The following article is based on my own interpretation of the said events. Any material borrowed from published and unpublished sources has been appropriately referenced. I will bear the sole responsibility for anything that is found to have been copied or misappropriated or misrepresented in the following post.
Anjana Jaladi, MBA 2014-16, Vinod Gupta School of Management, IIT Kharagpur
Dharavi ,the largest slum of India is now the land of opportunities ,at least for Snapdeal. This e-commerce biggie has tied up with remittance provider FINO PayTech to make the world of online shopping a reality in semi-urban, rural and low-income residential areas, within the country.
This expansion strategy can provide the slum dwellers with better access to quality goods .So while dharavi gets an improved standard of living .Snapdeal gets a wider customer base. So it sounds win –win in theory.
The model works this way once an order is placed through shared computers. It is shipped to the Snapdeal storefront in Dharavi as there is unavailability of proper shipping addresses. Customers can then pick up their goodies from the storefront and pay via cash on delivery. While it sounds simple enough ,it reminds me of the quote ,execution is a devil .The ability to read or access to gadgets is limited among slum dwellers. This limitation of the slum is a threat to the model planned. Also,snapdeal plans to expand this model to 65 cities and over 70,000 rural areas by the end of 2015.
The current investor backing from Alibaba and Softbank can set the model working .But soon investors would be pressing for better margins. That might lead a drift from the huge price discounts .At that point of time, I doubt the sustainability because of the price sensitivity of this section.Further,only time will tell !