The Snapdeal Story

The Idea

I think my circumstances were a little unique I would say, that’s right I think and I will talk about those and when Rohit and I were in hostel together, we always wanted to do something together. And I think it was only a matter of time, initially we thought we will do a few years  work experience when we get an MBA or something and then we will start working together. But I think circumstances were such I was working for the Microsoft in the US they applied for my H1B visa which got rejected. So, I actually came back to India and didn’t want do a job so, I just called up Rohit and said let’s do something together. That’s actually how we started. And back then, there was not much of a startup ecosystem honestly. I think it was still very much a – you know people didn’t know what Angel investing was, people didn’t know what start-ups were, people didn’t know what technology businesses are but I think clearly lot has changed since then.

Stages from Beginning Till Today

Many entrepreneurs start companies thinking about a certain need that they felt. Or they saw business model in some part of the world that they felt was attractive because they used it and they found some value in it. Ours was more of a latter story at least the starting point was more driven through that. Where we started selling with physical coupon books, we started as a publishing company which was called money saver. That’s because when I was in college in the US, I used to use something that was an entertainment publication and I thought that’s a great idea and maybe in India some form of it could actually be successful. So we spent almost a year and half signing up over 500 merchants essentially with the promise that we are going to publish a coupon book, with their offers in it and that’s going to drive more customers for you. And there were no employees – so it’s primarily me and Rohit did that. We would take – we would split up the accounts, go show up at the restaurants, bars, salons or retailers, headquarters and say please give us a discount coupon that we could put it up on our coupon book. And you know we had deep belief that it will be massively successful business and our initial estimate was we will sell 1 million copies at an average price of about 500 rupees. In the end, 3 months into launch, we had sold only 50000 at an average price of 50. So it was a great example of how not everything that you plan for actually does come true or does come through. But that didn’t deter us. We said okay – what didn’t work, what didn’t work here was the fact that – people didn’t like the fact that it was perishable, So, every 6 months they had to buy a new coupon book and they had to carry this coupon book everywhere we went – everywhere they went. So, we said no problem, how do we make it portable, and there was no mobile internet as such in India in 2007 it was just early days, but SMS was very popular. So, we did – we launched the mobile coupons version of money saver where for 99 rupees a month you could get unlimited access to coupons when you just send an SMS to say let’s say Adidas and you get a response that you get 20% off. You show it to the retailer, you will get an offer. We thought it’s a brilliant idea and we said let’s just open it up for free for the first one month and see what happens. We raised from a zero to 170000 users in 30 days and we realized very quickly that this is going to be massively successful. But let’s start monetizing it also because we are paying for the SMSs right now. We switched on monetization and literally within 7 days, the 170000 users fell to 1000 users. And we realized that this freemium premium stuff has a pretty big delta between the free users and the paid users. So we – then we started calling up users and talking to them and asking them, “Hey what is missing? Why aren’t you paying for it?”. They said – Well, it’s nice, it’s usable but there is no touch and feel, but we know from the past with the coupon books that the touch and feel had it’s cumbersomeness, So we had a new problem to solve. So, we changed from that to discount cards, where it lasted for one year and you could just present the card, the retailer would swipe the card and you get the discount. So, then we took a few months to launch that product. We called it the money saver prime card. Somehow that started doing quite well, we started selling thousands and thousands of those every month mostly to corporates who wanted to give this as a gratification tool to their employees, channel partners, customers etc.

