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  1. Snapdeal quadruples FY16 investment in logistics

Snapdeal quadruples FY16 investment in logistics

COO expects volumes to grow 10-fold in next three years

By: | New Delhi | Published: March 18, 2015 12:46 AM

Snapdeal co-founder and COO Rohit Bansal said on Tuesday that he expects volumes to grow 10 times in the next three years, from an average 8 million packets in a month to 80 to 100 million packets every month. But at the same time, he doesn’t think that the average ticket size, which is R2,500, will increase. The ticket size will increase only when more categories are added. If the ticket size remains the same, Snapdeal might be looking at a gross merchandise value run rate of $30 billion in three years, as it expects to close the current fiscal at $3 billion.

According to news reports, rival Flipkart is ahead, expected to close at $4 billion and Amazon matches at $3 billion.

The e-commerce industry in India is growing at a break-neck pace, fueled by acquisitions and fund-raising activity. Bansal’s expectation of increasing delivery 10 times might be too ambitious, given the fact that the industry is expected to be only $43 billion in the next few years.
Snapdeal has picked up a minority stake in logistics firm GoJavas to increase capacity, as Bansal expects shipments to increase 10-fold. “It will help build capacity. We will look at physical presence in 300 cities,” he said. Snapdeal has also increased its investment in logistics and supply chain from $45 million to $150 million to $200 million in FY2015-16.

This money will go in building distribution centres in 300-odd cities, with as many as 40 centres in large cities like Delhi and Mumbai. Then, there will be multiple smaller warehouses, which will quicken the delivery procedure. Bansal said that Snapdeal is on the verge of starting four-hour delivery in 10 cities to begin with, and later expand to more towns.

However, the partnership with GoJavas is not an exclusive one, and the logistics company will continue to service other e-commerce companies. GoJavas founder Ashish Choudhary said that the strategic partnership with Snapdeal will help GoJavas to build its network and capacity so that it can service more customers.

Bansal also said that this is the first logistics partnership it has done, but this may not be the last one. “We might look at more logistics partnerships in the future,” he said. However, he mentioned that it is not interested in opening up its logistics arm, unlike Flipkart which had created its own logistics arm, and later hived it off to call it eKart.

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