Snapdeal, once touted to be the biggest success stories in the Indian startup ecosystem, is currently not sharing the happiest of news from its hub. Following the resignation of Freecharge CEO Govind Rajan, Snapdeal is now slated to lay off around 600 employees. Softbank – backed Snapdeal, which is grappling with funding woes, is expected to lay off these employees in the coming days.
The e-commerce firm based out of Delhi, was started by started by Kunal Bahl, a Wharton graduate as part of the dual degree M&T Engineering and Business program at Penn, and Rohit Bansal, an alumnus of IIT Delhi in February 2010.
Entrepreneur closely looked at a couple of things that could have gone wrong for the company, which according to database compiled by CrunchBase has made 13 acquisitions till date!
The company has been under the radar for burning excessive amount of cash on discounts and marketing campaigns, which took a toll on their gross margins subsequently. The company, at one point of time also hired in bulk, which a lot of industry experts feel was not necessary.
Satish Meena, Analyst at Forrester Research, said that in the race to achieve over ambitious GMV goals to support high valuation for next round of funding Snapdeal lost track of its positioning when it comes to customer preference. “This lead to a decline in customer experience and when Amazon raised their game in India customers shifted to a company providing better customer experience,” he adds.
Where are the funds?
Snapdeal’s funding woes are not different from those of another Indian e-commerce peer Flipkart. According to an Indian business daily, the company was in talks to raise another round of funds at a lower valuation from Softbank. With valuation and excitement around the entire e-commerce sector on a downhill, Snapdeal hasn’t been spared of this wrath.
I do not think there is anything fundamentally wrong with Snapdeal. The challenge is with India's entire e-commerce segment. From days when tons of money was poured in on exorbitant valuations based on GMV to the day when money is not available even on down rounds and GMV is the new four letter word, the e-commerce pendulum has swung to the other extreme. What's happening now with Snapdeal will happen to other e-commerce companies too that fail to secure the funds required to keep fuelling the losses for a long time to come, Anil Chhikara, Principal at Jaarvis Accelerator said.
Some dismal exits
Retaining top-level talent has been the biggest struggles of Indian startups. Including Govind Rajan, who quit within nine months of joining, Snapdeal saw a slew of top hires such as Tony Navin (head of partnerships and strategic investments) and Anand Chandrasekaran (Product Head)
Late entry into mobile payments
Dr. Som Singh, Founder of Unspun Consulting and Angel Investor believes that the company in India where credit card penetration is very low, Snapdeal has ventured into mobile payments a bit too late with FreeCharge Wallet. Paytm's wallet services have already paved their way far ahead.
While the market today has an overdose of payment wallets, Snapdeal’s failure to grow and best utilize Freecharge’s platform has also not gone down well with industry experts and investors.
With the founders now planning to take corrective measures and go back and check basics, the worries of this online marketplace can cast a shadow on other small e-commerce players aiming to back it big in the industry.