When India’s massive ecommerce market place Snapdeal went into the ring a seventh time for funding last week, its owner Jasper Infotech will have been pleased with the result. However, that is according to street talk because the Asian giant with 100,000 clients selling 10,000,000 products is keeping mum.
Why Snapdeal Needs the Money
The Indian ecommerce marketplace has ambitions of unseating Singapore-based Flipkart operating in its backyard, and bragging with an estimated 33,000 employees and $8 billion merchandise value. Snapdeal has been splashing out on customer acquisitions and technical upgrades, as well as purchasing several new-age internet companies including prepaid mobile Freecharge. So it needed the extra cash to keep on rolling.
Alibaba and Foxconn Upfront in Deal
While Snapdeal responded to queries with a terse “we do not comment on speculations,” it is evident that Taiwan’s Foxconn and China’s Alibaba have each chipped in with $200 million investments, despite market uncertainty over Snapdeal’s valuation. The company’s largest investor Softbank contributed an additional $100 million limiting its rivals’ leverage gained to just 4% each.
Why the Jack Ma – Snapdeal Deal?
Alibaba’s chairman has been planning to enter India for some time, and engaged in talks with Snapdeal in 2014. These may have hinged on Snapdeal founders Kunal Bahl and Rohit Bansal’s known hopes of repeating the Alibaba business model. The timing is good with India’s Diwali Festival coming up. This is a five-day splurge when Hindus exchange gifts and seek the favour of the Goddess of Wealth.
With Snapdeal edging close to Flipkart’s $8 billion merchandise value and intending to beat it by at least one big one, the Indian ecommerce giant is a consumer conduit too good for Jack Ma to overlook. Diwali could make the difference to his brand strategy and provide a quick return on investment. In the evolving ecommerce world, any way to collaborate could turn out a good thing.