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Snapdeal tweaks business model, sets up wholesale unit

snapdeal22E-commerce firm Snapdeal has established a wholesale unit to buy products that will be sold to consumers directly, following in the footsteps of rivals Flipkart and Amazon, according to a report.

The move by Jasper Infotech Pvt. Ltd, operator of Snapdeal, is a departure from its marketplace-run business model, Mint reported, citing three people aware of the development it didn’t name.

The unit, E-Agility Solutions Pvt Ltd, will function on the lines of Flipkart’s WS Retail and Amazon’s Cloudtail, a joint venture between Amazon and Infosys co-founder NR Narayana Murthy’s Catamaran Ventures. Snapdeal is also looking for partners to create a seller on its platform, the report said.

E-Agility will be used to fund vendors and bring on board fashion brands that sell directly to e-commerce firms as fashion constitutes 20-30% of Snapdeal’s business. The unit will help comply with the new foreign direct investments norms, which state that e-commerce firms can sell only 25% of their goods from a single vendor or group of firms, the report said.

In response to an email query by TechCircle, Snapdeal said that E-Agility Solutions is a wholly owned unit incorporated in November 2015 to assist sellers to start online business. “It is part of Snapdeal’s seller support program – SD Wings and continues to support Snapdeal sellers through various initiatives, including on-boarding assistance and training for the digital environment,” the company said.

Snapdeal’s move comes just ahead of the festive season where the company and its two main rivals will slug it out to attract customers and boost sales. While Amazon and Flipkart will battle for pole position, Snapdeal will look to secure itself in the number three spot.

Amazon has been on an expansion drive, launching new fulfilment centres and increasing its seller base three-fold. Flipkart is betting on its annual Big Billion Day sale, for which it has hired 10,000 temporary staff. Snapdeal has rebranded itself by launching a new logo and tagline ‘Unbox Zindagi’. It also launched next-day free delivery and a private cloud service called Snapdeal Cirrus.

The government allowed 100% foreign direct investment in e-commerce marketplaces in March, but restricted foreign-funded retailers from selling directly to consumers. Also, Amazon, Flipkart and Snapdeal will be unable to offer large discounts because of a clause in the new norms that restrict these firms from directly or indirectly influencing the selling price of goods.

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