Around that time – so we felt that that’s the business we are going to be building now. Around that time, because of some of the results we were showing Kalaari Capital gave us 2 million dollars and in retrospect, the business was on pretty thin ice to be venture funded, but somehow or other we were able to get that. I think Vani at Kalaari I think more in than the idea she wanted to support the people. So, this was September 2009 that they funded us. Even like if I rewind July of 2009, we were, actually were out of money in the company, we had to pay 5 lacs of salaries and we had 53000 rupees in the bank account. So, Rohit and I actually put all our remaining savings in and we were left with only about 20000 rupees in our – cumulatively in our bank account. But, fortunately the Kalaari funding came in a timely manner and that 2 million dollars we started deploying to grow the distribution of the money saver prime card. But in January – end of January of 2010, a lot of merchants started reaching out to us saying that- the merchants we had signed up for our card, for money saver, that I’m seeing a lot of these online couponing sites come out. So why don’t you guys do something there because we‘ve been working with you guys for 2-3 years now. So, earlier we brushed it off, but you know thankfully, we didn’t brush it off completely. We said that there are enough people who seem to be making noise around this and Groupon had just started taking some stronghold in the US market. We said let’s explore this. And as we started exploring it within, we realized this is something we need to do and 8 days later we launched Snapdeal on Feb 4th, 2010. And it was actually a pretty averagely built platform where 50% of the transactions would fail, it wouldn’t do quite well. Rohit and I didn’t have an engineering background. So we had a team we didn’t even know whether it was skilled to do what we were asking them to do. But our goal was that if in 3 months we can get to 100 transactions a day, this would be massively successful. We actually got to 100 transactions in a day in just 3 weeks. So, for once in our entrepreneurial journey we felt that we weren’t running on a treadmill, where we are sweating really hard, covering a lot of distance, but no displacement. So for once the input that we were putting in was creating output. Then we didn’t look back. We just pressed the accelerator and 14 months later, we had 70% market share in that space. But around that time, middle of 2011, we started feeling that this space is interesting but it’s not going to be very large. And so Rohit and I started having very introspective conversations. So we went to China end of 2011 and met with a lot of the e-commerce companies there and realized what Alibaba had achieved was something phenomenal. So, we came back from China and within one month, we shut down our core deals business and pivoted Snapdeal into an online market place for product sellers and that’s the business we have been in over the last three and a half years and now are the largest such player in India, with over 200,000 merchants who are successfully selling on our platform to millions and millions of consumers.

Market Size Attractiveness

I think we realized that the no. of merchants in India who would be relevant for that kind of business are not enough. India has a lot of restaurants but many of them are usually empty. People don’t want to go to those places. So similarly, I feel that – you know we just felt that the market size was not large enough because the supply side was not large enough, which we knew was not going to be an issue on the product side because now you are going after the overall product consumption of India which was over 500 – 600 billion dollars a year. So, it was purely a market size issue that drove us in that direction.

Preparations and Experiments Before

We did some experiments which we had started doing already, just putting up a few products – physical products on the site which had good results but in the end, I don’t think that the data was significant for us to take this decision. I think when we went to China we just knew products e-commerce was going to be really really large and we shouldn’t wait. So, we just drove in overnight.

Core Belief

I think in all those businesses our focus was significantly on the small business owner and whether it was a services merchant selling – running a small restaurant or a seller selling sarees right now on our platform. I think at the core we have always been a business for the small business and how do you give them an uplifting experience in their lives financially. And I think that’s been a core belief Rohit and I have had for the longest time and I think it’s probably driven significantly by the fact that both our fathers are small business owners.

Business Model

Our business model is very simple. We have a platform where sellers come and list products and buyers come and buy products but we enable with logistics, payments, customer support etc. so that we own the end consumer relationship that delivers a good experience.

Team Building

That’s a great question. The first and foremost the most important ingredient is having good people. And to have good people you need to have a good recruiting process which we do. So, everyone in our team mid management and up has to prepare a detailed business plan and presentation before they are accepted. And that is a key criteria. So, automatically, you get an intellectually fairly homogenous people to come into the company. Secondly, we make sure that we set very very ambitious goals. That’s a very very key element of our business because we have some of the smartest people in our country, world class talent that works at snapdeal and in good numbers. The only way to motivate such people, such talented people is by offering them a big vision. And a big vision that doesn’t revolve only around making more money, but revolves around meaningfully impacting lives of others. And hence, a lot of what we do is centred around creating life changing experiences for the small businesses on Snapdeal.

Structural Changes of the Company

I think Rohit and I are always very very engaged with the org structure and how the teams are scaling and how individuals are scaling, how the leaders are scaling, and what are the strengths and weaknesses of various leaders. The key – if you want to make an organizational change you should always make it 6 months in advance of when it is needed because by the time it is needed it’s too late and any organizational change generally takes 2 -3 months to truly settle down. And one should pull the trigger as early as possible, not as late as possible, because sometimes it leads to uncomfortable conversations that people don’t want to have. But in the best interest of the business, those uncomfortable conversations are quite important.

