Today, Snapdeal.com is among the 30 most visited websites in India (according to Alexa.com, a web information services company). The portal sells discount coupons in over 50 cities in the country and has partnerships with over 10,000 merchants. According to Kunal Bahl, chief-executive officer, Snapdeal, the site attracts 100 million page views every month.
“We were skeptical, we never thought people would pay online, download these coupons, print it and then take it to a retailer.”
This is the story in October 2011. In early 2008, Kunal Bahl and Rohit Bansal, the founders of Snapdeal (then called Jasper) were going after solving the same problem they solve right now. The duo wanted to sell discount coupons to Indian consumers and this, they believed, would help retailers get rid of perishable inventory. However, their business model was vastly different from what it is today. In fact, in the early phase, the founders weren’t convinced about the Internet as a distribution medium. Bahl says, “We were skeptical, we never thought people would pay online, download these coupons, print it and then take it to a retailer.”
In this article, we take you through Snapdeal’s journey – through a variety of business models, distribution strategies and most importantly, its management’s ability to make extremely quick business decisions.
Plan A: The early experiment
As Bahl and Bansal took the entrepreneurial plunge, there was one thing they were extremely clear about; they believed discount couponing certainly works for both consumers and merchants. According to Bahl, in the U.S. there were over 400 billion coupons (in the year 2007) distributed to consumers through various channels – the web, mobile and even printed coupon books. In India, this number was negligible. Snapdeal’s Plan A was to create a whole new category and the company launched their first product ‘MoneySaver’, a printed book of tearable coupons from multiple brands (with a particular validity per coupon). The coupon book was sold to consumers for Rs. 400.
Bahl says, “The first six months was spent in cold calling merchants. We signed up brands like Levi’s and Reebok and the early phase looked promising.” But a few months into the business, Bahl realised there was a problem. These discount coupons expired in a stipulated time, but Snapdeal still had these printed books, with expired coupons, lying around in its office.
“We had worthless paper (worthless inventory) in our hands. We had to do something different, so, we moved to mobile coupons,” says Bahl. With mobile coupons, there was no inventory; the coupons would be delivered to a customer’s mobile phone.
Plan B: Fixing the inventory issue
Snapdeal tweaked its model to deliver these coupons onto a mobile phone. For Rs. 99 per month, it would deliver an unlimited number of discount coupons. In order to buy this service, consumers had to buy a scratch card (with a unique code) for Rs. 99, send out an SMS to Snapdeal with the code, register one’s phone and then start receiving the coupons. The first month was a free trial; over 1,00,000 consumers signed up. However, a very small percentage turned paying customers. Bahl says, “The moment you said, you have to buy a scratch card, no one wanted to take action.” Plan B didn’t work either.
Plan C: A model that works
Bahl opted for the middle path and launched a discount card called ‘MoneySaver Prime’. It looked like a credit card and consumers were willing to buy this. The challenge was there were no retailers who sold a product like this.
“We started off with selling these discount cards at Café Coffee Day outlets,” recalls Bahl. However, this could not be scaled either since the touch points with consumers were too far and wide.
Bahl modified the concept again and made it a B2B2C (business to business to consumer) product. Corporate customers could use the discount card to hand out incentives to employees and customers. The cards were co-branded with a client company. This approach moved in the right direction. Profit margins were good and the company sold a few lakh discounts cards every month. Most importantly, in this phase, the company built good relationships with several merchants and brand owners.
Plan D: A skeptical experiment that, in hindsight, is extremely successful
It was this relationship with merchants that paved the way for Snapdeal’s foray into the Internet medium. In January 2010, one of its merchant-partners mentioned to Bahl about how he acquired seven new customers by selling a discount coupon online. The merchant suggested that Bahl should explore something similar. On January 26th 2010, Bahl and Bansal spent their Republic Day holiday brainstorming the company’s foray into the Internet.
On February 4th 2010, with the help of just one designer and one developer, the duo launched Snapdeal.in (.com wasn’t available then). “We were hoping to reach 100 transactions / day after three months. Contrary to what we thought, the early adopters came in hordes. We touched 100 transactions per day within three weeks.” The Internet was working as a medium of customer acquisition for brick-and-mortar retailers. For Bahl, it was a watershed moment.
Once the potential was recognised, Bahl and his team wasted no time in scaling up. Today, just 20 months after launching online, the company employs over 500 people (its strength was less than 50 people while working on Plan C). The company raised over $ 52 million in venture capital financing and is working towards launching Snapdeal in over 100 cities in India. From selling discount deals for retail services, it has now expanded to sell deals for online products and travel deals as well. It acquired Grabbon, a Bengaluru-based group-buying portal to scale further. Snapdeal also launched the Innovation Fund to acquire smaller companies which can help the company scale further. Today, Bahl’s focus is on more explosive growth. His prime day-to-day responsibility centers on defining processes for scaling up and building the team.
Bahl’s entrepreneurial journey is not very different from the stories of other entrepreneurs. Bansal and he launched products based on gut-feel and research, but constantly modified the business model based on market realities. Snapdeal’s journey from Plan A to Plan D is only the beginning. He says, “The next question is, how do we make this business large – like really large – and grab the entire share of a consumer’s wallet.”
Key lesson learnt from the Snapdeal journey:
Once you launch a product, keep measuring the key metrics of your business, evaluate, fine-tune and take action based on what you find. Bahl was running a good business when he sold MoneySaver Prime, the discount card, to corporate customers. However, when a merchant told him to think about using the Internet as a platform, in two weeks, he setup a portal to experiment the idea.