EBay is leading a $133.7 million investment in online shopping website Snapdeal that could result in a buyout of what is viewed as the eBay of India.
EBay contributed a large majority of the total investment, according to a person familiar with the deal, while existing investors took part on a smaller scale. Last spring, eBay also led a $50 million investment in Snapdeal, which has now raised more than $200 million to date.
The investment could lead to an outright buyout down the line as eBay has done in other global markets, Devin Wenig, president of eBay Marketplaces, told Re/code in an interview this week, although a decision has not been made.
“When we make an investment and are cooperating with a third-party like Snapdeal, we hope to be successful and hope eventually we can take the next step,” Wenig said. “We have a history of making minority investments where at times it works well and we take the next step and end up acquiring the target.”
Snapdeal was founded in 2010 with a similar model to Groupon’s, but later evolved into a general online e-commerce marketplace where about 20,000 businesses list all types of products for sale, from mobile phones to jeans. The site is available in English, Hindi and Tamil. In India, Snapdeal competes against Flipkart, backed by more than $500 million in investments, Amazon’s recently launched India site and eBay’s own subsidiary, eBay India.
Snapdeal CEO Kunal Bahl said in an interview earlier this month that his company was forecasting $1 billion in gross sales in its upcoming fiscal year. Snapdeal takes a cut of each transaction, which can range from five percent on electronics to as much as 30 percent for certain types of apparel, Bahl said. On average, Snapdeal’s cut is in the low teen percentages, he said in an interview last year.
Wenig said that while the sites compete in some ways, they are mostly complementary. For example, the customer demographic skews male on eBay and female on Snapdeal, he said. As a result, he said there are no plans to phase out eBay India.
“Success is running two brands with tight coordination just like we do in Korea,” Wenig said, speaking of eBay-owned Korean sites Gmarket and Internet Auction Co.
More than half of eBay’s marketplace revenue and total revenue comes from outside the U.S.
While eBay and Snapdeal both employ a marketplace model, there are differences between the two approaches. For one, the vast majority of goods on Snapdeal are sold by businesses, while eBay’s foundation has been built on individuals selling to other individuals. Additionally, businesses that sell through Snapdeal must use Snapdeal’s logistics service, which routes shipments to one of several delivery companies based on factors such as speed of shipment and price. Ebay, on the other hand, gives its marketplace sellers the choice of whether they want to use the company’s fulfillment service.
As part of a separate commercial deal between the two companies, each advertises some of its product listings on the other’s marketplace. Eventually, shoppers may be able to buy goods from eBay India directly on Snapdeal and vice versa.
In the future, eBay may also help Snapdeal merchants sell goods in the U.S., Wenig said.
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