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What really went wrong with Snapdeal?

Snapdeal was one of the most promising e commerce companies that carved the biggest startup success story. Snapdeal is going through one of the toughest times in the eCommerce market. It is about to lay off around 600 employees and is struggling with major funding woes. The eCommerce firm, which started in 2010 had carved a success story most startups could be envious of. If one analyses the different moves made by the company, it can be concluded that the trouble started long back. The company has made many wrong decisions that has brought its downfall.

Snapdeal spent a huge amount of cash on discounts and marketing campaigns during the festive season. It launched a new brand identity in the Unbox Diwali campaign, which gave a new look to the company. This took a huge toll on the gross margins of the company. In addition, the company also hired in bulk to prepare for the festive discounts, this was unnecessary and only added to the expenses. The company faced a big blow when the festive sale did not reach the expected value. Snapdeal was being readied for another round of funding and in the preparation for the same, the company ended up spending more than necessary. By the end of the year, Softbank decided against putting in any fresh capital in the company. The founders have announced that they will undergo a 100 percent salary cut to help the company in difficult times.

Another downfall of the company was the dismal exits of some of the top hired talent. Govind Rajan quit within nine months, which was followed by the exit of six senior top executives from the firm. This situation is a wake up call for many eCommerce companies that are trying to generate millions in a couple of years. If a startup is functioning on the money from investors, it will lead to quick decisions and overspending of the funds. Snapdeal hired a lot of talent without adequate planning and a lot of money was spent on digital expenses. The company is also facing problems with the buyers, in the last six months, the market has gone low in terms of buyers with an increasing number of sellers on board.

The company has laid out strategic plans to return into the business. It will continue with the discounts, but the same will be aimed towards higher returns. In addition, a profitability strategy will be also be laid out which will help the company generate profit on every unit sold. The company is in talks with Softbank for another round of funding. It is also speculated that Flipkart will be acquiring Snapdeal, if all goes well. Currently, Softbank requires the consent of atleast two Jasper Infotech Shareholders to put the deal through. If the merger goes as planned, Flipkart will be taking over Snapdeal and Softbank will become a significant shareholder in the largest eCommerce company in India. For now, it is time to wait and watch how the deal unfolds. 

 

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