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What went wrong with snapdeal?




E-Commerce stands for electronic commerce. Dealing in goods and services through the
electronic media and internet is called as E-commerce. E-Commerce or E-business involves
carrying on a business with the help of the internet and by using the information technology
like Electronic Data Interchange (EDI). E-Commerce relates to the website of the vendor,
who sells products or services directly to the customer from the portal using a digital
shopping cart or digital shopping basket system and allows payment through credit card,
debit card or electronic fund transfer payments. E-Commerce is the movement of business
onto the World Wide Web (WWW). E-Commerce facilitates new types of information
based business processes for reaching and interacting with customers. It can also reduce
costs in managing orders and interacting with a wide range of suppliers and trading
partners. For developing countries like India, E-Commerce offers considerable

Electronic commerce or E-Commerce refers to a wide range of online business activities for
products and services. It also pertains to “any form of business transaction in which the
parties interact electronically rather than by physical exchanges or direct physical contact.”
E-Commerce is the use of electronic communications and digital information processing
technology in business transactions to create, transform and redefine relationships for value
creation between or among organizations and between organizations and individuals.

Today E-commerce in Indian society has become an integral part of everyday life.
Accessibility to E-commerce platforms is not a privilege but rather a necessity for most
people, particularly in the urban areas. Today the number of internet users in the world is
close to 3 billion, out of this; India has a total of 259.14 million internet and broadband
subscribers. This penetration of internet coupled with the increasing confidence of the
internet users to purchase on line. This leads to an enormous growth in the E-commerce
space, with an increasing number of customers registering on E-commerce websites and
purchasing products through the use of mobile phones. India is in a prime position for the
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growth and development of the E-commerce sector.

As per the report, the compound annual growth rates in the mature E-commerce markets of
Japan, South Korea and Australia will run 11% to 12% over the next few years. In the
rapidly growing markets of China and India, these growth rates will be 25% and 57%
respectively. The report also highlights the rapid growth of E-commerce markets in
neighbouring China where, the compound annual growth rates of over 20% will take the
market to over $ 350 billion. A report by the Internet and Mobile Association of India
(IMAI) has revealed that India’s E-commerce market expected to grow by 37% to reach
U.S. Dollar 20 billion by 2015.

Growth of E-commerce sector in India

The Indian e-commerce industry has been on an upward growth trajectory and is expected
to surpass the US to become the second largest e-commerce market in the world by 2034.
India’s e-commerce industry is expected to grow at a Compound Annual Growth Rate
(CAGR) of 30 per cent to reach US$ 200 billion by 2026. India’s internet economy is
expected to double from US$125 billion as of April 2017 to US$ 250 billion by 2020,
majorly backed by ecommerce.

Much growth of the industry has been triggered by increasing internet and Smartphone
penetration. Internet penetration in India grew from just 4 per cent in 2007 to 34.08 per cent
in 2016, registering a direct increase of 89 per cent in 2016 over 2007. The number of
internet users in India is expected to increase at a CAGR of 15.6 per cent from 450 million
as of June 2017 to 700 million by 2020.

A young demographic profile, rising internet penetration and relative better economic
performance are the key drivers of this sector. The Government of India's policies and
regulatory frameworks such as 100 per cent foreign direct investment (FDI) in B2B e-
commerce and 100 per cent FDI under automatic route under the market place model of
B2C e-commerce are expected to further propel growth in the sectors.

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India’s e-commerce market will grow at a 30% compound annual growth rate for gross
merchandise value to be worth $200 billion by 2026, according to investment bank Morgan

In a report titled India’s Digital Leap–The Multi Trillion Dollar Opportunity, Morgan
Stanley said this growth in e-commerce will help grow market penetration to 12% in the
next nine years, versus 2% today. An increasing number of internet users, all new to e-
commerce, will help lead this growth, the report said.

“Our analysis of some global e-commerce companies highlights that two-thirds of the
growth in their e-commerce sales happened due to new users coming online and shopping,
while the balance was driven by existing online shoppers buying more frequently and/or
driving up order values,” the report said. India had 60 million online shoppers in 2016,
which is 14% of the internet user base of the country. This will rise to over 50% by 2026,
the report said.

Morgan Stanley said in an interview. “Generally, people who have been on the internet for
less than two years don’t transact on the internet (including mobile banking). So generally,
they are engaging in basic activities like messaging, social media, and search, things that
don’t involve a monetary transaction.”

However, once a consumer has been online for over five years, they are more likely to buy
online. Right now, that’s only 30% of India’s 432 million internet users.The reason for that
is very simple, because a bulk of the addition in the internet base has happened in the last
three years.

“That’s when Smartphone penetration started ballooning. So a large base of the internet
population has been on the internet for not as many years as required to get comfortable
with the medium. When does that maturity come through? Most likely 2019,” he
said,adding that the year can be an inflection point for India’s e-commerce market.With this
comfort, e-commerce customers are also moving to digital payments.

“On the extent of cash on delivery in e-commerce, there is little data available publicly to
figure out the exact number, so a lot of this is based on our discussions,” Gupta said. “I
think a couple of years back, cash on delivery was over 60% of e-commerce sales which
has now come down to maybe 55-60%. Secondly, if you look at UPI and digital wallets,

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their share has increased to 4-7%. A couple of years back, that number used to be just about
a percent or two.”

But, this growth will still be led by the so-called “horizontal” e-commerce players,
including Amazon India and Flipkart. “If I look at the way e-commerce has evolved
globally, it is generally the horizontal e-commerce players who have dominated,” Gupta
said. “We have seen this in the US and China.”

Growth of E-Commerce in India [Market Research 2017]

According to reports published by International Monetary Fund (IMF) and Central

Statistics Office (CSO), India is among the fastest growing economies of the world. Among
several factors, a conscious patronization of online commerce, and an emergence of retail
as a dominant market segment have contributed to the unprecedented growth of ecommerce
in India.

For the financial year 2016-17, ecommerce sales reached the US $16 billion with a
projection of a seven fold growth within the next two fiscals as estimated by Morgan
Stanley. By 2020 online commerce sales is expected to cross $120 billion.
The three principal driving factors for this growth in ecommerce sector of India are:

 Participation of niche companies in online trading

 Unmatched FDI (foreign direct investment)
 Uniform GST (Goods and Services Tax)
Participation of niche companies
With the increase in awareness about the benefits of online trading, there has been a
significant rise in investment in ecommerce business. Hand in hand with offline trading,
many established business houses have setup online transaction channels. Online retailing
is the ‘in-thing’ in today’s commerce. Every other day a new company is being set in the
online retail segment.
Specialization and customization are the underlining features of online trading. Ecommerce
companies are specializing in exclusive items and have consciously moved away from the
‘one for all’ concept. Every new company is focusing on a definite item or targeting a
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particular demographic segment. So instead of addressing universally, it is better to

concentrate on a single area and execute it to your best ability. Consumers prefer this kind
of preferential treatment and personalized attention.

India, being a land full of diversity offers ample scope for new companies to join in this
ecommerce business tirade. Business opportunities are limitless considering the
innumerable clothing, food, and cultural habits of Indian communities.
Role of FDI
Foreign direct investments (FDIs) till lately was not allowed in ecommerce for the single
brand or multi-brand retail companies. It was only allowed for B2B businesses. Now, FDI
is allowed in cases of wholesale trading or in cases where involvement is limited to use of
technology platform. The ever-expanding Indian ecommerce market has attracted
companies from Europe and United States who are joining as conglomerates.

Though FDI has been successful in lending variety to online market of India, their full
participation is limited by government laws.

