It’s not the first time that Snapdeal co-founders Kunal Bahl and Rohit Bansal are changing their business model. In their almost a decade long journey, they have run a physical couponing company, a daily deals site and then the current online market place business. However, none of them has turned out to be profitable.
Snapdeal, which was negotiating its sale to Flipkart, announced on Monday that it was calling off the deal and that it would operate independently.
Called ‘Snapdeal 2.0’ by the co-founders, it will be a leaner version of the current marketplace model and focus on creating more value for the sellers. The move is seen as Snapdeal’s last chance of resurrection.
The company is armed with almost Rs 350 crore from sale of Freecharge to Axis Bank. The co-founders have said they don’t need more money from investors and would manage the leaner version with their own resources.
The new version is likely to see more layoffs and almost 50% of the current workforce of 1,200 would have to go.
The revamp of the e-commerce player will include getting out of the unprofitable category of mobiles and other electronic goods and focus more on fashion and lifestyle products. The firm will also focus on cutting down on losses due to customer returns and increase the margins through commission from sellers.
BestMediaInfo.com asked industry experts about the likely future of Snapdeal 2.0 and where the e-commerce player will stand in the competitive e-commerce market.
Ashish Bhasin, Chairman & CEO, South Asia, Dentsu Aegis Network
This is scale business and there are two competitors that are so big, Snapdeal needs to make a special niche for itself. If it’s just a similar e-commerce marketplace then it’s going to struggle and on the other hand, if it is going to find a special niche in some area in which it is better than the others that will give it a good chance. They need to figure out the space that they want to occupy.
Encashing your asset is always less risky option but on the other hand, if they can make a big success out of it then it can have much higher returns for them. Snapdeal needs to focus on business and needs to come up with viable business plan. As long as it is able to bring something special for the consumers, it could turn out to be a wise decision but it’s a higher risk option.
Anil K Nair, CEO and Managing Partner, Digital L & K Saatchi & Saatchi
Success in this space will be a function of the natural growth of e-commerce as a category over the next 10 years and the opportunities that India will provide. E-commerce companies that provide bottom line value to their investors over the long term will be the winners. It will mean tighter operations, smarter logistics, curated merchandise and symbiotic supply chain relationships.
The opportunity exists but character and staying the course will eventually answer this question.
I believe that it has been a brave decision and I am sure they have some cards up their sleeve and are seeing something on the horizon that we aren't .Experience is a great teacher and 2.0 may see them take the battle to the opposition. This is a high stakes game and the co-founders have taken a bold calculated punt.
Harish Bijoor, Brand-expert & Founder, Harish Bijoor Consults Inc.
The e-commerce market is getting carved out distinctly across delivery competencies rather than anything else. Snapdeal 2.0 needs to focus at that end more and less at the branding end. E-commerce in India is no longer a branding game, it is a delivery game. The big ‘O’ in this game is operations! I think Snapdeal co-founders would be able to carve out a space for the revamped company in India’s very competitive e-commerce market provided they have a game-plan that is new. The game-plan needs to be one that defines new strategy for the e-commerce pie in India.
Though I think that offer with Flipkart should have been bitten but now that is gone, Snapdeal needs to invest very quickly in new strategy for the market play it intends to unleash.
Shivaji Dasgupta, Brand Advisor, Inexgro Brand Advisory
Organised e-Commerce is an increasingly commoditised market place where the only variables for success are choice, price and logistics. Unless Snapdeal 2.0 can define a sustainable uniqueness in this space it does not stand a chance against the competition. As yet another mid-sized player it will be eaten up by the competition. The founders have suggested that they aim to be an accessible hub for individual sellers and thus offer them an online platform to reach a mammoth base. If this or any other genuine innovation leading to differentiated customer value can emerge that will be their only formula for success.
I believe that the management was not happy with the Flipkart’s offer at large so they have chosen the strategy to tide for a year or two, take some short-term steps to pump up valuation and then sell out at the earliest. This is not a long-term move of integrity and belief, instead a smart way to make a lot more money in the fairly near future.