Once near closure, Snapdeal India reinvents itself as a value e-commerce leader, slashing losses and eyeing profitability.
Snapdeal India, once a prominent player ranking among the top three e-commerce platforms in India alongside Flipkart and Amazon, is presently engaged in a strategic revitalisation effort. The company is navigating the fiercely competitive landscape of the value-driven segment as it endeavours to carve out a distinctive and successful resurgence in the market.
Snapdeal India’s history
Two childhood friends, Kunal Bahl and Rohit Bansal, dreamt of starting something of their own since they were students at Delhi public School. Fulfilling their dreams, they founded Snapdeal in the year 2010 being one of the country’s earliest unicorns and commanded a valuation of $6.5 billion in 2016, solidifying its position as the second-largest e-commerce entity in India, trailing only behind Flipkart in terms of market prominence.
During this timeframe, Snapdeal not only garnered favour among investors, boasting notable names such as Ratan Tata, eBay, SoftBank, and Nexus Venture, but also expanded its portfolio through the acquisition of 11 companies. Among these, the most noteworthy were Freecharge and Unicommerce.
Jumping ahead a year, Snapdeal India found itself on the brink of closure due to a series of unsuccessful acquisitions. In a final attempt to salvage the situation, the company explored a merger with Flipkart, but this last-ditch effort did not come to fruition.
With funds dwindling to a point where they could barely sustain the company for a month, founders Kunal Bahl and Rohit Bansal faced a precarious situation in 2017. Unlike a similar predicament in 2013, raising capital this time around posed a formidable challenge.
The tightening dominance of Amazon and Flipkart in the Indian market further complicated matters. Even the anticipated sale to Flipkart was poised to be at a fraction of Snapdeal’s peak valuation of $6.5 billion. It was difficult for Snapdeal to balance its position the way it was a year ago.
As soon as Covid hit, Snapdeal India disappeared from the market, leaving no space for comeback as Amazon and Flipkart had already tightened their grips. The Co-founders, Kunal Bahl and Rohit Bansal, were not ready to give up easily and started to plot strategies for Snapdeal India’s resurgence as Snapdeal 2.0.
In a Linkedin post by Kunal Bahl in the year 2018, he mentioned, “With a perplexed team in the office and critics crowing from rooftops, it was much easier for Rohit and I to move away, washing our hands off a toxic situation. That, however, was farthest from our minds,” conveying to people that Snapdeal is not over yet.
There was another Linkedin post of Kunal Bahl saying, “On September’ 19, Snapdeal’s total monthly transacting customers hit the highest number in the history of the company. Setbacks happen. So do comebacks.”
Snapdeal 2.0
“We were going to fall off a cliff if a call was not taken immediately to continue to build the business. Urgent discussions ensued within the Board to determine a way forward. Rohit and I were clear that in light of all the friction and delays around the merger process, Snapdeal’s best bet was to go forward as an independent company – with a clear business plan, christened Snapdeal 2.0. Any further delay in taking a categorical decision, one way or the other, was guaranteed to be fatal for the company. The Board agreed with our conviction. The date was July 31, 2017 and Snapdeal had just a few months of money left,” said Kunal Bahl in his linkedin post.
Talking about the strategies and aims of Snapdeal 2.0, Kunal Bahl summarised the Snapdeal 2.0 focus:
- “Single-minded focus on our core business – only running a pure-play marketplace
- And hence, divest non-core assets. We were clearly moving away from the approach of being in multiple businesses at the same time, each with their own moving parts, competitive pressures and demand on resources
- For that, go back to our roots of catering to the needs of the value conscious buyer, because that’s why our most loyal consumers came to us over the years
- Continuously improve the experience for our buyers and sellers, keeping the guardrails on economics in place
- Stabilise the culture and ensure everyone in the team is aligned with the company’s plans”
Now the question remains, did they achieve what they actually aimed for?
In the concluded financial year of FY 2018-19, Snapdeal grew its consolidated revenues by 73% YoY, while simultaneously reducing loss by 70% YoY. Revenue from Operations for Snapdeal (standalone) grew by 87% YoY. Not only this, their transacting customers grew 2.2X and traffic surged 2.3X to 70 million unique users/month, all this in a year when the e-commerce companies in India burnt through ~USD 2.5 billion in the pursuit of growth, according to the information and statistics provided by Kunal Bahl in his linkedin post.
“We were also the first large scale e-commerce company in India to achieve the cash-profit milestone in the year (month of June 2018). Over the last two years, we have reduced our loss by an incredible 96% while growing on parameters which matter to every business – more customers and more revenue,” he further added in his 2019 linkedin post.
Why did Snapdeal India sell FreeCharge?
“The FreeCharge sale was an important part of Snapdeal 2.0 and without that capital, our survival as a company would have been at risk,” Kunal Bahl, co-founder of Snapdeal, openly discussed on LinkedIn the challenges that the e-commerce company faced over the past year.
Despite facing a loss of confidence from investors, Snapdeal founders Kunal Bahl and Rohit Bansal rejected an $850 million offer from Flipkart. The highly anticipated and widely discussed Flipkart-Snapdeal merger, which had been under consideration for months, was ultimately abandoned in August 2017.
According to Bahl, the turning point came with the sale of the fintech company FreeCharge, which revitalised hopes for Snapdeal’s resurgence from a challenging period.
How is Snapdeal India doing now?
As investor funding for tech companies becomes increasingly dependent on financial performance, Snapdeal reports a significant reduction in its FY23 losses, with a year-on-year decrease of 93-94%.
During an interview, Himanshu Chakrawarti, CEO of Snapdeal told PTI about Snapdeal India’s business metrics, which are “in a good space” in the category of value Ecommerce as it has opted to “reinvest in growth now,” approaching the point of optimal financial performance.
While facing higher marketplace expenses and increased marketing investments for brand building, Snapdeal India achieved a notable 10.4% increase in revenue for FY22, reaching ₹563 crore. Despite these increases, the company managed to narrow its losses significantly compared to the previous year, with a loss of ₹413 crore, representing a 54% improvement from FY21. This promising financial trajectory, coupled with successful cost optimisation efforts, fuels Snapdeal’s optimism for achieving profitability in the near future.
Also read – Why e-commerce’s role is vital in India’s economic growth