Inclusion of food and grocery in online retailing

Earlier food and grocery were never thought of as items for online trading. However, with
the change of working habits, and consumers opting for adaptability and convenience, there
are now innumerable small and large ecommerce companies selling provisions and food
Indian ecommerce industry is in a position to sustain itself as a viable business opportunity
not only for established names but even for start-ups.

Indian Ecommerce Industry Analysis

 The e-commerce retail market is estimated to be worth US$ 12 billion in gross merchandise
value (GMV) terms as of 2016.
 Electronics is currently the largest segment in e-commerce in India with a share of 47 per
cent and is expected to grow at a CAGR of 43 per cent by 2020.

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 The apparel segment has the second highest share of 31 per cent in the e-commerce retail
 Currently, there are 1-1.2 million transactions per day in e-commerce retailing.

Commodity distribution in Indian Ecommerce Industry

Goldman Sachs’ recent report on the huge growth and potential of India’s e-commerce
industry ($300 billion by 2030) is primarily boosted by the country’s attractive demography
of a young population. The country will have over 300 million new online shoppers in the
next 15 years, making online retailing the largest online segment.

Where is the consumer’s vote in all of this? It is to be noted that the current debate on e-
commerce is mainly focused on the impact it may have on traditional retailers, small
enterprises (SMEs) and other such businesses. The benefits it brings to consumers, who are
the majority and should be the first priority of the government, are not even being
mentioned in the ongoing debate.

In India, the B2B e-commerce sector has seen substantial growth in the last couple of years.
This growth, however, cannot sustain unless there is an environment that can help the
players — suppliers, sellers and online platforms — gain economically and operate without

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What went wrong with snapdeal?

regulatory obstacles. As of now, there is confusion around the operational structure of e-

commerce companies and this has created a situation where most of these companies are
forced to operate like technology platforms.

Many full-fledged e-commerce operators act as service operators; they only allow retailers
to display and sell their products and add value by providing several back-end services like
home delivery. These companies cannot yet source directly from manufacturers and sell to
consumers — if this is allowed, it could be a game-changer for the price-sensitive India
market and consumers would be the winners.

Consumer is king

It is critical that the regulatory framework in the country be conceptualised keeping in mind
the larger interests of consumers in the country. If technology is available to cut
intermediary costs on consumer products, it must be allowed to be used to its full potential
as it will bring down the retail price of many consumables and benefit the middle-class,
which is impacted most by price rises.

In the long run it will also benefit the economy, the contribution of the e-commerce
industry to the GDP will go up 15 times in the next 15 years No other industry is promising
such growth in these times of a global slowdown. To allay fears of consumers being
exploited, the ministry of consumer affairs, under the leadership of Ram Vilas Paswan, has
been at the forefront of tackling consumer grievance issues and has formulated regulations
to ensure proper redressal. That being accounted for, the Indian customer today wants
access to domestic and global products at the click of a button, and at competitive prices.

This also extends to the rural consumers who now want parity in fulfilling consumption
aspirations, as their economic status is increasing and they have better access to the
internet. In this sense, e-commerce is playing the role of a leveller and is bridging the rural-
urban divide. Any regulation that restricts the open growth of this bridging medium will not
only drive consumers away but will have an adverse impact on business, economy and
entrepreneurship, not to speak of small-scale manufacturing.

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The global perspective

The worldwide leaders in B2C e-commerce exports are the US, the UK, Germany, the
Nordic nations, the Netherlands and France. Together, their online retail cross-border
exports are forecasted to top €100 billion by 2020. Cross-border B2C e-commerce thrives
in Europe, supported by initiatives of the lawmakers in creating a single online retail
infrastructure and regulation. More than a quarter of online shoppers in the European Union
(EU) have made purchases from other EU countries, with this share being higher in the
euro area.

Interestingly, none of the above-mentioned countries imposes stringent restrictions on e-

commerce companies, and finds them no threat whatsoever to brick-and-mortar retailers or
even traditional retailers and SMEs. E-commerce companies in most countries are treated
just like any other professional business entity and are not restricted to act like technology
platforms. Many such companies across the globe are collaborating with small retailers as
well as SMEs not only to broaden their own product portfolio but also to allow such
retailers increase their reach as well as sales by using their medium.

In simple terms, it is more a perception of threat than any actual threat that is urging a
particular section of retailers and SMEs to protest at the growth of the sector and allowing
FDI. Soon they too will realise, as some have begun to do, that the customer is king and if
you can offer him or her a better product, cheaper, more conveniently, and with satisfaction
guaranteed, you can only gain.

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What went wrong with snapdeal?


Snapdeal is an Indian e-commerce company based in New Delhi, India. The company was
started by Kunal Bahl and Rohit Bansal in February 2010.Snapdeal was started on 4
February 2010 as a daily deals platform, but expanded in September 2011 to become an
online marketplace. Snapdeal has grown to become one of the largest online marketplace in
India offering an assortment of 10 million products across diverse categories from over
100,000 sellers, shipping to more than 5,000towns and cities in India.

Investors in the company include SoftBank Corp, Ru-Net Holdings, Tybourne Capital,
PremjiInvest, Alibaba Group, Temasek Holdings, Bessemer Venture Partners, IndoUS
Ventures, Kalaari Capital, Saama Capital, Foxconn Technology Group, Blackrock, eBay,
Nexus Ventures, Intel Capital, Ontario Teachers' Pension Plan, Singapore-based investment
entity Brother Fortune Apparel and Ratan Tata.[4] Snapdeal acquired FreeCharge for $400

Snapdeal’s business and platform model is anchored by an innovative system that

incorporates updates from both sellers and shoppers. The platform enables sellers to list
products for sale on the site, manage inventory, and make pricing changes in real-time
based on what is happening in the marketplace. High volume—for example, a pair of shoes
sells every 30 seconds— means that thousands of sellers are making dynamic price
adjustments. Meanwhile, shoppers on review and rate sellers for customer
satisfaction based on their experience with the product, including shipping, delivery and
returns. With every page click, combines the updates from shoppers and
sellers to display the most relevant products, as well as rankings for all the sellers that are
offering the product by price, delivery time, and customer satisfaction

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7 Year-long history of Snapdeal

2010 - The company started off as a daily deals platform.

2011 - The company pivots to an online marketplace after getting Series A funding from
Kalaari Capital and Nexus Ventures.

2013 -eBay joins investors in Series C funding.

2014 - Turned out to be a phenomenal year for Snapdeal with Ratan Tata joining the board
as an angel investor, Softbank investing 627 million US dollars and the brand's GMV
hitting $1 Billion.

2015 - Alibaba joins Softbank and Foxconn and literally pours in $600 million dollars in

2016 - Raised $200 million dollars and the brand was valued at $6.5 billion.

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Literature Review was done by referring previous studies, articles and books to know
the areas of study and analyze the gap or study not done so far. There are various studies
were conducted relating to Ecommerce sector, challenges and issues they face in India.

1. “Study on E-commerce and Online Shopping: Issues and Influences” by

Dr. Anukrati Sharma (2013)
The article entitled “A study on E-commerce and Online Shopping: Issues and Influences”.
In this article an attempt is made to study the recent trends, influences, preferences of
customers towards E-commerce and online shopping and to give the suggestions for the
improvement in online shopping websites. The study found that, most of the people who
are engaged in making the decision of purchasing are in the age of 21-30 years. While
making the websites for online shopping it must be designed in a very planned and strategic

2. “E-Commerce in India-A review” by Abhijit Mitra (2013)

The article entitled “E-Commerce in India-A review”. In this article an attempt is made to
study the present status and facilitators of E-Commerce in India, analyze the present trends
of E-Commerce in India and examine the barriers of E-Commerce in India. The study
found that, there has been a rise in the number of companies taking up E-Commerce in the
recent past. The study also found that, major Indian portal sites have also shifted towards E-
Commerce instead of depending on advertising revenue.

