Kishore Biyani might not particularly like e-commerce companies, but he doesn’t clearly shy from buying them at the right price.
Future Group’s logistics arm, Future Chain Supply Solutions, has acquired Vulcan Express, Snapdeal’s own logistics company. The deal had been in the works for a while, and Future Group seems to have acquired Vulcan express at a steep discount — Vulcan Express had raised over Rs. 200 crore from investors, but was eventually sold to the Future Group for just Rs. 35 crore in cash.
Vulcan Express was owned by Jasper Infotech, Snapdeal’s parent company, and counted Snapdeal, Airtel and UPS as its primary clients. It provided end-to-end logistics services, including warehousing, line haul and transportation, last-mile distribution and reverse logistics, as well as quality control and refurbishment of goods.
“Through Vulcan, we plan to boost our last mile capabilities and also offer state-of-the-art solutions to our e-commerce and retail clients, including realising our disruptive vision of Retail 3.0,” Kishore Biyani said in a statement. Vulcan Express could fit in neatly into Future Group’s plans — Biyani had earlier unveiled what he called a new model for retail, in which his company would dot urban cities with stores. These stores would be open only to members, who’d pay a yearly fee in order to use them. Future Group would also deliver to these members who’d be able to order via WhatsApp and Facebook Messenger. It’s likely that Future Group has acquired Vulcan Express to to enable this last mile delivery.
Also, Snapdeal wasn’t particularly keen in keeping Vulcan Express in its portfolio. Snapdeal had a torrid 2017 — during the year, it fired employees, forced founders to accept no salaries, and generally fell away from the e-commerce race, leaving Flipkart and Amazon to battle it out for the top spot. It also rejected a merger offer with Flipkart, meaning that it now doesn’t have the cash to keep running non-core businesses. Snapdeal then pivoted to a marketplace-led model, which it called Snapdeal 2.0, and started hiving away businesses that were no longer a part of its plans. Last year, it had sold FreeCharge to Axis Bank for $60 million. Like Vulcan Express, FreeCharge’s sale too had been at a steep discount — two years prior, Snapdeal had purchased FreeCharge for $400 million.
The deal should please both companies — Biyani’s Retail 3.0’s ambitions happened to coincide quite neatly with Snapdeal’s 2.0 plan — but Kishore Biyani will likely emerge as the happier of the two parties. He watched from the sidelines as e-commerce companies burnt cash to build the infrastructure to grow their businesses. He’d continually warned that e-commerce models weren’t sustainable, and when his predictions have come true and e-commerce startups are struggling, he’s swooped in and bought their assets for peanuts. It remains to be seen how his own Retail 3.0 model fares, but his reading of the state of the e-commerce industry has been spot on thus far.