Structural Change with Example

Absolutely, one recent example would be Sandeep who came in as a part of the first acquisition we made 5 years ago called Grabon, he ran marketing at Snapdeal for 5 years very successfully, built a brand which is now very ubiquitous, now over the last 3-4 months he took on a new project called Shopo which is a platform for unorganized sellers to sell on – online through an app. And that whole – Sandeep had no background in technology, no background in product management, but in a short period of time, he was able to really upskill himself in terms of knowing what kind of team he needs and what kind of skills he needs to build a business like this and that business is absolutely on fire right now where in less than 6 weeks over 20000 sellers selling over 300,000 products on that platform. It’s just absolutely doing phenomenally well. Now this has worked out great for the company because in marketing we have a fresh pair of eyes looking at the problem or whatever the opportunity areas are in a very fresh manner. Sandeep gets to solve a very large problem or address a large opportunity area in a very entrepreneurial environment and so everyone’s happy and the results are only great which shows that this cross pollination and little bit of changing around the org structure every 18 to 24 months is very very important in any start up.

Top 3 Product Features

I think there are largely 3 key pillars in our business – value, convenience and assortment that determine whether someone comes and buys with you or not. DO you have what you want – do you have what the consumer wants, do you have it at a great price, can you deliver it in a manner that the consumer finds convenient. And so, we have really focussed on all 3 of them. We started with focussing on assortment which meant signing up a lot of sellers and bringing a lot of products on Snapdeal. We followed that up with focussing lot on pricing because we wanted people to feel that we offer great value. I think in the long run where consumers will optimize their choices is around convenience, because if everything is available everywhere and is available at a decent price, then you are going to really differentiate on service quality. So, for the last one, we have made a lot of investments around logistics and warehouses etc. across the country to provide a great quality of service for consumers. Like in the top 10 cities, in metros we are now delivering about 80% of the products in 2 days.

Product Development Process

Ya… it hits the market well. So what we do is before the launch of any major product release, we do a day long bug bash internally where we roll it out to all our team members and during the day they have got to like rigorously test that feature or the product that we are launching, not physical product, I’m talking about technology product and give copious amounts of feedback, because we realize that unless our team is excited about something and has really stress tested whatever we want to launch, it’s unfair for us to expose our consumers to it. And this is one great way of galvanizing a company around something new that you are doing so that it doesn’t become one of those things or product that the engineering team have created and no one else really knows about it and no one’s ever used it either.

Key Technological Feature

Our view is that we want to be on all screens and accessible to all users. So, we provide TV shopping, we provide shopping on the PC, we provide shopping on apps, mobile sites but I also believe that 2G is going to be a big – still a big contributor to our traffic, still 35% of all our traffic comes on 2G. if you talk to most telcos, they will tell you that about 30 – 35% of all their traffic comes on 2G also still. And you know if your mobile site opens in 20 seconds or 25 seconds on a 2G device, consumer is going to have a pretty bad experience and we are talking about one third of your consumers. And hence, we have a lot of plans around creating products – technology products that make Snapdeal more and more accessible to every person in the country.

Choosing Investors

I think in the early stages it is very important to partner with investors who have had a lot of entrepreneurial experience themselves, either have been entrepreneurs or been a part of entrepreneurial companies, because in the early days there is always a turn of uncertainty in the business, the business model keeps changing and companies sometimes go through tough phases and it is very very critical for any entrepreneur to have investors around him or her who are supportive of such a dynamic environment. I think over a period of time, as the companies gets larger you have to start seeking more strategic value rather than only financial strength that an investor would bring. That’s where relatively more strategic investors start becoming very interesting.