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3. “Future of E-commerce in India”. by Nisha Chanana and Sangeeta Goele

The article entitled “Future of E-commerce in India”. In this article an attempt is made to
study the overview of the future of E-commerce in India and discusses the future growth
segments in India’s of E-commerce. The study found that, various factors that were
essential for future growth of Indian E-commerce. The study also found that, the overall E-
commerce will increase exponentially in coming years in the emerging market of India.

4. “Emerging Trends of E-commerce in India” by Sarbapriya Ray (2012)

The article entitled “Emerging Trends of E-commerce in India: Some Crucial Issues
Prospects and Challenges”. In this article an attempt is made to present a snapshot of the
evolution of E-commerce business indicating the chronological order, category of E-
commerce business, description of organizations involved in E-business in India. The study
found that, the role of government should be to provide a legal framework for E-commerce
so that while domestic and international trade are allowed to expand their horizons, basic
rights such as privacy, intellectual property, prevention of fraud, consumer protection etc
are all taken care of.

5)“Online purchase trends--Indian scenario”by Villivalam, Srikanth

This paper gives an overview of ecommerce and internet marketing, discusses the global
and Indian online trends, and identifies the various reasons behind the online purchases and
the impact of select reasons on genders, specific to Indian online shoppers.

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Chapter 3 Research Methodology

3.1 Research Problem

1)To try to understand business model of Indian E-commerce Companies with focus on

2) To Understand Inconvenient truth about E-commerce in India that they are Largerly
Unprofitable .

3) To study various trends and Challenges faced by E-commerce in India.

3) Challenges Faced by Snapdeal and how it Finally lost its market share.


1) To understand business model of Snapdeal.

2) To understand Consumer’s Perception regarding snapdeal

3) To study various Challenges faced by Snapdeal and to analyze how snapdeal lost its
market share.

4) To compare snapdeal with its rivals on the basis of Customer satisfaction.

5) To study satisfaction level of customers towards snapdeal.

Scope of Study

The primary component of research mainly focuses on the consumer’s perception about compared to its rivals. Data is collected mainly from the people between age
of 18-25 and residing in Central suburbs of Mumbai. Secondary data available on Internet
is used to understand reasons behind decline in market share of snapdeal. The study only
focuses on Ecommerce market in India and its challenges with special focus on downfall of

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Method of data collection

A common classification is based upon who collected the data.

Primary data: Data collected by the investigator himself/ herself for a specific purpose.
Secondary data: Data collected by someone else for some other purpose (but being
utilized by the investigator for another purpose).
In this research primary data is used to understand decline in market share of snapdeal by
understanding consumer’s perception about snapdeal. Data is collected by carrying out
online survey among the people who shop online and have age between 18-40.

Secondary data is collected from various websites and journals to understand major
reasons responsible for the downfall of India’s largest E-commerce website
This has been used to study the conceptual framework,definition, present trends and some
of the challenges faced by E-commerce companies in India. All the data included in
secondary base have proper references given wherever necessary.

.Research design

Research design is the set of methods and procedures used in collecting and analysing
measures of the variables specified in the research problem research. This research is a
combination of descriptive and exploratory in nature .

Sampling Design

Sampling is a means of selecting a subset of units from a target population for the purpose
of collecting information. This information is used to draw inferences about the population
as a whole. The subset of units that are selected is called a sample.

Data is collected from 101 respondents out of which majority of people are in the range of
18-25.age. Random sample technique is followed and data is collected from people who
shop online.

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Limitations of Study

1) Authenticity of seconday data

2) Sample size is limited to 100.
3) The study focus only on snapdeal and E-commerce market in India.

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Chapter 4 Data analysis and Interpretation

4.1 Questionnaire analysis

Sample size – Data is collected from 101 respondents out of which majority of people are
in the range of 18-25.

1) Age

No of
Age respondents
18 3
18-25 76
25-40 15
40-60 7
above 0

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60 and above




Below 18

0 10 20 30 40 50 60 70 80

Out of 101 respondents, 76 people were between the ages of 18-25.and 15 respondents
were in the age between 25-40.

2) How often you shop online?

No of
Period respondents
Morethan once
in a month 17
Once in 1- 2
months 37
Once in 3-6
months 30
Once in 7- 12
months 17

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No of respondents
0 No of respondents

Out of 101 respondents, majority shop once in 1- 2 months (37 respondents) followed by
once in 3 -6 months

3)Which of the following are your reasons for shopping online?

Out of total responses collected , Main reason for shopping was wide range availability
followed by discounts and convenience.

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4) Which of the following are your reasons that deter you from shopping online?

Out of 101 respondents around 43 are concerned about the quality of product they will be
delivered while shopping online,29 respondents wants to feel product physically before
making purchase , 16 people are concerned about lag between payment and delivery.

5) Which of the following features you like about snapdeal?

No of
Qualities respondents
Ease of searching the
item you are looking for 31
Discounts 24
Customer Service 9
Delivery time 11
Cash on delivery 20
Exchange offer 6

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No of respondents






Lack of value preposition
other reasons

Majority of people liked snapdeal because of ease of searching item followed by discounts
that snapdeal used to give to its customer

6) Which of the following features you do NOT like about snapdeal?

No of
Qualities respondents
Less discount as compared to
other- commerce sites 36
Delayed delivery 22
Lack of Customer support 19
Other reasons 24

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No of respondents

Lack of value preposition

Huge overheads

Competitive business
Any other reasons

The main thing which customers did not like about snapdeal is that it gives less discount
compare to its rivals. 36 out of 101 respondents agree with this.

7) How do you rate your experience with snapdeal?

No of
Rating respondents
Poor 15
Average 59
Good 25
Excellent 2

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No of respondents
0 No of respondents

Out of 101 respondents, 59 rated snapdeal as average on the basis of overall customer
satisfaction ( Convenience, delivery time availability of products, pricing structure).

8) What are the other e-commerce sites you have shopped from?

Majority of people prefer Amazon and Flipkart for their shopping requirement.

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9)According to you, why snapdeal lost its market share?

No of
Column1 respondents
Lack of value preposition 17
Huge overheads 15
Competitive business environment 58
Any other reasons 10

Chart Title



No of respondents
No of respondents

Lack of Huge Competitive Any other
value overheads business reasons
preposition environmen

Out of 100 respondents 58 people believe that due to Competitive business environment,
Snapdeal lost its Market share.

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10) Why did you stop buying from snapdeal?

No of
Reasons Respondents
Lack of Customer support 39
No discounts 39
Unavailability of products 18

No of Respondents

Unavailability of products

No discounts No of Respondents

Lack of Customer support

0 10 20 30 40

People stopped buying from snapdeal because of lack of customer support and less discount
compared to its rivals.

11) How do you rate Amazon as compared to snapdeal?

Ratings Responses

Better 69
Equal 26

Poor 5

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Better Equal Poor

69% respondents believe that Amazon is better than snapdeal on the basis of satisfying
their requirements (Convenience, delivery time availability of products, pricing structure)

12) How do you rate Flipchart as compared to snapdeal?

Ratings Responses
Better 60
Equal 35
Poor 5

Even when compared with Flipkart, 60% people consider it better as compared to snapdeal
on the basis of overall experience while shopping.

