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Rising from the dead - Snapdeal 2.0

Rising from the dead - Snapdeal 2.0

Abhishek Yadav
October 22, 2024

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Introduction

The 2010s marked a significant period for the emergence of e-commerce in the Indian market, driven by a few passionate entrepreneurs. This era gave rise to several startups, which have since evolved into prominent companies that now bear the responsibility of shaping the future of e-commerce in the country. Among these startups, Flipkart and Snapdeal stood out as notable contenders. Flipkart has since achieved substantial success and is currently one of the largest online commerce platforms in India. In contrast, Snapdeal has experienced a fascinating trajectory since its inception. This issue explores the narrative of Snapdeal, detailing its journey from being a favored e-commerce entity to facing near closure, and subsequently, its resurgence. This business case study focuses on Snapdeal 2.0.

So, let’s dive in….

The origin of Snapdeal?

In the year 2007, Kunal Bahl and his high school classmate Rohit Bansal started a discount coupon book business called Jasper Infotech Pvt. Ltd which operated under the name MoneySaver focusing on offline coupon distribution. However, in 2010, the founder pivoted to an online model, launching Snapdeal as a daily deals website.

In the year 2011, recognizing the potential of the burgeoning e-commerce market inspired by Chinese company alibaba.com, Snapdeal transitioned into a full-fledged online marketplace. This strategic shift aimed to provide a wider range of products and services, allowing third-party sellers to list their offerings.

Meteoric Rise and An array of acquisitions

Sentiments about E-commerce were quite positive during that time, and taking advantage of it, the two young founders of Snapdeal cracked an investment deal with Vani Kola, the founder & now managing director of Kalaari Capital. Despite their not so good first meeting, Kalaari Capital recognizing the potential of the business and vision of the founders decided to invest in the company. That was the beginning of it all and Snapdeal never saw back again. One investment after the other just kept falling:

January 2011: Raised $12 million from Nexus Venture Partners and Indo-US venture Partners(now a part of Kalaari Capital)
July 2011: Raised $45 million from Bessemer Venture Partners.
August 2013: Raised $50 million from eBay.
February 2014: Raised $133 million, led by eBay, with contributions from all major institutional investors including Kalaari Capital, Nexus, Bessemer, Intel Capital, and Saama Capital.
May 2014: Raised another $105 million, bringing in new investors such as BlackRock, Temasek Holdings, and others taking the company’s valuation to $1 Billion, officially making it a unicorn.
October 2014: A staggering $647 million from Softbank, making it the largest investor in company.
August 2015: Secured an additional $500 million from a consortium including the Alibaba Group, Foxconn, and SoftBank.

An investment of such great size in a span of less than 5 years is more than enough to make you one of the biggest players in the market. And so did it do to Snapdeal. Snapdeal recorded an year-on-year growth of nearly 600%.

It was also the time when Snapdeal made some major acquisitions:

In June 2010, a Bangalore-based group buying site, Grabbon.com
In April 2012, esportsbuy.com, a Delhi based online sports goods retailer.
In May 2013, Shopo.in, an online handicraft product marketplace.
In April 2014, Doozton.com, fashion products discovery site.
In December 2014, Wishpicker.com, a gifting recommendation site
In January 2015, a small stake in Smartprix.com, a product comparison website.
In April 2015, Snapdeal acquired Freecharge, an-Commerce payments firm. And lastly..
In May 2015, Snapdeal acquired MartMobi, a Hyderabad-based mobile technology startup.

Now according to experts who watched Snapdeal’s journey closely, many of these acquisitions were not really required and proved to be very heavy in the balance sheets of the company. Which ultimately proved to be true in the coming years.

And then started the fall

It was after 2015 that Snapdeal started losing its grip on the market and thus began their downfall. While its counterparts like Flipkart & Amazon understood the market trends, Snapdeal proved unsuccessful in distinguishing itself meaningfully. By 2016, it started taking the drawbacks of its short term strategies and heavy cash burn. A few other factors that contributed to this fall were:

