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Snapdeal 2.0- Scripting the business turnaround of an e-commerce

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Snapdeal 2.0- Scripting the business turnaround of an e-commerce

Remember the times when Amazon and Flipkart were not only your choices to surf while placing an order but also because the market lacked contemporary competitors? It is rightly said that great things take time, and we understand this better with Snapdeal’s inspiring turnaround. Kunal Bahl, the co-founder of Snapdeal, was just 24 when he founded it. The company reached a soaring market value of $6.5 million within six years and became the second-largest e-commerce industry in the country. Those were the times when Snapdeal not only had lucrative investors on its side, including Ratan Tata, but also had in its acquisition 11 companies notably Freecharge and Unicommerce.

An array of acquisitions

In 2015, the company recorded an year on year growth of about 600%. This was also the time when the company was exclusively focusing on strengthening its speed and scaling its business to new heights. For this, Snapdeal not only attracted big investors but it also increased its acquisitions.

In a span of 4 years from 2010, Snapdeal acquired a group buying site Grabbon.com, an online sports goods retailer esportsbuy.com, an online handicraft product marketplace Shopo.in, and a fashion products discovery site Doozton.com.
In 2015 alone, Snapdeal made a series of acquisitions. It started with acquiring Smartprix.com which was a product comparison website. The company went on to acquire Freecharge, MartMobi, and Unicommerce to name a few.

However, this dream was short-lived. In the summer of 2017, the clouds of despondency and despair loomed large over the Gurugram-headquartered company. The reason was a failed merger with Flipkart. The worst was yet to come - the co-founders were left with paltry funds that could run dry in just a month. 2017 hit hard and hit differently to the e-commerce industry. While it lost its grip on the Indian economy, other MNCs like Amazon and Flipkart emerged as strong competitors.

Beginning of the fall

Snapdeal’s fall as a strong competitor and a business leader came to a fall owing to a host of reasons.

Failed Merger with Flipkart: Snapdeal’s investors could not come to the same page upon the merger terms which was required by Flipkart. It is said that the merger was called off because of the unwillingness of the founders of Snapdeal and their earlier investors, i.e. Nexus Venture partners and Kalaari Capital.
Labour Issues: While Snapdeal was already in hot water with their burgeoning losses, it also had to take tough decisions with regards to manpower. It was said that the company was forcing its employees to resign. This had a very negative impact on Snapdeal’s brand image.
Costly Decisions: Snapdeal spent around Rs.200 crore just to rebrand itself. This was done at a time when the company was already running dry of its finances. However, because there was no specific direction set to their campaign, the situation became worse.
Lack of a Unique Selling Proposition (USP): Both the competitors, Amazon and Flipkart differentiated themselves from the others. Amazon pantry is its USP and Flipkart already had an upper hand in consumer electronics. However, Snapdeal never focused on developing a USP for its brand.

Reading the pulse of the market

Three years down the line, Bahl and Snapdeal have made a major comeback and turned around their e-commerce business. Not only have their revenue from operations increased to 85%, but the company has also been successful in reducing its loss by an overall 95%. Isn’t that phenomenal, given that Snapdeal saw more than 27 million unique and new users in 2020 buying on their platform?

The cornerstone of Snapdeal’s turnaround has been, as Bahl puts it, “is because we have been sharp about what we work on, and what we don’t.” Besides a change in vision, a renewed energy, and a stronger focus, the most important ingredient to its success strategy is “focusing on a very few things and doing those few things very well.” This is what helped Snapdeal find a niche, by focusing on specialisation, and the understanding of what it doesn’t want.

Also Read: Are online discounts killing e-commerce?

The company has realised the pulse of its customers. In a bid to unlock aspirations for people with less money, they now know that this particular segment of India is very discretionary in its online purchase choices. Today, they care more about whether the products they buy hold value within the limited money scale, and not on what brand they are wearing! This tactical shift and emphasis on value ecommerce have provided about $163 billion opportunities in India.

The Internet changed company targeted demographics

The bedrock of value e-commerce lies in the exponential penetration of the internet and smartphones to the nook and corner of the country. As Jio entered Indian markets aggressively in 2016 with 4G connectivity, it brought online people who were from the lower to middle-income demographics. Therefore, Snapdeal took a step back and re-analysed its entire online tactics.

It created a range of products that were not expensive or those products that could possibly dissuade the buyers. With 200 million listings on its platforms, the company did not give discounts on most of its products because they were already low-priced. This attracted a lot of manufacturers too, who wanted to sell directly, without any intermediaries.

snapdeal statistics

Image Credits: How Snapdeal is turning its fortune report by Forbes India.

The Lucky Lockdown for Snapdeal

The old adage ‘Every cloud has a silver lining’ came true for Snapdeal when India announced a complete nationwide lockdown in March 2020 due to the Covid-19 pandemic. People who were sceptical about online purchases came rushing in. The online e-commerce adoption also brought in a plethora of options for customers to choose from. People from affluent and semi-affluent strata of the society also began re-prioritising their needs and expenditure, given their economic and income uncertainties.

Buyers rushed online, and sellers knew that this was the opportunity they were waiting for which helped in the creation of a wide melange of value-priced products. What was sold in bazaars and markets was now being sold online. The extraordinary result of the same was that Snapdeal reached 6 million new buyers, 1500 new pin codes. Today, it covers around 27,000 pin codes all over India.

Reframed Strategies

Snapdeal 2.0 was devised with a fresh strategy where it focused on 2 key areas.

Focus on value e-commerce: Snapdeal created an identity for itself and drew a line on how it is different from others. Value e-commerce helped them gain new customers, both affluent and aspirational ones. This was possible as Snapdeal 2.0 made itself a platform where non-customised but unbranded products, as well as generic brands, could co-exist.
Divesting/Selling businesses: Snapdeal had acquired 11 companies like Freecharge, Martmobi, PepperTap, and others on which it spent a staggering $400 million. However, these businesses had not been lucrative. To build a strong core business, Snapdeal disinvested in many and sold Freecharge to Axis Bank for Rs. 385 crores.

Snapdeal: Unboxing Zindagi

What is Snapdeal’s next destination from here? For now, it is lying below the radar and keeping a bull’s eye on capability creation. This is inclusive of Snapdeal’s investments into algorithms and discoveries, technology, and personalisation.

Talking about its lean supply chain model that pivots on zero inventory, Bahl said, “We have also been keeping our operating costs very low. For instance, we served over 30 million customers or two percent of India’s population last year with just 650 to 700 people in the company and generated over $100 million of net revenue, which is our commission income. That’s no easy task.”

Snapdeal 2.0 attributes its refreshed growth to its flexible approach to capital and the never-give-up attitude. And as Mike Hawkins says, “You don’t get results by focusing on results. You get results by focusing on the actions that produce results.” Snapdeal got this strategy right and unboxed its new Zindagi!

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