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20 Responses


13) Do you still shop from snapdeal?

Yes/No Respondents
No 58
Yes 42

Around 58% of
respondent agreed that
Respondents they currently do not
shop at snapdeal



0 10 20 30 40 50 60 70

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14)Why did you stop buying from snapdeal?

Lack of customer support

Unavailability of products
No discounts
Delayed delivery

Due to lack of customer support, less discount and unavailability of products people had
stop buying from snapdeal.

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4.2) Hypothesis analysis

For hypothesis testing are comparing amazon flipkart and snapdeal based on the ratings
given by respondents.

Ratings are given on the basis of overall shopping experience by customers.

H0= Snapdeal is better than amazon and flipkart.

H1= Snapdeal is not better than amazon and flipkart.

Better Equal Poor Total

Snapdeal 26 60 14 100

Amazon 70 26 4 100

Flipkart 60 35 5 100

Total 156 121 23 300

χ 2 testing

Observed(O) Expected(E) (O-E)2/E

26 52 13
60 40.33 9.5935755
14 7.66 5.2474674
70 52 6.2307692
26 40.33 5.0917158
4 7.66 1.7487728
60 52 1.2307692
35 40.33 0.7044111
5 7.66 0.9237076
E= row total* column total/N

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χ2 = 43.771

Degrees of freedom

DOF= (R-1)(C-1)= (3-1)(3-1) =4

At 5% level of significance for χ2(4,0.05)= 9.49

χ2= 43.771

χ2> χ2(4,0.05)

Reject the hypothesis

Our assumption is wrong
Therefore, snapdeal is not better than amazon and flipkart.
People consider flipkart and amazon better than snapdeal.

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4.3) Secondary data analysis

4.3.1) How and where Snapdeal lost their way?

1) No differentiation

Busy building too many warehouses and burning cash, Snapdeal never built any category as
their USP like Flipkart did with fashion and electronics, and Amazon with Prime and
“Snapdeal was not doing anything ground-breaking. Online retail, after all, is
also just retail. Your competitors are as good as or better than you. If you don’t have a
striking differentiation, why should a consumer choose you over the others? Snapdeal
failed to stand out—they had the upper hand in no particular category or service,” says an
e-commerce expert who does not want to be named.Additionally, Snapdeal’s tie-ups with
ClearTrip, redBus, Zomato and UrbanClap for their respective services also failed to make
any impact.

2) Acquisitions for nothing

Many of Snapdeal’s acquisitions turned out to end poorly. Snapdeal’s 20 million
investment in it. Snapdeal’s own logistics arm Vulcan Express was also rumoured to be in
talks for sale.
If Flipkart acquired Jabong and eBay India on their deathbeds, every company Snapdeal
acquired was at its peak. But as fate (or bad administration) would have it, Snapdeal’s
acquisition of FreeCharge also failed to make waves for the company, as Paytm continued
to be the leader in digital payments and FreeCharge failed to capitalise on
demonetisation like Paytm. FreeCharge is now rumoured to be close to acquisition by
Snapdeal’s earlier acquisition of, for luxury fashion, bombed in less than a
year and was shut down a few months ago.

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3) Omnichannel downfall

The failure of Snapdeal’s omnichannel strategy stands out in its list of downfalls. When it
was launched in October 2015, many experts saw it as a possible game changer for
Snapdeal. Organised retail in the country itself is becoming increasingly omnichannel, with
conglomerates like Tata (with TataCliq) hopping onto the e-commerce bandwagon. It had
promised that customers can discover products online and order with faster hyper-local
fulfilment executed by offline retailers.

It also lets users to access value added services including demonstration, installation,
activation or returns at a store near them. Importantly, with this customers will be able to
procure products within two hours of ordering and access these services at the nearest store
if they chose the pickup option across 70 cities in India

This model had great potential—with initial tie-ups with Mobile Store, Shoppers Stop, etc.
With efficient implementation, it could have given Snapdeal a turnaround, but failed to
make waves due to strategic mismanagement.

On the other hand, may be the time was not perfect for this launch. To provide touch and
feel as well as lesser delivery time for the customer, all parts of the system should work out.
If offline retailers are not fast for pick up, the whole system can collapse.

4) No thought for grocery and furniture

These are opportunities Snapdeal lost out on. Both grocery and furniture categories have
not been cracked yet in Indian ecommerce.Even Flipkart is only building on those now.
(Amazon has been quietly building its Grocery network and Amazon Pantry)

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What went wrong with snapdeal?

5) Lack of democracy

It’s not the money or brand, but culture that inspires your team members to work hard. But
in Snapdeal’s case, sources say, this was lacking. “Co-founders Kunal Bahl and Rohit
Bansal never allowed others to participate in decisions or shares. Many senior officials left
Snapdeal—even those with five years of experience there—due to the autocratic structure
within the organisation,” a former senior employee says on the condition of anonymity.

6) Salary of Cofounders

Rohit and Kunal, before taking the 100 percent salary cut, were both reportedly drawing an
annual salary of Rs 46 crore. An investor who has closely observed the industry says
Snapdeal had no commendable secondary management team. Long-term planning was not
something Snapdeal did best. Besides Kunal and Rohit, there was no major executive who
could lead the company, like Kalyan Krishnamurthy could do for Flipkart

7) No golden touch

‘Snapdeal Gold’—the free service that needs no registration—followed the launch of

Amazon Prime, which charges Rs 499 annually. Under this offer, the customer can get
next-day free delivery in select areas, and standard free delivery everywhere else. Also,
returns can be made in 14 days instead of the usual seven days. Orders placed with cash-on-
delivery do not get this offer.

But alas! Customers wanted a better experience, not just fast delivery. Snapdeal claims that
this service was aggressively pushed following demonetisation last year, and now more
than 20 percent of the order volume at Snapdeal is shipped through Snapdeal
Gold. However, that metric does not look great when compared to Amazon Prime’s.
Amazon claims that one in every three orders placed on its platform is from Prime
customers, despite being a paid service.

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What went wrong with snapdeal?

8) Multilingual tragedy

The vernacular app was lauded at the time of launching. However, either rural Indiawas not
ready for e-commerce or vernacular was not the most effective way to reach out to the
masses. Those masses know how to transact – they figure it out even without the regional
language on the app. So there was no volume of users to cater to with the 14 regional
languages in the app. Moreover, the regional audience has to be much larger in number for
such an initiative to succeed. Language was, in fact, never the biggest issue to be solved to
expand the customer base for e-commerce. The entire shopping experience from UX to
products to delivery needs to be fine-tuned according to the needs of this demographic.

4.3.2 What went wrong with snapdeal?

1) Culmination of errors
According to company insiders, investors and the people mentioned above, Snapdeal’s
current predicament is entirely due to a culmination of a series of errors by its co-founders
and its largest investors—SoftBank, Kalaari and Nexus.

It all started in September, when Snapdeal launched an expensive re-branding exercise to

transform its image, as it looked to stay relevant in a bruising market share battle with
larger rivals Flipkart and Amazon India.

This despite Snapdeal’s board members being aware at the time that the online marketplace
could witness a rapid erosion in its valuation, in the event of a fund-raising or a potential
sale—which, in turn, would trigger a boardroom fight between the investors over the
valuation of Snapdeal.

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What went wrong with snapdeal?

For the re-branding campaign, Snapdeal forked out nearly Rs200 crore and held at least
three heavily advertised sale events, in an attempt to stanch market share losses to Amazon
and Flipkart.