The merger talk: Snapdeal merging with Flipkart was talk of the town at a valuation of less than a billion dollar which never really happened because of founder and their early investors did not agree to it.
Lack of Innovation: While Flipkart and other e-commerce giants were innovating day in and out, Snapdeal never tried to sail those seas. And in a hyper-competitive space in a hyper-competitive market, that’s not really a good strategy.
Poor Execution: Poor execution of strategies was another roadblock for Snapdeal. It takes a lot of focus and experience to plan and execute strategies right from the beginning. Also snapdeal had a lot of investors which led to the condition where “too many cooks spoil the soup”.
Costly marketing: Apparently, the brand spend roughly 200 crore while rebranding itself. But all its marketing lacked direction, hence ROI was close to zero.
No differentiator: As previously mentioned, while its counterparts were innovating continuously, there was nothing that made Snapdeal unique, ultimately falling behind

Surviving the fall: Rise of Snapdeal 2.0

It’s been some time that the company went into silent mode, taking a step back and reworking on its strategies. And it looks like that has been working quite well. In response to the challenges that the company during it’s so called downfall, it launched Snapdeal 2.0. It adopted several strategies that helped them focus on the key areas of business. Some among these strategies are:

Bring back the core-business: The first thing that Snapdeal did was cut away the cash burning machines such as FreeCharge and Vulcan Express. This allowed the company to focus and allocate resources more affectively and efficiently towards its ecommerce operations.
Focusing on the Majority: While Tier-I cities were and still are the targets of major players, the shift has been tilting towards Tier-II and Tier-III cities. Majorly because of the internet & smartphone penetration. Consumers here are more-price sensitive and seek-value driven products.
Enhanced User Experience: Snapdeal invested significantly in improving the customer experience by leveraging technology. The platform adopted artificial intelligence (AI) and machine learning (ML) to personalize the shopping experience, making it easier for users to find products they were looking for.
Cost Optimization: Snapdeal implemented rigorous cost-cutting measures that included streamlining operations(as mentioned above) and reducing overheads. This lead to significant reduction of losses- by roughly 54% in FY22 compared to the previous year.
Asset-Light Model: The company adopted an asset-light operating model that emphasized decentralized logistics and minimal inventory management, keeping operational costs low while maintaining service quality.
Connecting with the customers: To connect with its user base, Snapdeal started creating marketing content on regional languages so that its customers can understand and relate to it.

Is Snapdeal 2.0 strategy working?

Well, to answer that question, here are some numbers:

In FY22, Snapdeal reported a 10.4% increase un revenue, reaching INR 563 crore(roughly $75 million), while reducing the loses to INR 413 crores (around $55 million).
By FY23, losses were further reduced by approximately 93-94%, showcasing a robust recovery trajectory.
The platform has around 27 million unique customers who interact with Snapdeal for browsing and purchasing products. This broad customer base is primarily concentrated in smaller towns and cities across India, where Snapdeal has established a strong presence
In August 2024, Snapdeal's website received approximately 8.22 million visits, marking a 33.78% increase from the previous month, July, which had about 6.14 million visits.

Current Position & Future Outlook

So, what does the above numbers tell about the future of Snapdeal?

As of now, Snapdeal is focusing on enhancing its brand presence while continuing to cater to value-conscious consumers. The company aims for profitability in the near future.

To give another example of the efforts Snapdeal is putting, it integrated with the government-led Open Network for Digital Commerce(ONDC) initiative to strengthen its position in non-metro regions where it generates over 86% of it business. Read about it here.

By focusing on value-driven commerce and taking a lean approach, Snapdeal has carved out a niche in India’s evolving e-commerce platform. It’s comeback is a testament to the power of strategic realignment and understanding the market dynamics.

The lessons learned:

Well, as usual there are a few basic lessons that every entrepreneur can learn from the story of Snapdeal. These are:

Bigger does not mean better: Having a large bank balance and a large portfolio of companies under your umbrella does not necessarily mean you are large enough to survive. Sometimes even the biggest plane company cannot stay afloat if right decisions are not taken. Stay lean, and slowly grow out.
Think long-term: Most basic yet the most underestimated rule of the game. You can’t survive if you won’t paint the bigger picture.
Connect to your customer: While correct in most cases, it is particularly important when you are consumer facing brand. Let your customers know you care about them. That’s when they will stay.
Tier-II & Tier-III is the new market: One pattern that has been repeating itself for some time is the untapped market that is slowly opening up and majority of the companies are not really thinking about it. So if you are a business owner or planning to start one soon, this can be your potential entry space.

Well, that’s it for this issue. I hope I was able to provide some value to your knowledge base by bringing this super-interesting case study to you. If I did, considering subscribing to my newsletter for more such interesting stories.

I will get back to you with more stories like these. In the meantime, take a look at these other stories

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