Snapdeal IPO papers reveal the e-tailer’s offline aspirations for budget fashion

• Snapdeal’s IPO consists of a fresh issue of ₹1,250 crore.
• The company plans to set up offline centers through offline stores and new franchises.
• It also wants to invest and set up new Power Brands, which is owned by the company but manufactured by someone else.

Indian ecommerce giant Snapdeal is now looking to set up offline distribution network, the company revealed in its preliminary paperwork for its initial public offering (IPO). Snapdeal’s IPO consists of fresh issue of ₹1,250 crore and offer for sale of over 3 crore equity shares.

The company, in the draft red herring prospectus (DRHP), has highlighted that “a successful value ecommerce player with an omni-channel presence will be able to capture shoppers’ mindshare across both online and offline channels.”

Value ecommerce brands are companies that offer affordable products. Snapdeal already competes with online-only players the likes of Amazon and Flipkart, but it will enter into competition with offline value retailers like V Mart, Future Retail and D Mart.

As a part of its expansion plan, the company will create distribution channels through offline stores, existing neighbourhood stores as well as new franchises. This will help the company increase the customer’s trust in the brand and allow them to try the product before purchase.

According to a Redseer report, the majority of India’s overall value lifestyle retail segment sales happen offline and most of it is unorganised and unbranded. The top 15 offline retailers had a combined annual revenue of approximately $5.5 billion in the fiscal year 2020, which accounted for less than 6% of the overall value lifestyle retail market.

“The market is very fragmented, with the top retailers accounting for only a fraction of the overall market,” the management consultancy firm noted, highlighting that there is a large headroom for revenue growth in this segment.

Snapdeal, while citing the RedSeer report, also noted that they would not have to worry about delivery reliability, return experience, shipping costs and user interface in the offline value distribution.

Snapdeal also wants to invest and set up new Power Brands, where the company owns the intellectual property of the brand but licences to third-party sellers for manufacturing. It already has 13 such power brands, including mens grooming brand MoochWale, watches brand David Miller, healthcare brand 9+ lives.

These brands made up for 5.6% of all purchases on Snapdeal between April to September 2021.

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