In July 2016, Snapdeal, which had raised some $1.4 billion since October 2014, still had
about $500 million left. Those cash reserves were wiped out by discounts and marketing,
along with its daily expenses and those at its payments unit Freecharge.

At the same time, it rejected at least two funding offers because of differences at the board
between SoftBank on one hand, and Kalaari and Nexus on the other.

“It’s partly a case of brinkmanship by the investors and founders. Everyone expected the
other to back off but no one has been willing to budge. SoftBank had assured Snapdeal that
it would invest in Snapdeal in the worst-case scenario. But they obviously wanted the
funding on their terms. This wasn’t agreeable to the others,” said one of the people cited

2) Valuation differences
Even as late as January this year, Snapdeal was spending heavily, expecting funds from
new investors or SoftBank, despite the differences between investors. But no such deal
materialized. Sales crashed in February and March as it cut spending. It cut hundreds of
jobs and shut Shopo, a consumer-to-consumer marketplace.

SoftBank is now keen to sell Snapdeal at a cut-price value, but that deal is being opposed
by Kalaari and Nexus, since such a deal would value Snapdeal at a fraction of its peak
valuation of $6.5 billion and severely reduce the value of the holdings of Kalaari and
Nexus, which count Snapdeal as their largest investment. Such a deal would result in a
huge blow to Kalaari and Nexus, as it would put the future of their India strategy in
jeopardy, as both VCs placed such a huge bet on Snapdeal and their future is literally riding
on the outcome of this deal.

The two VCs, along with the Snapdeal co-founders, have demanded that SoftBank buy out
their stakes. At the last board meeting, SoftBank expressed interest in partially buying out
the stakes of Nexus and Kalaari, but is yet to agree to those terms, the people mentioned
above said.

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What went wrong with snapdeal?

SoftBank owns 33% in Snapdeal, while Nexus owns roughly 10% and Kalaari nearly 8%,
according to documents with the Registrar of Companies. Snapdeal founders Bahl and
Rohit Bansal together own less than 6.5% in Snapdeal after cashing out part of their stakes.

3)Uncontrolled spending
Much before the current boardroom battle at Snapdeal played out, signs of trouble and what
was to come were starting to emerge in the middle of 2015 when Amazon India was
increasing its market share by leaps and bounds at the expense mainly of Snapdeal.

During the go-go days of 2014 and 2015, India’s largest consumer Internet start-ups led by
Flipkart, Snapdeal, cab-hailing company Ola and Paytm raised several billions of dollars
from investors led by Tiger Global Management LLC, SoftBank, DST Global, Naspers Ltd
and Accel Partners LP.

The mammoth funding rounds at the time were deemed necessary for the likes of Flipkart,
Snapdeal and Ola to grow rapidly at the cost of near-term profits and keep deep-pocketed
American rivals Inc. and Uber Technologies Inc. at bay.

Founders at India’s foremost e-commerce start-ups were given the licence to spend heavily
to fund deep discounts to attract more online shoppers and focus on one thing and one thing
alone—gaining market share at the expense of Amazon India.

In Snapdeal’s case, it enjoyed the blessing of its largest backer, SoftBank, which till date
has pumped in $900 million into the online marketplace.

From the time it pumped $627 million into Snapdeal in October 2014, SoftBank—
represented on Snapdeal’s board by Nikesh Arora at the time—encouraged the online
marketplace to go all out and spend heavily on marketing, discounts, logistics and
warehouses, without caring about cash burn rates.

4) Trailing rivals
Snapdeal, which had originally been started as a daily deals site in 2009 by Wharton
graduate Bahl and Indian Institute of Technology-Delhi alumni Rohit Bansal, duly obliged.

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What went wrong with snapdeal?

But even as it expanded rapidly, it lagged Flipkart and Amazon on key parameters—most
importantly, customer satisfaction and brand trust. Snapdeal also hired thousands of
employees in an unplanned manner rapidly over a short period of time.

These shortcomings in Snapdeal’s arsenal were brutally exposed during key discount-
driven festive sale months, when Flipkart and Amazon pulled away comfortably ahead of
the rest.More worryingly for Snapdeal, sales growth started to stagnate during late 2015
and early 2016, despite an increase in the number of Internet shoppers. According to a 2015
report by Silicon Valley-based VC firm Kleiner Perkins Caufield Byers, the number of
Internet users in India grew by 40% in 2015 to 277 million.

While rival Flipkart at the time was struggling to grow sales, Snapdeal’s plight was worse.
From November 2015 to April 2016, Snapdeal in fact witnessed a decline in monthly
revenue. To compound matters for Snapdeal, existing and new investors promptly refused
to pour fresh funds into an e-commerce firm that was already starting to be seen as an also-
ran against Flipkart and Amazon.

New foreign direct investment rules introduced in March 2016 prohibited online
marketplaces from influencing product prices and forced online retailers to put sales events
on hold. Snapdeal was thus forced to cut discounts and curb advertising spending in order
to preserve its dwindling cash reserves. That lasted till SoftBank again urged Snapdeal to
undertake the rebranding exercise in September 2016, amid worries over further market
share losses to Amazon and Flipkart.

5) Conceding defeat
The events of the past 6-12 months culminated in an email to all employees from Bahl and
Bansal earlier in April, where the founders indicated that the fate of the company is out of
their hands with its investors “driving the discussions around the way forward”.

The email marked a startling confession of the mistakes Bahl and Bansal (and also the
investors) made over the past few years that have culminated in Snapdeal’s current

“There has been a lot of media reporting and speculation around Snapdeal recently. While
our investors are driving the discussions around the way forward, I am reaching out to let

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What went wrong with snapdeal?

you know that the well-being of the entire team is mine and Rohit’s top and only priority.
We will do all that we can, and more, in working with our investors to ensure that there is
no disruption in employment and that there are positive professional as well as financial
outcomes for the team as the way forward becomes clear,” Bahl and Bansal wrote in the
email, a copy of which has been seen by MintAsia.

The email was sent to Snapdeal employees with the intention of boosting the morale of the
company, which has been hurt by large-scale layoffs, falling monthly sales and shutdowns
of under-performing business units such as Shopo.

6) SoftBank’s strategy
At the core of Snapdeal’s current troubles lies SoftBank’s desire to undo the mistakes it has
made in India over the past three years. Unlike other venture-capital rivals such as Accel
Partners and Tiger Global Management that have backed local market leaders such as
Flipkart and Ola, SoftBank has failed to pick any category winners in India’s booming
consumer Internet economy.

A sale of Snapdeal to Flipkart, along with an infusion of funds in the buyer, and a sizable
investment in India’s largest digital payments start-up Paytm—in which SoftBank is
currently in talks to invest up to $1.5 billion for a significant stake—would go a long way
in negating some of the mistakes that the Japanese firm has made in India.

For SoftBank, the world’s biggest investor in start-ups, an investment in Paytm means an
entry into India’s big financial services market. The proposed deal with Paytm is another
instance of SoftBank trying to get it right the second time. SoftBank initially considered
investing in Paytm in late 2014 but passed on the opportunity. It instead bet on online
marketplace Snapdeal. At that time, Paytm was rapidly expanding its nascent commerce
business, which SoftBank was opposed to because of its Snapdeal investment.

Another of its portfolio companies, Grofers, is in initial talks with larger hyperlocal
groceries delivery rival BigBasket for a potential merger.

SoftBank is eager to sell Snapdeal to Flipkart even in a cut-price all-stock deal and then
invest more cash in the buyer, according to three people aware of the discussions. That may
well be the best deal on offer, with Snapdeal being valued at around $1 billion, they added.

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What went wrong with snapdeal?

