loyalty programmes, and more.
A Bain & Co report cites trust deficit as the major hurdle for e-commerce companies operating in small towns. How do you address this?
Though our target group is value-conscious customers, and not the small-town consumer base, there is a huge overlap between the two. Hence, more than 80% of our buyers are from small towns. Over the years, we have realised that this set of users finds the present search-led e-commerce platforms very confusing. These platforms have a Westernised approach based on customers knowing their requirements and setting up filters accordingly. However, our TG wants their experience to be similar to a ‘bazaar’, where they go with a budget in mind but would like to look around before deciding on their purchase. With our discovery-led model, we have tried to replicate this physical setting for them. Similarly, we have introduced features such as gamification and videos to replicate the liveliness of a market.
We also have a ‘no-questions-asked’ return policy, and customers can reach out to us using any channel including WhatsApp. This has worked for us in keeping the consumers engaged; and that is why 5% of connected India bought from us last year. This, despite the fact that only 3% of value commerce is online in the country yet.
How viable is selling to ‘value conscious’ consumers, given that ticket sizes are low, and delivery and return costs are high?
We are extremely consumer-centric, but ensure that we only operate in categories that offer positive unit economics. Our two constraints are that we have to offer value to the consumer while being cost-efficient at the same time. And hence, we run a very lean operation, especially in terms of the supply chain. For instance, we do not have centralised warehouses; our sellers ship the products directly to consumers. We also work with manufacturers directly to make sure that a lot of intermediate costs can be removed from the ecosystem, and help them build their brands.
How do you ensure a consistent delivery experience when sellers ship products to consumers directly?
We have built deep integrations with logistics partners and built a machine learning algorithm, which chooses the best logistics provider for every order based on the location and type of product. From the time the order is placed and till it reaches the customer, it can be tracked on our platform on a real-time basis.
Has your strategy to stay away from discounting and loyalty programmes paid off?
We are not a platform that sells branded products at discounts. If there is any cost reduction that we can achieve for a product, we like to pass most of it on to the customer, and this makes them return to us. They do not come back because of loyalty points or discounts, but because we offer them good value for money. During 2018-2020, our traffic has increased by 109% from 9.6 million to over 20 million. We are making northwards of $100 million in revenue. Whether it is the number of customers buying from us, unit economics or loss reduction, it has worked well for us in all aspects.
Even as Snapdeal’s losses were on the wane since FY18, you reported a 47% rise in losses in the last financial year…
First of all, it was on the back of a year where we had reported 70% year-on-year growth, while reducing losses by 71%. So, we had set ourselves up for a fairly uphill task. Last year, we invested in several market expansion activities — vernacular, video and other strategic projects. We also discontinued certain products that we felt did not meet our quality standards, and this put downward pressure on our revenue. That said, while 47% sounds alarming, the increase in loss was only around Rs 60-70 crore (in FY20). In FY17, our losses stood at Rs 5,143 crore and in FY19, we brought this down to Rs 188 crore. As the absolute amount shrinks, the percentage increase becomes irrelevant.