Advice on Shifting from one Business to Another

I think the key begins with – there is a fine line between stubbornness and persistence and when persistence of an entrepreneur becomes stubbornness that can be quite counter-productive because then they may not see the headlights heading their way. I think with Rohit I and our extended team, we’ve always been very objective – we’ve been objective about what is working and we’ve been objective about what is not working and if something is not working we don’t try to become stubborn about it we are persistent about making it work, but not stubborn. So, we have a good sense on when to pull a plug on something and when to change a particular business or business model. I think over a period of time we have gotten a good sense of it and I don’t know if our timing has always been best, probably because the company has become successful, so people think that timing was always accurate or appropriate. Maybe it was maybe it wasn’t, maybe we should have done a little earlier, or a little later – nobody will know but at some level I think the biggest piece of advice I would give here is just always be very objective with the results of your business. Don’t ever be intellectually dishonest to yourself.

Launching a New Feature

I think that there are different methods in which you learn about what products you need to build, technology products, part of them are driven by business team requirements, part of them are driven be consumer feedback, seller feedback, any pain point that you are facing as a company. I think you have to be very very open minded. But at some level you have also got to have vision. You got to think about launching things that others have not done or anyone in the world has not done and be brave about it, be bold about it and not be worried about it, because if you want to change the world, you have to do world changing things.

Toughest Phases

I think there have been different phases. I don’t think there was one toughest phase I would say, but many times we ran out of money and I think that’s never fun because you have taken a responsibility for your team and you don’t want ever to let them down and their families down. I would say those were always the toughest phases in this journey. If you are a profit making company etc. then I guess that is a less of a concern, but given our growth trajectory and the trajectory we want, there is lot of front loaded investment we need to make. And that means we are dependent on the market – and the markets and the funds  and the investors to support our business and I guess the most struggling moments are always when you know you are on the right path but other people don’t believe you. In due course, they may but at that moment they are not, and I think that’s always a little bit of a concern moment. Outside of that, it’s all about here we have a certain business plan tracking against – how we are tracking against good, bad, ugly, and if it’s ugly then why? Do we have a solution, then it’s okay. If you don’t have a solution then we have a big problem.

Market Size

Our market size is – how I think about our market size is not only how does the percentage of retail move online but also – but more importantly, how does the percentage of consumption in India move online and consumption in 10 years is going to be about 2.5 trillion dollars and I feel about 10% of consumption of India in 10 years should be happening online. So, it will be a 250 billion dollar market. It goes beyond just products. It goes into utilities. That’s what Freecharge is doing or financial services which is what Rupee Power or Capital Assist are doing, so different businesses do different things for us and with the end goal of how do we move more and more of India’s consumption online and make it more efficient in the process.

Vision

I think at a meta level, our vision is to create India’s most impactful digital commerce ecosystem, and if people think about commerce, they should think about us, whether it’s paying a bill, whether it’s booking a cab, whether it is buying a product in some way or the other, they should think of us or touch our products, doesn’t mean we have to own the whole ecosystem, it just means that we need to create a really strong ecosystem around our core business which is Snapdeal.

Advice to Young Entrepreneurs

Find a great co-founder. I think there are lots of pieces of advice one could give but it becomes more contextual. But one piece of advice which is absolutely critical is find a great co-founder because you will need someone to bounce ideas off, someone to pick you up when you are down in pieces and someone you will need to pick up when he or she is down in pieces. It also helps to maintain your energy levels and think through some tough problems like pivoting your business. So, I think finding a great co-founder and investing a lot of energy behind that is a great use of time.

Online Education

Education is super super critical obviously, right. Everyone knows that – I think in India I don’t think – people keep talking about how we need better infrastructural education. I think that people are thinking about the problem in the wrong way, what we need is better distribution because there is a lot of content available and there are companies who are and will continue to create more content. What we lack is great distribution and a large number of skilled teachers who can help put that content in context of the student. I think those are the two areas where focus needs to be put, but I feel companies like Upgrad and others are really doing a great job in trying to bridge that gap. But I feel that the two big meta trends in India that mobile will really influence in the next 3 to 5 years are going to be healthcare and education.

Kunal Bahl, Co-Founder & CEO, Snapdeal
ABOUT THE SPEAKER
Kunal Bahl, Co-Founder & CEO, Snapdeal - Kunal started with his career in companies like Deloitte Consulting and Microsoft in the US. He came back to India to turn entrepreneur and started an offline couponing business, MoneySaver and which eventually paved the way to Snapdeal in 2008.
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