However, a buyout of by Flipkart may yield more immediate benefits to Tiger Global
Management, Flipkart’s largest investor, than to the buyer or to Indian consumers.

The buyout is being arranged by Tiger Global managing director Lee Fixel and SoftBank,
respectively. The deal may see SoftBank buy some of Tiger’s holdings in Flipkart and put
additional cash into the company, said the people mentioned above. According to these
people, if the sale of Snapdeal to Flipkart goes through, SoftBank may invest anywhere
between $500 million and $1 billion in Flipkart.

The proposed deal seems like a desperate attempt at financial engineering by the country’s
two most influential start-up investors, which have seen their bets falter to differing degrees
over the past 15 months (SoftBank’s a lot more so than Tiger’s).

Whatever be the outcome of the current round of talks with Snapdeal, one thing is clear—in
the ruthless world of Indian e-commerce, there is no prize for a distant second player. More
so in the case of Snapdeal, which has now slipped to fourth position after being overtaken
by Flipkart-owned Myntra in terms of monthly sales—a far cry from the days when its
proud founders dreamt of toppling Flipkart.

4.3.3 Understanding reasons for downfall from sellers point of view.

For the success of any E-commerce website it is really necessary that companies should
maintain healthy relationship not only with buyers but also with sellers. On the popular
website quora, I found an article in which seller tried to explain reasons behind decline in
marketshare of snapdeal. Analysts have their own views, VCs have their views, customers
say service was bad and offers went away, Snapdeal says competition killed them.

Sellers run E-commerce market, No seller = No sales

Kill sellers, kill marketplace.

Happy sellers = profitable marketplace.

Here’s a sellers point of view

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What went wrong with snapdeal?

Here is the actual account of what happened wrong at Snapdeal from an insider view with
proper timeline.

I am a manufacturer and exporter. I wanted to bring export quality goods in India and the
best option which worked out for us in a profitable way was by becoming a seller on

We became a seller on Snapdeal in 2013 and for 2 years we have minted money.

Everyday there were more than 1000 B2C orders which we had never anticipated, the
managers at Snapdeal were very warm in their approach, I was giving the best prices to
them which even they could not find anywhere.

As Snapdeal was filling my capacity, I never even looked at any other marketplace.Every
15 days I used to be in Snapdeal office to know what to plan for future.Meanwhile I started
selling on Flipkart in 2014 end and other marketplaces as we had increased our production
capacity. Hell broke loose in November 2014 when Snapdeal blocked my account!

Reason - You dispatched “wrong product” to the customer.

On analysing data, I found that out of 20,000 orders in a month, 17 orders had such a
problem out of which only 10 were genuine and balance were customers claims. Dispatch
process is a manual process and every process has a margin for error.

Nevertheless, we tried to explain the same to Snapdeal along with an improvement plan but
they still kept us blocked for a month.

The managers whom I used to interact on a daily basis gave up their efforts as they could
not find the policy maker who framed such a useless policy.

In a single day, 10 of these managers resigned from Snapdeal. (These managers still work
with me in whichever organisation they have gone).

I soon got in touch with many sellers across the country and found out they were also
having similar experiences, and there was no access to the top management.

At this point of time we were not facing any problem of payments from Snapdeal.

Then this happened.

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What went wrong with snapdeal?

To attract sellers, Snapdeal to open fulfilment centres in 15 more cities

A welcome move, with a foolish implementation.

We sellers already had big enough warehouses to cater to the orders which Snapdeal was
giving us. And the stock in our warehouse could be sold on Flipkart and other sales avenues
also. (Amazon was very limited at that time).

Snapdeal’s logic to open their warehouses was to ensure on time and correct dispatch and
fast delivery. And also to rake more funding against these warehouses from investors.

So where is the Problem?

Unlike Flipkart and Amazon today, Snapdeal rolled out this service for free to sellers.But
sellers were not keen to send stock over there due to various operational issues and were
happy dispatching from their own warehouses. (Dropshipping).This is where Snapdeal
started having its downfall. They made the first of the numerous changes in their system.

Snapdeal put a cap on the daily orders that a seller could dropship, in my case it was 5
orders per day. Reason? So that sellers would be forced to use warehouses.Effect, the
warehouses of one region were not big enough to accommodate all sellers. This led to
products being shown as out of stock on Snapdeal.

Second change, now a new change was made, the Central team in Delhi would create an
ASR (Advance Stock Receipt) of the goods that you could send to the warehouse, this
would take upto 7 days to get generated. (In Amazon you yourself generate ASR). At the
same time, goods were not showing in stock on Snapdeal. This used to be a big problem
during peak season, and this would lead to stock being stranded at sellers warehouse, or
stocks being inwarded post the season, which would lead to clogging of Snapdeal’s

Third Change, as sellers has no option, they would have to send all goods to the
warehouses, so even slow moving and newly introduced products were sent to the
warehouses, this would clog the warehouses. So they started a new policy, only high
moving products will be allowed in priority to the warehouse. Who decides high moving?
Some “Algorithm”.

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What went wrong with snapdeal?

Here I will give you an example, suppose the Algorithm was introduced in May, at that
time, Ice Creams were high moving, and Sweaters were slow moving.

So Algorithm likes ice cream, hates sweaters.So in Diwali, it wants ice cream in warehouse,
and no sweater. Result, in demand goods were not available on Snapdeal, out of demand
goods were jamming their warehouses.

Consequently, the in demand goods were available to sell and buy on Flipkart and
Amazon.By now Snapdeal had lost the plot and sellers were recalling inventory from
warehouses so that they could be sold on other channels.

Fourth change, they refused the sellers to call back inventory from warehouses. Now, as
there were no sales, sellers stopped sending inventory to Snapdeal warehouses and stopped
concentrating at Snapdeal.

I will give my example : I deal in trousers, Size 28 and 40 were available for sale as they
were in Snapdeal warehouse, but balance sizes were not available as I did not want to send
goods to their warehouse and Snapdeal did not want me to dropship. As a result, if
Snapdeal would advertise my product, a customer would like the image and go in to order
it, but could not find the size that would fit him. So customer would search same product on
Flipkart and buy from me over there.I win, customer wins, Snapdeal loses.

Now again a change around November 2015. Snapdeal said now they will charge
warehousing fees from sellers. And those sellers who did not want to pay could take their
goods back.

What do sellers do? Ask for goods back. It took Snapdeal 2 months to remove those goods
and send to the sellers.

Now its the fun part, as the sellers have now got all their goods back, they reconcile their

Sent Goods - Sold Goods + Customer Return - Goods recalled from warehouse = 0.

But 0 never happened.

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What went wrong with snapdeal?

Inventories worth crores was lost at their warehouses. Snapdeal gave claims to lot of sellers
and is still giving claims to sellers.The managers at the warehouses were caught stealing

Due to all this, the Cost of Selling on Snapdeal was increasing day by day. Many more
foolish policies were introduced by some unknown MBA clowns who did not know
anything about ecommerce selling. As a result, sellers had increased their prices on
Snapdeal compared to the prices prevailing on other cheaper selling options.

Meanwhile, groups of sellers and I were trying to get the solution implemented at Snapdeal.
But there was no deciding authority who could solve these things. The decisive authority
was packed in some room, inaccessible to all the sellers and executives.

So we tried to reach out to the CEO Kunal Bahl. Hundreds of sellers tried to get in touch
with him at different times, he never responded or felt like solving problems of any sellers.

Such companies always go down.

From January 2015 to December 2016, Snapdeal was a failing company which was running
only a gimmick. Talks of being profitable, IPO etc were just to grab cheap publicity

The above analysis of the problem with snapdeal is explained by Kush Agarwal (seller on

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What went wrong with snapdeal?

