Snapdeal Shifts Business Model, Incorporates Wholesale Unit E-Agility Solutions

Jasper Infotech Pvt. Ltd, which runs Snapdeal, has reportedly created a wholesale unit under the name of E-Agility Solutions Pvt. Ltd. The unit will be used by the online marketplace to sell products on its ecommerce platform, according to sources close to the development.

This move is a significant shift from its previously adopted marketplace model of business, where the company acted as an intermediary between sellers and buyers.

According to an official statement, the newly formed entity  is a completely owned subsidy of Jasper Infotech Pvt. Ltd. It will act as an associated entity of Snapdeal.

In another development, Snapdeal is also searching for Indian partners that could facilitate it in creating a seller company on its platform, said sources aware of the plans.

Commenting on the development, the sources said, “The new entity will be largely used to onboard fashion brands that prefer selling goods upfront to ecommerce firms. Also, fashion constitutes 20%-30% of Snapdeal’s business and will help abide with the FDI (foreign direct investment) laws. The entity will also be used to fund vendors.”

Before Snapdeal, rivals Flipkart and Amazon India followed a similar strategy where fully- or partially-owned entities by these ecommerce giants acted as sellers on the respective platforms. Where Flipkart has WS Retail, Amazon India’s largest selling platform is Cloudtail India.

The move will also be in compliance with new rules in India’s foreign investment policies that prevent a single seller from accounting for more than 25% of a marketplace’s total sales.

Amazon India’s biggest merchant Cloudtail is a joint venture between Amazon Asia and Infosys founder NR Narayana Murthy’s private investment fund Catamaran Ventures. It recently stopped the sale of mobile phones on its platform in order to comply with FDI norms.

In the same manner, WS Retail acted as a sort of clearinghouse for most of the goods sold on Flipkart, sourcing the bulk of the merchandise from vendors. The company was originally part owned by Flipkart founders Sachin Bansal and Binny Bansal, who later sold their stakes to a group of Indian investors and resigned from its board in 2012.

According to documents filed with the Registrar of Companies, E-Agility was incorporated in November 2015. It currently lists Jasper Infotech and Vishal Chadha, Senior VP, Snapdeal as owners. It also includes Anand Suryanarayanan, Vishal Chadha, Saurabh Nigam, and Ashish Chandra as the Directors of the company.

After reporting a loss of about $200 Mn (INR 1,328 Cr) on revenue of $140 Mn (INR 938 Cr) in FY 14-15, Snapdeal got off to a bad start in 2016. But it has been working hard to counter the growing competition in ecommerce sector and to establish a positive brand identity.

In August, Snapdeal launched a new service for its customers: ‘Snapdeal Gold’. It also launched its new brand identity “Unbox Zindagi” In September 2016. It has also unveiled a new logo. It has reportedly invested about $30 Mn (INR 200 Cr) for the brand overhaul. Snapdeal also announced its plans to utilise solar energy in a big way as an integral part of its daily operations by launching green initiatives earlier last week.

This development was first reported by Mint.