Snapdeal: India's e-commerce can grow faster than China
Even with the explosive growth in recent years, India's e-commerce sector remains in the nascent stages and isn't anywhere near its true potential yet, the boss of New Delhi-based Snapdeal said.
The country's e-commerce industry could grow nearly eight-fold to $250 billion within a decade, Kunal Bahl, the CEO and co-founder of the Indian online marketplace, told CNBC at the Converge technology conference in Hong Kong.
"India's gross domestic product (GDP) is $2 trillion today and 70 percent of that is in consumption. I believe in 10 years, this consumption figure will become $2.5 trillion, with 10 percent moving into [the] online [space]. As a result, the online market can become $250 billion, versus today's $20-30 billion," Bahl, who co-founded Snapdeal with his schoolmate Rohit Bansal, said.
This bullish outlook is good news for Snapdeal, which has captured 35-40 percent of India's online retail market, Bahl said. "If we retain our market share, I expect us to grow from $5 billion today to $75 billion over the next 5-10 years."
According to a report by the Associated Chambers of Commerce and Industry of India along with PricewaterhouseCoopers, India's e-commerce sector is expected to log a compound annual growth rate of 35 percent and cross the $100 billion mark in value by 2019. The study, released in December 2014, put the industry at a current value of $17 billion.
Meanwhile, Nomura estimates the burgeoning industry to quadruple to $43 billion over the next five years from $10 billion in 2013, a report released in August 2014 said.
While the exact forecasts vary, they highlight what analysts see as the enormous potential of India's online retail market, catapulted by the country's rising disposable incomes and greater internet penetration. In recent years, Indian consumers have grown increasingly comfortable with shopping online, snapping up books and electronics from the nation's three large online marketplaces: Flipkart, Snapdeal and Amazon.
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Founded in 2010, Snapdeal is now India's fourth most valuable startup, with gross value of the goods sold on company's online marketplace hitting $3 billion, according to data compiled by Wall Street Journal. The website has 25 million subscribers and over 150,000 businesses selling on its platform.
"It took us three years to get the first 100,000 sellers, [but] the next 100,000 will come in in just six months. That's how exponential India's growth [is]. We just launched a mobile platform called Shopo and in 10 days, we've had 10,000 sellers set up shops without any marketing or promotion," Bahl told CNBC.
"That's why I think India is taking to online buying and selling at a pace that even China did not see," he said.
IPO? Not so soon
Snapdeal's rapid growth has not escaped the eyes of many investors around the world.
According to media reports in June, China's e-commerce behemoth Alibaba and Taiwan's contract handset manufacturer Foxconn are in talks about investing in the Indian e-retailer, in a deal which could value the company at $5 billion.
In October 2014, Japan's telecommunications and internet giant Softbank pumped $627 million into Snapdeal, chalking up the largest investment in India's e-commerce sector, according to Reuters.
With BlackRock, Temasek and eBay among its other investors, Bahl told CNBC that his company is "well-capitalized" at the moment.
"The great thing about technology businesses and the industry right now is that private capital markets have become much deeper than they used to be 5- 10 years ago. As a result, companies can stay private for longer and retain the flexibility in execution and [have] al long-term orientation in their planning," he said.
"We are quite a capital-efficient company. We do invest in technology [and] infrastructure, but we don't invest in inventory which uses a lot of cash. So, we are very well capitalized right now," Bahl added.