4.3.5)Acquisitions and Investments of snapdeal.

So, under the Snapdeal umbrella was wallet company FreeCharge, Shoppo (it allowed
buyers and offline sellers to chat and close a deal), services like lending, travel booking and
food delivery, unicommerce (that helped offline sellers manage inventory and sales online),
government partnerships, highend fashion portal Exclusively, lending for sellers, and a lot

Of these, FreeCharge was perhaps the most expensive. Snapdeal paid $400 million in April,
2015 for Kunal Shah-headed digital payments company. The idea was cross-sell on each
other’s platforms. FreeCharge had 30 million customers who used it to recharge phones and
pay bills. Snapdeal has some 50 million registered users.

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What went wrong with snapdeal?

Snapdeal had also made an investment of about $30 million in PepperTap, the grocery
marketplace, which was later supposed to be integrated into Snapdeal. Unfortunately,
PepperTap, which was backed by Sequoia Capital, Saif Partners, among others, ran out of
money and was shut down.[8]

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What went wrong with snapdeal?

4.3.6) The Three Main Challenges India's Snapdeal Faces In Its

Comeback In E-Commerce

In February this year Kunal Bahl and Rohit Bansal, cofounders of online marketplace
Snapdeal announced that they will forego their salaries with immediate effect, thereby
becoming the first Indian startup entrepreneurs to do so. The decision to not take salaries,
while not an uncommon one in Silicon Valley (both Larry Page and Sergey Brin, the chief
executive and president of Alphabet respectively, have taken $1 as compensation for years),
is somewhat unprecedented in India’s startup ecosystem.

This decision of conserving cash and cutting costs is aimed to turn around the fortunes of
their seven-year-old firm.

“This will mean tough choices and a conscious departure from a me-too race to the edge of
the cliff. Let’s remember — GMV [gross merchandise value, an industry term for the total
value of merchandise sold on an e-commerce site] is vanity, profit is sanity,”
read the email circulated within the company.

For the financial year ending 31 March 31 2015, the founders received compensation of
more than $7 million (Rs 52.94 crore) each, which include salaries of more than $226,727
(Rs 1.5 crore) and payment against founder stock options of more than $7 million (Rs 51.43
crore), according to filings with the Registrar of Companies and data collated by Tofler, a
leading corporate research and monitoring platform. Founder salary records for fiscal 2016
are yet to be disclosed.

The move comes at a time when the company faces a possible make or break moment and
looks to execute a turnaround in its fortunes. Snapdeal is currently #3 in Indian e-commerce
market, behind Flipkart and Amazon, where the latter dislodged it from the second spot last
year. Along with its inability to rack up fresh funds due to losses incurred by the high cash
burn rate of over $20 million a month, Snapdeal faces a slew of challenges that include
cautious sellers, brand taking a hit and high attrition rates among top executives.

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What went wrong with snapdeal?

Sellers practicing caution

A seller body, the eCommerce Sellers Association of India, cautioned its 1,500 members to
either stop selling on Snapdeal, or to ensure that their dues from the company don't run

The All India Online Vendors Association (AIOVA), a body of over 2,000 online
merchants, also requested its members to stop selling on Snapdeal citing credit risk to the
tune of $45-$60 million (Rs 300-400 crore) that the e-commerce company owes all its

AIOVA stated in an email to the Indian commerce minister Nirmala Sitharaman: “Our
organization estimates that on any given month, this company [Snapdeal] holds Rs 300-400
crore in the form of outstanding dues, and goods in transit or refunds. Our constituents are
now having a sense of credit risk while dealing with this company due to the past
experience in losing money and no immediate relief in case of Askmebazaar and other
marketplaces. We are looking forward to your forward to your intervention or assurance
from you in this matter. Until then, we have requested our constituents to immediately stop
sales on this platform."

Re-branding taking a hit

In September last year the company had showcased a new logo and a tagline: "Unbox
Zindagi." This re-branding exercise was aimed to lure new buyers entering the e-commerce
fray in India. During the launch of this initiative its cofounder Kunal Bahl
had commented, “Delivery speed, assortment, discounts and return policy are now basics,
commented on only if there's a slip up. Brands need to pick the emotion they stand for and
how they participate in people's lives.”

As part of this initiative Snapdeal spent a humongous $30 million (Rs. 200 crores)
including festive spends over the period of October-December 2016. Commenting on the
performance, the spokesperson of All India Online Vendors Association said, “There was a
little boost during the Diwali sale due to the advertisement blitzkrieg by Snapdeal, but after
that shipments dropped once again. Sellers are now concentrating mainly on Flipkart and

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What went wrong with snapdeal?

The online marketplace’s daily shipments have halved in recent weeks to 60,000-80,000
units a day, and gross sales have dropped to a fraction of the company’s peak of $3.5-$4
billion in 2015.

4.3.7) What really went wrong with Snapdeal?- A case study by Delhi
school of Internet Marketing.

Beleaguered online marketplace Snapdeal is going through troubled breaks.Struggling to

raise fresh capital, confuting against internal conflicts, once an e-commerce major Snapdeal
has decided to stop all non-core actions, reduce costs and handover pink slips to employees
to turn cost-effective. Earlier Snapdeal was the 2nd best alternative for people after Flipkart
but emergence and rapid growth of Amazon gave people a better alternative.

When Amazon entered in 2016 with an additional $3 billion investment in India, it made
clear its intention to dominate the Indian market and pose a massive challenge for home
ground e-commerce companies, among which Snapdeal became extremely unhappy and
didn’t keep up the tempo.

Recently, the brand saw the brunt of Snapchat CEO’s ‘poor India’ comment and lost its
brand image due to confusion. Previously the startup had gone almost through the similar
situation; getting blowback from Aamir Khan Controversy.

Snapdeal Founders Admit Their Mistakes- What went wrong?

Indian e-commerce portal Snapdeal’s management has said it has made mistakes like many
of its industry peers, failed in some aspects of its business, which have led to some tough
decisions as part of its goal to become a more lucrative business in the next two years.
Here are some surprisingly mistakes the founders have made about where the company has
gone wrong.

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What went wrong with snapdeal?

1) Execution Errors
Over the last two to three years, with funding coming into the market, Snapdeal like many
in the industry started making mistakes, the founders said. “Has our company and industry
been going through a troubled time? Absolutely. Did we make errors in our execution? No
doubt about that.”- Kunal Bahl, Snapdeal Founder

2) An Imitator in Business
One huge problem with Indian startups is that very few companies are true innovators and
mostly are copycats. The approach signifies picking up a model working in the US or
Europe and to duplicate it in India. They end up putting colossal amount in these business
models. This copying approach works really well in China as they are a secured market.
The foreign players are banned out there and the economy knows to create replacements.
However, India is an open country and players like Amazon, eBay, Uber have a free run to
come and compete here. Thus, a simple copycat strategy is not supposed to work for long.

3) Some Decisions Proved Costly

The brand is its ‘exorbitant’ rebranding exercise which burnt INR 200-crore hole in its
pocket. At a time when the brand was already draining, it tried to look profligate by
spending an insane amount of money. They spent a lot of money to shout in the
undifferentiated marketplace.“Branding at the cost of business does more damage to the

4) Late Entry into Mobile Payments

Snapdeal has ventured into mobile payments a bit too late with Freecharge Wallet.
While the market today has full of payment wallets, Snapdeal’s failure to grow and best
utilize Freecharge’s platform has also not gone down well with industry experts and
investors. I: Private sector lender Axis Bank acquired 100% stake in Snapdeal's payments
arm FreeChargefor Rs 385 crore ($60 million), as per a notice sent to the Bombay Stock
Exchange (BSE). Online marketplace Snapdeal had bought FreeCharge in what was one of
the largest acquisitions in the Indian startup ecosystem valuing the company at Rs 2,500
crore ($400 million) in 2015. Snapdeal sold freecharge at almost 90 per cent lower than
what it had paid for the firm in 2015.

