It’s advantage Snapdeal as Chinese e-tailers pack their bags

With Chinese e-commerce platforms such as Shein, Club Factory and Romwe out of the picture due to the recent ban on 59 Chinese apps, homegrown e-commerce companies such as Snapdeal targeting the value-conscious customer could be in the gain.

The SoftBank-backed company, along with social commerce startups, has been witnessing an increase in traffic, said three sources. According to them, the void created after the exit of Chinese e-commerce apps is expected to be filled by the likes of Snapdeal, Meesho, GlowRoad et al.

Sources emphasised that Snapdeal has started witnessing a spike in volume in categories such as fast fashion, home decor and lifestyle accessories. Over the last two years, Shein, Club Factory and Romwe had managed to build a noticeable scale in these categories collectively. 

“When the lockdown was lifted in June, Club Factory used to process about 30,000 daily orders while Shein and Romwe collectively shipped 15,000 to 20,000 orders. Since they aren’t operational, these volumes will gradually move towards Snapdeal and other fashion-focused e-commerce companies,” said one of the sources on condition of anonymity. “Snapdeal may grab 40-50% of the collective scale of the three Chinese e-commerce firms.”

At present, Snapdeal does about 150K to 170K orders a day. Market analysts also believe that the ban on the Chinese e-commerce marketplaces would shift a significant chunk of their business towards Snapdeal. 

“As the Chinese players exit the market after an aggressive bout of high spending, Snapdeal seems poised to emerge as a significant beneficiary. It’s now the only large, independent horizontal e-commerce company in India with a sole focus on Bharat,” said Satish Meena, forecast analyst, Forrester. 

Snapdeal has declined to offer comment for the story.

But, why is Snapdeal in a position to grab the market share of Club Factory, Shein and Romwe? Let’s gain some background on Snapdeal and the status of the unorganised e-commerce segment.

About three years ago, caught in a bruising battle for market share and investors trying to drive a merger with Flipkart, it almost seemed like the end of the road for Snapdeal. However, the firm decided to break away from traditional high-burn e-commerce business models and reinvented itself as Snapdeal 2.0.

During the 2018-19 period, Paytm Mall and ShopClues stood a solid chance to claim the third spot in the fast-growing value e-commerce segment. Unable to raise funds and shrinking scale, ShopClues lost the plot and consolidated with Singapore-based Q0010 in a fire sale. Paytm Mall kept changing goal posts without a long- term and consistent plan.

While both companies were in the position to leave Snapdeal behind, the Kunal Bahl-led company cleared all distractions to focus on cracking the value-seeking segment.  

Club Factory, Shein and Romwe together invested close to $175-200 million in India, most of it used to acquire customers and subsidise operations. Their basic game plan was to capture the fast-growing value segment in India by aggressively courting both buyers and sellers. “Such investment has no enduring advantages. A short absence from the market will reset these businesses back to the starting line,” emphasised Meena.

Social commerce players will also be the beneficiaries of the ban, but unlike e-commerce companies, their model depends on resellers. People don’t buy directly on the portal as there is an involvement of an intermediary aka reseller. 

As far as other niche e-commerce companies are concerned, there is almost no one left with a decent scale. Voonik, StalkBuyLove, Yepme and Zovi had shut shop whereas Limeroad is the only company that may be able to capitalize on the exit of the Chinese e-commerce companies.