Snapdeal has initiated preliminary discussions with ShopClues to evaluate a potential strategic alliance.
Twenty months after walking away from a potential sale to arch-rival Flipkart and embarking on the ambitious Snapdeal 2.0 revival plan, Kunal Bahl, the plucky co-founder and CEO of the online marketplace is back on the deal street. And this time around, the prospective partner is a rival headquartered in his backyard.
"Snapdeal has initiated preliminary discussions with ShopClues to evaluate a potential strategic alliance," a source familiar with the negotiations told Moneycontrol. This was confirmed by another independent source.
"Talks are at an early stage and may or may not necessarily result in a transaction," one of the above-mentioned sources said, adding that deal would most likely be through a share swap.
If the proposed transaction goes through in the cut-throat domestic e-commerce market, it would be a case of two Davids combining forces to take on the deep-pocketed triumvirate of Goliaths - Amazon, Walmart-Flipkart and Alibaba-Paytm.
"As a combined entity with synergies across product categories and user base, they would also be better positioned to raise capital and attract higher valuations," added an individual who closely tracks the e-commerce space.
Shopclues counts Tiger Global, Helion Ventures, Nexus Venture Partners and GIC amongst its major investors. Snapdeal has partnered with investors like SoftBank, BlackRock, Temasek, Foxconn, Alibaba & e-Bay Inc amongst others.
In response to an email query from Moneycontrol.com, Shopclues said: "This is nothing but speculation. Shopclues has not spoken to anyone pertaining to either merger or acquisition. We are focused on our business model and continue to grow in the niche e-commerce segment."
Snapdeal did not respond to an email query at the time of going to press and Moneycontrol is awaiting their reply.
Snapdeal was started in 2010 by Kunal Bahl along with Rohit Bansal. Back then, the company said it had an assortment of 60 million plus products across 800 categories from regional, national and international brands and retailers. It also claimed to have more than 300,000 sellers, and of delivering to 6000 plus cities and towns.
Shopclues was founded in July 2011 by Sanjay Sethi, Radhika Aggarwal and Sandeep Aggarwal. According to its website, the online marketplace has more than 8.5 million products in segments ranging from mobiles & tablets to beauty and perfumes. It clocks more than 100 million visits every month and delivers to 30,000 destinations with many merchants based out of tier-2 and tier-3 cities.
Both companies have endured turbulent times in recent years and have scripted comebacks. In an April 2018 blog post, Shopclues co-founder Sanjay Sethi spoke about the financial resurgence of the company and said it closed FY18 with a "strong growth in revenues and a reduction in losses”. Revenue from operations rose $42mn in FY 18 from $28mn in FY 17 and losses came down significantly to $31 mn in FY18, the blog said
As part of its extensive restructuring programme Snapdeal 2.0, Bahl and his team have shed non-core business, cut costs and stayed away from heavy discounting of products on their platform. The strategy has worked with losses dropping by a sharp 88 percent to Rs 613 crore in FY18, compared to a loss of Rs 4,647 crore in the previous fiscal. But operational revenue slipped from Rs 903.8 crore to Rs 436.1 crore in the same period as per regulatory filings.
Last month, several e-commerce companies including Snapdeal and Shopclues launched a trade association called The E-Commerce Council of India to provide policy advocacy and encourage best practices in the sector. The domestic e-commerce market will touch $84 bn in 2021 from $24bn in 2017 on account of healthy growth in the organised retail sector, according to a recent report released by Deloitte India and Retail Association of India.