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Snapdeal looking to shift from true marketplace model, and set up a wholesale unit

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Snapdeal, the e-commerce startup competing against Flipkart and Amazon, which had recently gone through a re-branding and unveiled a minimalistic new logo seeking a global footprint. In a bid to acheive the same, the company is now planning to introduce a major shift to its business model and set up a wholesale unit to enable people to buy products upfront, reports LiveMint.

As per the reports, with this new wholesale unit, the company is looking to shift its business model from the marketplace model. In the marketplace model, the platform acts an intermediary for sellers and buyers.

E-Agility Solutions Pvt. Ltd, the wholly-owned subsidiary of Jasper Infotech, which owns and runs Snapdeal, will resemble a structure already adopted by rivals Flipkart and Amazon. Currently, Amazon and Flipkart have closely associated wholesale entities Cloudtail and WS Retail, respectively. These sellers play a significant role in selling products on the e-commerce platforms.

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The report further suggests that Snapdeal is also looking for Indian partners who can help the company get new sellers on the platform. This new business model will give better control to Snapdeal and will also enable them to improve their customer service.

However, it will be interesting to see — how Snapdeal implements this new business model and diverts from its marketplace model, as Snapdeal’s founder Kunal Bahl has always been an advocate of marketplace model over inventory-led model.

One person aware of the matter, said to LiveMint:

The new entity will be largely used to on-board fashion brands that prefer selling goods upfront to e-commerce firms. Also, fashion constitutes 20-30% of Snapdeal’s business and will help abide with the FDI (foreign direct investment) laws. The entity will also be used to fund vendors.

Even when Flipkart and Amazon came up with complex structures to keep their business running, Snapdeal had stuck to its true marketplace model. As per new guidelines from the government for the e-commerce companies, none of the online marketplace can have a single seller contributing more than 25 percent of its sales.

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This move from the company is definitely aimed towards regaining the market share, it has lost to Amazon and Flipkart. In similar efforts, Snapdeal also announced re-branding and launched its new logo and TV campaign. For this, the company has committed to spend around Rs. 200 crore in September and October.

Recently, a report suggested that Amazon India will hit $81 billion in GMV by the year 2025, however, Flipkart will continue to dominate the segment. The same report estimated that Snapdeal’s share in the market will fall from 14% in 2014 to around 9% by 2019. This move towards a wholesale business model could, however, help the e-commerce company build the much-needed.

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