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Indian Deal Site Snapdeal.com's Interesting Business Model

Snapdeal.com is an e-commerce site based in India. Snapdeal originally started in 2010 as a Groupon clone for India. But due to several restrictive lawas around online retailing, Snapdeal changed to become an online marketplace just one year later in 2011.

Starting off with it own warehouse and shipping it's own products, Snapdeal instead now operates like TradeMe where individual sellers offer products to buyers. Snapdeal also handles all the payments, so when you make a purchase you pay Snapdeal, not the seller.What also sets Snapdeal apart from sites like eBay and TradeMe are the features of the site that promote competition among it's 60,000 merchants. The site has developed apps where the seller can drop the price if the competitor drops the price. This means prices are changing on the site constantly, and buyers get both an exciting shopping experience, and a good deal.

When you buy an item on the site, Snapdeal uses a third party courier to both pick up the item from the seller, and deliver it to the buyer. Funds are held in the Snapdeal escrow account until a successful delivery is made. This protects both buyers and sellers who don't know each other. With India being such a large country, there is the potential for things to go wrong, packages to go missing etc, so Snapdeal takes control of this and manages the buying process end to end. This way no buyers can be ripped off.

India has always run on local commerce. You can buy anything you need locally, and you seldom order in products from across the country. The downside to this is that you may not be getting the very best deal in the country.

You might be able to buy a product $30 cheaper, but not be able to travel halfway across the country to do that. With India's economy opening up in the way, there are deals to be had, and competition is fierce among sellers. This is of course great for buyers.

Snapdeal has changed this. Now every seller can sell to not only their local area, but to the whole of India. It is still small business to consumer, but 'local' now means the whole country, not just the surrounding town. At this point in time there are 60,000 merchants selling on the site.

Snapdeal in less than 5 years has grown extremely fast. They now operate in 5,000 towns and cities across India. That is a massive undertaking. The company has over 2,000 employees so you can see just how big Indian e-commerce is. The E-commerce industry in India has been growing at a great rate. In 2014 the country is thought to have gained more internet users than the US

India's internet access is by a large part through mobile. This is one reason their growth in internet users have been so high. Desktop computers are not as prevalent as in the USA. But most people have a mobile phone, and increasingly they have internet access. Mix that with a strong way to buy goods locally and this helps to explain the growth of Snapdeal.

Comparing how Snapdeal operates compared to TradeMe is interesting. Imagine when you bought something on TradeMe, you paid TradeMe, and they sorted out the buyer, courier and hassle. That's an interesting concept. I can see that Snapdeal could offer a better user experience, at no risk.

However New Zealand is a small country, so we are more trusting of others. Because of 2 degrees of separation people are less likely to rip other off, because everyone knows someone who knows someone. In India it's likely a different story with thousands of cities and over 1,000 different languages.

I don't think there is a need for an "end to end, controlled marketplace" model like Snapdeal in NZ. Things work pretty well when buying online. There aren't too many stories of people getting ripped off. When there is, they go to court and we all hear about it. Interesting all the same to hear how e-commerce works in different cultures.

Posted: Mon 02 Mar 2015


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