India’s Snapdeal, an Amazon Competitor, Raises $500 Million From Alibaba, Foxconn and SoftBank

Snapdeal CEO Kunal Bahl

Snapdeal
Snapdeal CEO Kunal Bahl

Alibaba finally has its ally in India, perhaps the world’s hottest e-commerce market.

The Chinese e-commerce giant has invested in Snapdeal, an India-based e-commerce startup, as part of a $500 million round, according to multiple sources. Foxconn, the Taiwanese company best known as a manufacturer of Apple’s iPhones, also invested, alongside existing Snapdeal investor SoftBank.

Snapdeal had previously raised more than $1 billion from investors including SoftBank, eBay, BlackRock, Bessemer Ventures and Indian venture firms such as Kalaari Capital and Nexus Venture Partners. Alibaba and Foxconn were considering the investment earlier this year, which would value Snapdeal at $5 billion, the Wall Street Journal reported in June.

The company has undergone several iterations since Kunal Bahl and Rohit Bansal founded it in 2010, including one as a Groupon clone. Today, it’s an online shopping marketplace that sells a wide range of products, from cameras to jeans to toys — pitting it against Flipkart, a homegrown competitor currently valued at around $15 billion, and Amazon, which is investing billions of dollars into its Indian business.

In the past year, Snapdeal has started to develop an ecosystem of sites by acquiring companies focused on different areas of online commerce. It bought FreeCharge, a popular service in India that allows people to add money to prepaid phone plans and prepaid TV plans. It also acquired RupeePower, a comparison shopping site for credit cards and loans. The approach is not all that different from Alibaba’s, which runs a host of different marketplaces focused on different types of buyers and different regions.

The investment gives Alibaba a foothold in a country that is fast becoming the most talked about e-commerce market outside of the U.S. Earlier this year, Alibaba founder Jack Ma visited India and said his company was interested in investing in companies in the world’s second-most populous country. Alibaba and Snapdeal had been engaged in on-again, off-again talks since at least early this year.

An Alibaba spokesman declined to comment. Spokespeople for the other companies involved did not immediately respond to requests for comment.

A lot of the interest in India comes from demographics: India is the second-most-populous nation in the world, and a young one at that. More than two-thirds of the country is under the age of 35, and the country’s median age of 27 is 10 years younger than that of the U.S, according to a recent Goldman Sachs report.

This new generation of people is connecting to the Internet for the first time, and many are doing so on phones, skipping the PC world altogether. As a result, mobile shopping is exploding in popularity, and data prices are a big part of this. As of December, India users on average pay 0.5 cents per megabyte used, which is two times cheaper than in China, and almost three times cheaper than in the U.S., the report said.

While Flipkart has more market share in India, Snapdeal CEO Bahl thinks that company and Amazon are thinking too narrowly by being focused mainly on the sale of physical products, he told Re/code during an interview at Snapdeal’s Indian headquarters in April. Snapdeal, on the other hand, is going after what Bahl believes will eventually be a $250 billion opportunity — bringing all kinds of other transactions online in addition to the sale of products.

“What’s the delta between retail and consumption?” Bahl asked rhetorically, referring to the difference between the two. “It’s things like financial services, education, utilities, health care. But today, all everyone is doing is products.”

“Others are building aircraft carriers,” he added. “We are building an army of speedboats.”

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