Can Snapdeal make a Comeback?

Introduction – Snapdeal is an Indian e-commerce company based in New Delhi, India. The company was founded by Kunal Bahl and Rohit Bansal in February 2010.

It was founded on 4 February 2010 as a daily deals platform but was expanded in September 2011 as an online marketplace. Within 6 years, it became the second-biggest ecommerce company in India, with a peak market valuation of $6.5 billion.

Everything was going as expected and they were growing at a good pace but in 2017, the dream run was over and their growth came crashing down. Just 7 years after it was founded, Snapdeal was in the middle of nowhere as it was left with inadequate funds which were barely enough to last a month.

It also tried a merger with Flipkart but the deal failed to materialize. By 2017, Amazon & Flipkart had gained a major portion of market share and this was a major concern of Snapdeal. Their market share shrank from 25% to 4% and their valuation was reduced to less than $1 billion.

Snapdeal also faced criticism when their brand ambassador Aamir Khan made a comment at an even about the perceived intolerance in India. People were mad at Aamir Khan and they expressed their anger by uninstalling the Snapdeal app.

In response, Aamir Khan wasn’t approached to return as brand ambassador when his contract was ended and Snapdeal said the comments were made personally and they weren’t responsible in any manner.

A local startup achieving a valuation of $6.5 billion sounds like an awesome story but things have gone south since 2017. No funds, a failed merger, competitors gaining market share and backlash due to comments made by their brand ambassador seems like a perfect recipe for disaster.

Now the big question is – Can Snapdeal make a Comeback? We will answer this in today’s blog.

 

Early Days – The founders of Snapdeal had various ideas to start a business such as:-

1. Product Review Website
2. E-Commerce Site Review
3. Online Movie Ticketing

But all these ideas were dropped as the market was already full with companies having 1^st mover advantage. Hence, the founders came up with a new idea of issuing physical discount coupons but the business failed as they only managed to sell a handful number of coupons.

After selling some coupons they realized that India has a lot of potential for an E-commerce business. Hence, they transitioned from the coupon business to an online E-commerce business. They were processing 2,000 orders per day which grew to 100,000 orders per day in just 2 years.

 

Marketing Strategy – Some of the famous campaigns of Snapdeal are as follows:-

• Dil Ki Deal
• Bachate Raho
• Unbox Zindagi

These campaigns grabbed people’s attention. They even launched a thank-you campaign for the Indian soldiers. This gesture touched the Indian customers and Snapdeal was praised for this campaign.

Aamir Khan was hired as the brand ambassador but his contract was terminated due to controversial statement by the actor.

 

User Base & Valuation – Snapdeal crossed 100 million app downloads in November 2019. Just 12 months before, they had 73 million app downloads. This was a growth of 37% in their user base.

They once had a peak valuation of $6.5 billion but it came down to around a billion dollars. The founders are now trying to revive their startup and are looking for another round of fresh investment as soon as possible.

 

Funding & Shareholdings – Snapdeal has various investors and it received various rounds of funding.

The investors are as follows:-

• Ratan Tata
• eBay
• SoftBank
• Nexus Venture
• Bessemer Venture Partners
• Kalaari Capital
• Intel Capital
• Saama Capital
• BlackRock
• Temasek Holdings
• PremjiInvest
• Alibaba Group
• Foxconn

 

The funding was as follows:-

• $12 million came from Nexus VP and Indo-US VP
• $45 million came from Bessemer VP
• $50 million came from eBay and other investors
• $133 million came from Kalaari, Intel, Saama, Nexus VP and Bessemer VP
• $105 million came from BlackRock, Temasek, PremjiInvest and others
• $467 million came from Softbank
• $500 million was raised from Alibaba, Foxconn and Softbank in August 2015
• In may 2017, Snapdeal raised Rs 113 crores from Nexus VP

 

Acquisitions – Snapdeal has so far acquired 12 companies. The most notable ones are as follows:-

• Freecharge
• Unicommerce
• RupeePower
• Graboon
• Esportsbuy
• Shopo
• Doozton
• Wishpicker
• Smartprix
• Exclusively
• Gojavas
• Reduce Data

Freecharge was acquired for $400 million but was later sold to Axis Bank for $60 million.

 

Revenues & Losses – Snapdeal’s revenue increased by 73% and losses narrowed significantly in 2019. They reported a consolidated loss of Rs 186 crores, from a loss of Rs 611 in the previous fiscal year.

On a standalone basis, Snapdeal posted revenues of Rs 899.2 crores, from Rs 527.5 crores a year ago while their losses narrowed by more than 71% to Rs 187.4 crores.

 

Controversies – A major controversy that Snapdeal had was when their brand ambassador Aamir Khan gave a statement at an event about Intolerance in India.

It was followed by major backlash and people uninstalled the Snapdeal app. Snapdeal said that the comments made by him are completely personal and they have no involvement whatsoever. In February 2016, they ended their contract with Aamir Khan as their brand ambassador.

In February 2016, Snapdeal employees approached the Labour Department claiming that the company was firing them and had forced almost 600 employees to resign.

After the protests, Delhi Government ordered the Labour Department to investigate the matter.

 

Present & Future Goals – When Snapdeal failed to merge with Flipkart and was on the verge of bankruptcy, many thought that they will end up like many other startups and fail after a dream run but they are now positioning themselves as Snapdeal 2.0 and are beginning a new innings.

Snapdeal has reduced its loss by an incredible 95 percent, while revenue from operations grew by 85 percent. According to the company, Traffic has seen a 100 percent growth.

Last year, more than 27 million unique buyers bought on the platform, and during the pandemic, it added another 6 million users and 20,000 new sellers, apart from its already-existing 500,000 sellers. They also added over 1,500 new pin codes, taking their total coverage to over 27,000 pin codes across the country.

Now they have taken a completely different approach where they will be focusing on profitability and sustainability. They have planned to achieve this by focusing on the segments where they perform the best and exiting from areas where they don’t excel.

This will save a lot of time, effort and money for the company and will give them a clear path to profitability in the future. They also have invested a tremendous amount of effort into technology, data science and artificial intelligence to make a strong comeback.

 

The Big Question – After discussing almost everything about them, do you think they will ever make a comeback? I think yes.

They can make a good comeback but it will be quite difficult for them as Amazon and Flipkart have already captured a lot of market share and they have to act in a swift and smart way.

But at the same time, the internet boom will help them, all thanks to Mukesh Ambani for introducing affordable rates for fast 4G internet services.

India now has 504 million active internet users, of which about 70% are daily users, according to the Internet and Mobile Association of India. The country’s smartphone base is expected to swell to some 820 million by 2022, according to consultancy firm KPMG.

We wish all the best for Snapdeal and only the future will tell us whether they will ever make a comeback or not.