How Snapdeal is creating focused brands to capture value e-commerce segment

Forms subsidiary to create such brands, is pivoting towards Bharat to reach value-conscious customers in tier-2 and beyond

Homegrown e-commerce player Snapdeal is betting big on the value retail market. The company has, for the past few years, pivoted towards the Bharat audience in a bid to cater to value-conscious customers. Having moved the Snapdeal marketplace focus to value retail, the company has now formed a subsidiary that is creating value-focused brands.

At present, other than the marketplace model, Snapdeal has two more business lines—Unicommerce esolutions, a cloud-based ecommerce enabler, and Newfangled Internet, which has Stellaro and other brands under it.

Snapdeal launched Stellaro in August 2022, which acts like a house of brands and caters to the value segments. These include names such as Urban Mark - for men, women and kids, Rangita - for women’s ethnic wear, Nord – for men, Miyuki and Aragma - for women’s beauty and personal care products, HomeTales – for the home and kitchen segment, and NBox – which sells electronics. An eighth brand for accessories is also currently in the works.

“We are now building what we think is the long-term sustainable business for us,” Himanshu Chakrawati, CEO, Snapdeal Marketplace, told Business Standard. Chakrawarti who took on the reins of Snapdeal is bringing his offline retail experience to build these brands from scratch.

“If we look at the value segment, specifically the value lifestyle segment in India, it is primarily offline. A very small component of this segment is online and within that, most of it is unorganized. Moreover, the quality that customers get for the price they pay is quite erratic within this segment,” said Chakrawati.

Why?

There is a reason for this pivot of creating value brands. Currently, around 86 per cent of users on Snapdeal are from beyond metropolitan cities, and almost 72 per cent are from beyond tier-2 regions.  

Moreover, Chakrawarti points out that the value lifestyle segment is an $8-billion-a-year market in the online segment and is predicted to grow at a CAGR of 39-40 per cent for the next five years. “We are seeing a huge growth and opportunity in this, especially with our brand promise,” he added.

“A large percentage of customers within the value segment are from tier 2 cities and beyond,” added Chakrawati, who joined Snapdeal in November of 2021. “The market is fairly nascent because, until recently, access to the internet was very difficult in these areas.”

According to a recent report by consulting firm Redseer, festival season sales in 2022 were primarily driven by tier 2 and tier 3 regions, with 64 per cent of shoppers coming from these cities. An estimated 125 million of these shoppers placed orders across platforms in the festive month. Fashion led the growth, especially in Tier-2 markets, which was mainly driven by unbranded fashion.

“There is an absence of brands with consistent good quality in the value lifestyle segment. We are looking at solving this problem at scale, not just for the Snapdeal platform. Our brands are sold across various platforms to address this challenge,” added Chakrawati.

Snapdeal defines a value buy as any product in the price range below Rs 1,000. Products from the Stellaro are priced at Rs 1,000 or lower.

Where is Stellaro now?

Chakrawarti points out that the Stellaro House of Brands was built from scratch organically without relying on acquisitions. “The advantage of this decision has been that, because we understand the e-commerce space exceedingly well, we can take our brands to other platforms and grow from there.” Acquisitions will, however, take place in the future as the business grows, Chakrawati said.

Some of its brands have been launched on Amazon, but in another four to six weeks, all the brands will be available across major platforms like Flipkart, Amazon, Jiomart, Ajio, Nykaa, etc. Within the next few years, the company is aiming to achieve the top three spot in terms of market value all of the sub-categories it is operating in.

Stellaro operates independently of Snapdeal. The House of Brands has a full-fledged team that is building the business, including sourcing, buying, merchandising, quality control, content curation, social/digital media presence.

“Stellaro as an entity does not have a sales operation on Snapdeal. However, the brands conceptualised by Stellaro and licensed to sellers are available on the platform. The seller ecosystem, who have taken the license, can create and sell on the platform where the quantity/inventory and price are managed by the seller ecosystem,” he said.

The primary focus of the business currently is, however, on achieving profitability and breaking even.

Snapdeal’s consolidated revenue crossed Rs 563 crore in FY22, up from Rs 510 crore in the previous financial year. The firm’s consolidated adjusted EBITDA loss increased from Rs 101 crore in FY 21 to Rs 419 crore in FY 22, driven by higher marketplace expenses, along with increased spending on marketing activities for brand building.

During the same period, the company recorded an 88 per cent increase in net delivered units, which grew from 18.56 million in FY21 to 34.92 million in FY22. The marketplace’s annual transacting customers also grew from 13.9 million in FY 21 to 17.7 million in FY 22.

IPO

Last month, the SoftBank-backed e-tailer had deferred its IPO plans indefinitely citing poor market conditions. Chakrawati claimed that the company is sufficiently funded and is not looking to raise funding right now.

“Our goal at the moment is profitability and reaching break-even. This will be accompanied by a normal growth trajectory. At some point if we decide we want to grow significantly, we may require funding which we will raise through public or private markets. But as of now, we are focusing on a path of regular growth,” he said.