Snapdeal was once a victim of gruelling competition in the e-commerce space. With money to survive only for a month, one would think the company had no other choice but to shut shop.
Founders Kunal Bahl and Rohit Bansal were in no mood to close the operations. It was not an option for them. Despite the failed merger attempts with their rival Flipkart, the founders did not let their company sink.
"With a perplexed team in the office and critics crowing from rooftops, it was much easier for Rohit and me to move away, washing our hands off a toxic situation. That, however, was farthest from our minds," Bahl said in his
. LinkedIn blog post How Did Snapdeal Land Up In Such A Situation?
Founded in 2010, Snapdeal was once known for its thriving consumer electronic business.
When Snapdeal entered the e-commerce space, Flipkart was the only firm competitor it had. However, the entry of Amazon into the Indian market in 2012 changed the game.
The sudden rise in competition in the e-commerce space, complaints on the quality of their products made it difficult for Snapdeal, as they lacked the 'edge' over others. In 2017, the company was left with almost nothing.
As time progressed, Amazon, carrying its strong reputation of quick delivery, disrupted the Indian e-commerce space and the competition became intensive.Snapdeal was the worst-hit. The company had lost 20 percent market share in two years between March 2015 and March 2017, according to a RedSeer Consulting report quoted by news website
VCC . "We had witnessed adversity in early 2013, when we had one month of money left in the bank in the midst of a hard pivot from selling online coupons to physical products, and yet had come out of it stronger. But this time it was different. It was at a much larger scale, very public and the stakes were very very high," Bahl said in the blog post.
Complaints on the degrading quality of the product and on late deliveries had piled up and the company's reputation in the e-commerce space drove the customers away.
At the time, Snapdeal froze. No major steps were taken, giving Amazon and Flipkart the leverage to tie up with major businesses for exclusive phone launches, entering different forays such as the fashion segment, etc.
The marketplace models of Snapdeal's rivals were dynamic. By the time Snapdeal shifted from its traditional pure-play marketplace to a managed or controlled marketplace model, its rivals had already changed their model to a hybrid one.
By 2016, Snapdeal saw a heavy cash burn which forced the company to excessively focus on unit economics. This sudden shift in focus reduced its marketing spend and resultantly led to a flat growth, the Red Seer report quoted by The speed breaker left the company almost penniless and desperate. It started merger talks with Flipkart but there was no sight of it bearing fruit.
VCC said. "The summer of 2017 brought more than just soaring temperatures. It brought uncertainty for Snapdeal in the form of an on-going, protracted merger discussion that wasn’t going anywhere. The view across shareholders and board members was divergent. Key business decisions had been put in abeyance for many months, as the company awaited a conclusive outcome of merger discussions. The uncertainty was costing Snapdeal money, morale, momentum and more. It was clear to us that we were hurtling towards a full-blown crisis," Bahl said.
Something had to be done. It had been seven months since the failed talks with Flipkart, and the quickest way of saving itself from shutting shop was not panning out.
So what now?
The Turnaround Plan - Snapdeal 2.0
Though the numbers showed otherwise, Snapdeal had started working on its failing business the minute it felt the heat of the competition. But the attempts did not bear fruit at the time.
So, the founders and the board in 2017, after the failed merger talks, sat down and made a detailed, well-strategised plan to pull the company out of shambles.
They called it, 'Snapdeal 2.0'.
The plan was clear. The company had to follow all the steps, one by one.
But there was another problem — the employees lost their motivation to work.
Bahl, in his blog post, said, "In July 2017, many team members were barely coming to work for just a few hours a day and I don’t blame them. They had no clarity about whether or not they would have a job if a merger happened, and as a company, we had been unable to give them that clarity."
The first step, taken by the company leaders, was to motivate their employees, a team of a little more than 800.
One-on-one conversations, creating a transparent environment on how the business is doing by putting up big screens in the workplace where all could see how the website is doing and making the company feel like one unit, and despite the ups and downs in this process, Snapdeal rose like a Phoenix, proving its competitors wrong.
With a strong team behind Bahl's back, the company began to focus on its turnaround strategy. The company was not ready to throw in the towel, just yet.
Snapdeal shifted back to a pure-play marketplace model and focused on divesting its non-core assets, fixing the economics of its business by going back to its roots and fixing its customer experience and regaining their loyalty.
"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," Bahl said in the blog post.
Another major goal for the company was a time-bound plan to reach positive cash flow and liberate the company from fundraising cycles. This was their ultimate goal and could make or break the company.
Following the plan, Snapdeal reached its goal and strives to do better. Within a year, from a cash burn situation, the company saw a positive cash flows and cut down their cash burn by a 100 percent.
"As we exited in July 2018, we had finished 10 consecutive months of achieving all our goals and despite all the odds, had more than doubled our monthly orders and revenues in the same period, while cutting down our cash burn by 100 percent," Bahl said.The competition remains gruelling. But the co-founder remains confident.
"From near death to generating cash, from despondency to resurgence – it took a lot of courage, focus and discipline to turn the ship around sharply," he said.