Snapdeal Shrunk Itself To Survive. But Will That Help?

Snapdeal tottered through months of uncertainty before the online retailer called off sale talks with bigger homegrown peer Flipkart in July 2017. Japanese investment firm SoftBank—which owned stakes in both—wanted the competitors to merge to take on Amazon.com Inc. That didn’t happen, and Flipkart was eventually acquired by the U.S. retail giant Walmart Inc. for around $16 billion.With depleting cash in one of the world’s most competitive ecommerce markets, Snapdeal survived a near death. “We were going to fall off a cliff if a call was not taken immediately to continue to build the business,” co-founder Kunal Bahl wrote in a blog in October last year.Going by just numbers, the strategy Bahl dubbed Snapdeal 2.0 at least helped him curtail losses. That came after Snapdeal slashed expenses by reducing promotions and laid off staff to cut costs. It’s now leaner with a focus on tier-2 and smaller cities.Cutting FlabThe fight with Amazon and Flipkart had left Snapdeal’s financials awash with red. Losses had risen by nearly 40 percent year-on-year to Rs 6,000 crore in 2016-17 on a two-fold jump in its expenses, according to filings with the Registrar of Companies.After snapping sale talks with Flipkart, Bahl wielded the axe. Snapdeal slashed fulfilment expenses by 67 percent, cut business promotion expenditure by 81 percent, lopped 67 percent off employee costs and lowered technology spends by about 75 percent. It also sold logistics arm Vulcan Express to Future Group and wallet platform Freecharge to Axis Bank Ltd.By the end of March 2018, losses narrowed by nearly Rs 4,000 crore, according to the filings.More than 80 percent of its business now comes from products other than mobile phones and electronics—the core categories for Amazon and Flipkart. Snapdeal relies on home and general merchandise, fashion and accessories to drive growth, a person privy to the company’s strategy said requesting anonymity since he is not authorised to speak to the media. The focus is on the value-conscious consumer, the person said, adding that the bulk of the growth is coming from tier 2 and smaller cities.Bahl and co-founder Rohit Bansal’s stake increased in the last 18 months from 7 percent to 18 percent as founders bought about 10 percent from Kalaari Capital.

Snapdeal Shrunk Itself To Survive. But Will That Help?

Will a leaner Snapdeal survive India’s e-commerce war?

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