HONG KONG—Snapdeal's chief executive, Kunal Bahl, said Thursday
the Indian e-commerce company aims to be profitable in two to three
years.
The company is spending millions of dollars on the technology
infrastructure needed "to make a ton of money later," Mr. Bahl said
at the Converge technology conference, co-hosted by The Wall Street
Journal and f.ounders.
"We are building the highways of commerce, investing
tremendously in technology," Mr. Bahl said. "Just scale will not
bring profits, sustainable capabilities will bring tremendous
profits."
Snapdeal started life five years ago as a daily deals website,
like Groupon Inc., but is now an online marketplace that models
itself on Alibaba Group Holding Ltd.'s Taobao. It has used
multimillion-dollar investments to build a warehouse network that
houses goods that account for 50% of all the marketplace's sales.
Snapdeal has also been on an acquisition spree, buying companies
that allow it to offer loans to both consumers and merchants on its
site.
Snapdeal also runs a television shopping network, targeted at
households that aren't yet online. "We're probably the only
e-commerce company that probably went backwards," Mr. Bahl
said.
A rush of investor capital into India over the past five years
is helping drive a spending boom by Indian startups.
"Traditionally, India has been a little capital constrained," said
Prashanth Prakash, a partner at venture capital firm Accel India,
who was speaking with Mr. Bahl at the conference. Now, "investors
are starting to bet big," he said. "There's a $100 million
investment in India every month."
Big checks help companies such as Snapdeal fund both technology
improvements, but also make investments in brick-and-mortar
warehouses and improve India's spotty logistics network.
Investors have begun to raise concerns about the rising
valuations of Indian startups and the rate at which they are
spending cash, according to several heads of Indian startups.
"You have to have a measured approach. You can't just blow a
bunch of money, because everyone says infrastructure doesn't exist
in India," Mr. Bahl said. Snapdeal built one million square feet of
warehouse space over the past six months, but acquired a portion of
a logistics company rather than build its own network.
Mr. Prakash is more concerned about companies staying ahead of
the boom in e-commerce, driven by falling smartphone and mobile
data prices. "Five years ago when e-commerce started [in India], it
took them a year to get to 10,000 transactions," said Mr. Prakash.
"Now you have companies that get there in six months."
"Investors are actually telling entrepreneurs to move faster. If
that means a little bit of capital burn, that's encouraged by
investors," he said.
Write to Sean McLain at sean.mclain@wsj.com
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