In an interview with Aveek Datta, a Columnist associated with The Financial Express, Snapdeal’s CEO Kunal Bahl said that “We will surely be the first e-commerce company to turn profitable in India because of the business model we follow and our commitment to it.” Bahl states Snapdeal has taken a conscious decision to stay away from diversifying into developing and selling private labels and stocking inventory, like some of its peers.
Moreover, the company want to focus on building the best online marketplace, along with an ecosystem consisting of sellers, merchants and courier partners. Kunal explains that “If we wanted to breakeven, we could do so in two quarters with two main components — technology, which is really the engineers that work for us, and marketing, which is a completely discretionary spend. As revenues grow, the amount of margin that we earn cumulatively on what we sell becomes enough to pay for all this.”
Currently, the firm have 50,000 sellers already and its goal is to have a million sellers in next three years. it is seeing phenomenal traction in home categories including furnishings, furniture, hardware, fixtures and sanitary ware. Based on the current run rate, it is going to be a INR 100 crore business in the next 12 months. It expects to reach about 6,220 crore in gross merchandise sales by this financial year, and profitability the year after. But is that really going to happen?
Who Else Said It?
Two years back, Sandeep Aggarwal, founder and then CEO of ShopClues also claimed that it could be the first Indian e-com firm to turn profitable in India, as mentioned in a Tech Circle report.
Sandeep also stated “We took a long-term approach to e-commerce and came with a 10-year window to India. If everything goes fine, we would definitely like to take this company to IPO.”
Following along the same lines, last year, Homeshop18‘s CEO Sundeep Malhotra noted that, “By 2014, we will be profitable as an organisation. We have seen tremendous growth over the past one year with an order every 5 seconds, across TV and online.”
According to another Tech Circle report, the teleshopping business of HomeShop18, which contributes around two-thirds of overall revenues, is already profitable.
-Then, in an interaction with YourStory earlier this year, Valyoo‘s founder Peyush Bansal also claimed that Lenskart, WatchKart, Jewelkart and Bagskart group of companies will achieve profitability (in terms of EBITDA) by the end of this year.
And Economic Times reported last year that Myntra aims to be profitable by the end of 2014. “Only at scale can you amortise technology and marketing costs,” said Mukesh Bansal, founder of Myntra.
So if what Kunal Bahl claims becomes true, then clearly all these other companies are not profitable or near to being profitable yet. Hence is it possible that Snapdeal could become another one of these companies dreaming of the promise land? It would be good if the companies could come forward themselves and present a clear picture of where they are really heading. Who wouldn’t want to see an online retail firm break the ice and hit profitability, so that others can follow the lead.