Snapdeal Makes It To D-Street, But Where’s The Moat?

by · Inc42

SUMMARY

  • Snapdeal’s measured IPO response reflects the challenge of scaling its value-commerce play, but the bigger test is whether brand recall, customer growth and improving marketplace economics can translate into a sustainable competitive position
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One of India’s earliest ecommerce marketplaces has finally trotted onto D-Street. After a relatively muted 4.93X subscription to its IPO, Snapdeal’s parent AceVector is all set to make its stock market debut on Monday.  

AceVector’s ₹420 Cr IPO, which opened on September 25 and closed on September 29, comprised a fresh issue of ₹287 Cr and an offer for sale (OFS) of around ₹133 Cr, with shares priced in the ₹30-32 band.

The company’s IPO response is a far cry from its once-lofty standing in India’s ecommerce race. At its peak, the company was valued at $6.5 Bn, backed by heavyweight investors, including SoftBank Group, Alibaba Group and Foxconn. 

Then, as Amazon poured billions into building its India business and Flipkart emerged as a formidable rival, the ecommerce battle grew increasingly intense. Snapdeal eventually stepped away from its ambition of competing across the broader market and shifted its focus to affordable fashion, home and beauty products, catering to shoppers in Tier II and Tier III India looking for low-priced goods rather than premium brands.

But is value commerce really working for it? Let’s find out in this edition of Inc42 Markets.

How AceVector Makes Money

Snapdeal is only one part of AceVector’s portfolio. The company has two other businesses: Unicommerce, an ecommerce enablement software business, and Stellaro Brands, its consumer-brands arm.

According to an expert tracking the consumer internet sector, Snapdeal has grown its net merchandise value and customer base of value-conscious shoppers, but its scale remains quite modest compared with larger ecommerce platforms, especially Meesho.

The expert added that Snapdeal may not be generating enough revenue per transaction to cover customer acquisition, technology and logistics costs. 

Unlike an inventory-led retailer, Snapdeal operates an asset-light marketplace. Sellers own and list products, while Snapdeal facilitates discovery, transactions and associated services. It earns money through seller-related marketplace fees, advertising and marketing services, freight and collection fees, and charges for return shipments. This structure limits the need to purchase and hold inventory, but leaves the company dependent on transaction volumes, seller participation and the economics of fulfilling orders.