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July 18, 2019
Ratan Tata-backed Snapdeal having lost steam after its merger with Flipkart was called off while Amazon too had displaced it as among the leading e-commerce company apart from Flipkart is now steadily regaining its lost ground but in a new avatar.
Written By Sandeep Soni
Around August 2017, Snapdeal had called off Flipkart’s offer of buying it out for $850 million, down from $6.5-billion valuation it had in early 2016. Snapdeal’s sales had plunged, products count has also gone south even as Amazon had displaced it to become the new formidable competitor to Flipkart’s stronghold in the Indian e-commerce sector. The ecosystem had almost written it off with media reports narrating the fall. More than two years after the company’s founders Kunal Bahl, Rohit Bansal decided to battle it out on their own with a renewed Snapdeal 2.0 focusing on its core business of online retail, the lost mojo is coming back for Bahl and Bansal.
“The inflection point in Snapdeal’s journey was when they stepped back from the cut-throat competition that was happening between them, Amazon, and Flipkart in 2017. Snapdeal took that decision when they had little cash in the bank. It was a hard time to take that decision because any other alternative strategy would have also needed capital. So they took that decision to focus on core business,” Devangshu Dutta, CEO at retail consultancy Third Eyesight told Financial Express Online.
Snapdeal’s revenue grew by 73 per cent year-on-year from Rs 536 crore in FY18 to Rs 925 crore in FY19 even as losses shrunk by 70 per cent from Rs 611 crore to Rs 186 crore, Kunal Bahl said in a LinkedIn post as part of the company’s audited financial results for FY19. Snapdeal’s traffic went up 2.3X to 70 million unique users per month. But what led to Snapdeal’s founding that lost zing back? There are a couple of factors.
Capturing value-conscious Buyers
Kunal Bahl in one his blog last year had said that the company would focus on the value-conscious buyers — around 400 million that are still at an early stage of discovering and buying goods online. This lot doesn’t speak fluent English, less disposable income, lives beyond metro and tier-I cities and are not brand conscious. “Given their vast numbers, the supply of value-priced selection is growing online exponentially – mirroring the selection found in the bazaars of India. This is a market worth nearly $163 billion and only about 1-2% of this is online,” Kunal Bahl said in the blog.
“It is a shift from discounts to value. Snapdeal is trying to get customers’ mind off the price element. If you are looking at a product’s price, you are looking at it as a commodity. If you are looking at it as a commodity then you are looking at the like-for-like comparison and going for the lowest price,” added Dutta. This echoed with Kunal Bahl’s focus for next year. “We are not aiming for triple-digit growth rates,” said as he believed that “consistently compounding revenue growth create large and valuable enterprises.”
Rebuilding Seller Base
Snapdeal has been able to grow its listings to 200 million with 50 million listings coming in the last two years with more than 60,000 new sellers even as it uses artificial intelligence and machine learning to help its sellers aware of new trends and gaps in the product-pricing mix unlike “some other marketplaces use these interventions to promote their private labels or favourably position their proxy sellers,” Bahl said. For example, Snapdeal’s machine learning-based smart courier allocation tool analyses “the first-mile decision (pick-up) with a last-mile decision (delivery) identifying the partner(s) who can deliver the shipment in the most efficient manner.” “This is certainly a factor for their growth because if you are playing a pure marketplace game then sellers are relatively more comfortable because you are not a competitor to them,” said Dutta.
Tech Shift
Not just on the seller end, AI has become integral to Snapdeal’s efforts of ensuring that its no-frills customers can come across products that they want to buy — affordable and unbranded. AI helps in optimising catalogue and enhancing search based on which the customer is offered personalised and relevant products more than just top deals of the day or top discounts or top-selling items. Snapdeal has also created multiple short videos on the functionality of products for customers to understand them.
“Clearly at one point Snapdeal realised that investors are backing away from investing more money into them because the sense then was that Amazon would take over the market. You need really deep pockets to acquire market share if you are losing money on every dollar earned. However, e-commerce is at a nascent stage and we shouldn’t deal with it as if it is a short window of opportunity that is closing,” Dutta said. Moreover Snapdeal has been constantly engaging with its customers in their offices by inviting them to understand one-ono-one about how they shop and what they shop.
Source: financialexpress
