E-commerce is transforming the traditional norms of doing business in India. With India moving towards the digital age, the acceptance and adoption of new technology by the Indian’s has seen a tremendous upsurge in the last decade. Creating an apt platform for the growth of the Indian e-commerce companies.
“Snapdeal - India's largest online marketplace” is one such India company which took the benefit of the transforming ecosystem. Its journey started as online deals merchant, it showed tremendous growth and became one of the major e-commerce players. It had a valuation of $6.5 billion in Feb 2016 and now it is on the verge of acquisition by one of its rivals.
Let us analyze the numerous factors which led to the downfall of this company from an ex-employee's perspective:
Bets on the Wrong Technology:
Snapdeal launched products such as:
a) “Bhasha” a vernacular app which was praised at the time of launching. However, vernacular did not prove to be effective in connecting with the masses. As there were not enough regional customers to entertain an app with 14 different regional languages.
b) “Snapdeal Gold”: Free delivery to customers in selected areas and 14 days returns instead of regular 7-day return policy to compete with Amazon Prime from Amazon, a paid service.
It requires co-ordination between the sellers and the logistics team to pull off the offered services, which was lacking in the process. Thus, it brought not only extra charges in terms of logistics, but also bad customer reviews for not fulfilling the promised service.
The Synergy Mirage:
Snapdeal after building its consumer base wanted to expand by acquiring Exclusively.com an online luxury brand. Its customer base was not apt for exclusively.com as most of the clothing offered were very costly and that did not appeal to the conventional customers of Snapdeal. It failed in understanding the psychology of the customers who preferred purchasing the luxury clothing from the stores being skeptical about the quality being offered online. It had to shut down Exclusively.com within a year of its acquisition.
Stubbornly Staying the Course:
Snapdeal had a strong supply chain network with the highest number of fulfillment centers in the country - 69 across 25 cities, while the competitors like Amazon had 27 and Flipkart had 26.
Snapdeal could have explored the categories grocery and furniture which have high-profit margins by using this strong supply chain network, but they focused on the fashion and electronics, which had huge competition and low-profit margins.
Roll-Ups of Almost Any Kind:
Snapdeal was on the acquisition spree since 2012 to 2016, acquiring 12 companies in 6 years. Trying to expand its market and categories. Many of the acquisitions turned out to end poorly, they neither improved the company’s capital cost nor added any significant value to the company.
“The goal of any company should be long-term sustainable growth, not just short-term gain”- #SayQuotable
Snapdeal could have achieved sustained growth by concentrating on building its core business and establishing itself as a trustworthy brand before diversifying.