E-commerce firm Jasper Infotech Pvt Ltd, which runs the daily deals and now horizontal e-com site Snapdeal.com, has acquired eSportsBuy.com, an online retailer of sports and fitness equipment and accessories. eSportsBuy was started in 2011 by IIT Delhi alumni Prateek Agarwal and Amit Monga.
The specifics and terms of the transaction are not immediately available and when we spoke to Kunal Bahl, founder & CEO of Snapdeal, he refused to comment on it. When asked about the rationale behind the acquisition, Bahl cited the demand for sports goods and observed that eSportsBuy "has an enviable collection of sports and fitness equipment." So it made sense to acquire the company.
Since the startup is less than six months old and a rank new player, it looks like a case of acq-hire rather than a classical acquisition by one of the bigger names in Indian e-commerce space (and that too, at reportedly high valuations, which looks out of proportion).
An acq-hire implies that eventually, the operations would be merged and the acquired e-com venture would be shut down. But that's not happening immediately.
When asked about his future plans regarding eSportsBuy and whether it would be retained as a brand, Bahl said, "Currently, we will keep both the brands. eSportsBuy will co-exist and its products will be available on Snapdeal as well. But we are still internally discussing what the future course should be."
So should we consider this deal as an acq-hire, we did ask Bahl.
"Well, if you ask me, isn't every acquisition an acq-hire in that sense? The team comes on board as employees of the acquirer and that's going to happen in our case too," Bahl told Techcircle.in.
What Does It Mean To eSportsBuy & Snapdeal?
Snapdeal already stocks some sports equipment but these are not showcased as a separate category (we found badminton racquets featured in the 'Kids & Toys' category). So eSportsBuy would certainly help boost Snapdeal's vendor relations for those products and also help expand the product catalogue in that segment.
For eSportsBuy, it would mean a bigger platform to be associated with and that can help it bargain harder with vendors, at least as long as it maintains the site independently. It could also draw synergies in operations, especially at the backend.
For the two founders of eSportsBuy, it would surely mean working for a bigger set-up and scaling the business category for Snapdeal.
"Entrepreneurship is all about timing and for every move, timing really matters. So for eSportsBuy, the acquisition means scaling up its business on an already established, popular platform. And for us, we get to broaden our categories and add a segment which has a lot of demand," said Bahl.
"Like every new company, eSportsBuy was at the threshold of either fundraising or a sell-out. Of course, the company could have waited another six months to raise a huge funding. But then, Snapdeal's proposition was quite attractive and hence, the acquisition," he added.For Snapdeal, this is the second acquisition to build out its business. In 2010, it had acquired group buying site Grabbon and that site now redirects to Snapdeal.com. So that explains what Bahl means by all deals being acq-hires!
Snapdeal also has the means to take the inorganic route to expand quickly. Last year, it had raised over $50 million in two rounds of funding â€“ from Bessemer Venture Partners and Nexus Venture Partners â€“ as well as from the existing investor Indo-US Venture Partners. According to Bahl, "The capital will be used in investments, product expansion and future acquisitions."
On future plans for Snapdeal, Bahl said, "We already have 15 million registered users and get the highest traffic, compared to any other e-commerce site. By the end of this year, our product assortment will be 50 times larger than what it is now."
Year of Consolidation?
The year has already seen two e-commerce acquisitions (with Flipkart buying Letsbuy.com and Yatra.com acquiring Buzzintown. If we go by the general sentiment across the industry, consolidation will be the highlight in Indian e-com sector in 2012.
"It's bound to happen. I feel it's becoming harder for vertical players to survive in this highly competitive market. Also, electronics portals are facing a lot of problems because of low margins on the products they are selling. Therefore, such circumstances pose an opportunity and need for consolidation," Bahl commented.