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What went wrong with snapdeal?

5) Snapdeal was under fire with Aamir Khan Controversy

Snapdeal became an unlikely hitting bag for those who were criticizing actor Aamir Khan
(Snapdeal’s brand ambassador), for his derisive views on the issue of intolerance in
India. As a protest against Aamir Khan, many customers took to social media to reveal that
they gave poor ratings to the Snapdeal app on app stores, and even majority started
uninstalling it from their smartphones. E-commerce major tried to play safe by saying that,
“It is neither connected nor plays a role in comments made by Aamir Khan in his personal
Here, the brand was not able to understand users’ emotions and the take resulted in mass
uninstallation of its app, online shoppers rejecting it. Finally, Snapdeal ended up not
showing Amir Khan in its ‘Dil ki Deal’ ad and eliminating the contract. Many users began
demanding that they won’t buy any product from the e-commerce portal until Aamir Khan
gets removed as the brand ambassador.

6) Departure of Senior-level Executives

There have been several top-level exits in 2016. In January, Senior Vice-president of
marketing Srinivas Murthy resigned. In May, Snapdeal lost its prized Silicon Valley hire
Anand Chandrasekaran, who was the brand’s Chief Product Officer. In June, the Business
Head for electronics, Saif Iqbal, left.

In November 2016, Vijay Ghadge, Chief Operating Officer at Snapdeal’s in-house logistics
arm Vulcan Express Pvt Ltd, had quit barely four months after joining the firm. The
management-level exit was of Sandeep Komaravelly in January 2017. He was SeniorVvice-
president in charge of Snapdeal’s zero commission marketplace ‘Shopo’. Snapdeal’s Head
of Corporate Development Abhishek Kumar had resigned in Feb 2017. Tony Navin, Head
of Partnerships and Strategic Investments, decided to quit after 7 years time.

Snapdeal’s struggles over the past few months are additionally due departure of a string of
senior-level executives.

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What went wrong with snapdeal?

6) Drop in its Valuation

Snapdeal’s losses more than doubled to INR 3,316 crore in fiscal 2015-2016, while its
revenue growth dropped. Snapdeal had posted a 150% increase in losses from INR 1,328
crore in the year ended March 31, 2015. Revenue grew by 56% to INR 1,457 crore from
INR 933 crore in the same period, according to documents

Snapdeal, run by Jasper Infotech Pvt. Ltd, posted a 150% increase in loss from Rs1,328
crore in the year to March 2015. Revenue grew by 56% to Rs1,457 crore from Rs933 crore
in the same period, according to documents filed with the registrar of companies.Revenue
growth slumped from the 450% growth Snapdeal reported in the year to March 2015.
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What went wrong with snapdeal?

In November, Snapdeal decided to undergo a branding overhaul and launched a new logo
and television campaign, committing close to Rs200 crore in advertising and marketing
spending in September and October–the most lucrative season for e-commerce sales.

7) Struggle in Raising Funds

The company has been struggling to raise fresh funds due to the intense competition with
Amazon and Flipkart.
Venture capital firms Kalaari Capital and Nexus Venture Partners, both of which have
associates on Snapdeal’s board, are in a battle with SoftBank Group Corp., which has two
board seats, over the company’s valuation in a potential sale.

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What went wrong with snapdeal?

The board allowed Snapdeal to keep spending, leading to a cash crunch.In July 2016,
Snapdeal, which had raised some $1.4 billion since October 2014, still had about $500
million left, after Snapdeal launched INR 200 crore campaigns to transform its image.

8) Confusion costs against Snapchat

After Snapchat’s CEO, Evan Spiegel was alleged of saying that he didn’t want to expand to
‘poor nations’ like India and Spain, people started to down rate Snapdeal instead of the
Snapchat app. It sparked off a boycott movement for ‘Snapchat’ but caught unaware in this
storm was the Indian e-commerce portal ‘Snapdeal’. Social media users are erroneously
downloading Snapdeal app, down rating its services and intimidating to stop using it.[8].
After analysing above case study, we understand that there were number of reasons
responsible for decline in market share of snapdeal.

4.3.8) The fall and fall of Snapdeal: Why its market share slipped from
26% to 4%?

Less focus on quality, lack of a unique value proposition and missteps on the marketing
front led to the fall of Snapdeal, according to report by research and advisory firm RedSeer
The market share of the e-commerce firm—which early this week pulled out from merger
talks with bigger rival Flipkart after six months of intense negotiations—fell from about
one-fourth in September 2015 to 4% in March 2017.
While its counterparts realised the market trends and focussed on growing categories such
as mobiles, consumer electronics and fashion that dominate online retail, Snapdeal failed to
meaningfully differentiate itself.Graph below interprets decline in marketshare of snapdeal
from $6.5 billion to $1 billion.

While Flipkart and Amazon have been aggressively working on winning the mobile
category by inking exclusive smartphone launches, Snapdeal couldn’t land any major
partnerships. Its once-thriving consumer electronics business shrank with the arrival of US-
based Amazon which promised faster delivery and better seller prices, according to

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What went wrong with snapdeal?

RedSeer. Snapdeal also couldn’t leverage on the high-margin, fast-growing fashion

segment as it couldn’t offer the level of product assortment and quality offered by market
leaders Flipkart (along with Myntra and Jabong) and Amazon.

The report also cited Snapdeal’s numerous pivots as a major reason for its failures. The e-
tailer operated on a pure-play marketplace model with no inventory until 2013 when
Amazon entered the country, changing the market dynamics for domestic e-commerce
Snapdeal then moved to a managed or controlled marketplace model with own warehouses
called SD+ centres to ensure some level of quality control. However, it never adopted a
hybrid model that has been followed by Flipkart and Amazon with WS Retail or Cloudtail,
respectively, which helped them gain control on quality, cost and consumer experience, the
report noted.

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What went wrong with snapdeal?

“The marketplace model did not allow Snapdeal to have any sort of control over quality of
products. This has brought down the trust of customers on the company,” said Mrigank
Gutgutia, engagement manager at RedSeer.
Come 2016, Snapdeal began to feel the heat of its messed-up strategies and 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.

4.3.9) Comparison of snapdeal with its rivals based on Secondary data

(Popularity over search engine)

We are using Google Trends to analyze data on e-commerce companies, and it’s worked
remarkably well so far. Right after the first day of the sales, we’d predicted that Flipkart
would have the strongest sale, and this was corroborated later by other outlets when the
three companies released their sales numbers. Given Google’s volumes, and the similarity
of products sold by the three companies, Google Trends is an effective proxy to judge the
relative popularity of the three main e-commerce players.

In 2014, e-commerce in India was flourishing. Money was flowing, discounts were aplenty,
and e-commerce companies were growing rapidly. Searches for Flipkart and Snapdeal
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What went wrong with snapdeal?

rose, and even though both companies were accumulating huge losses, investors weren’t
worried. It was okay to make losses as long as you could grow. Amazon, e-commerce’s
poster child, had famously followed this approach – it never made profits until

quite late in in lifecycle. But things have changed after that. Since the end of 2014, the
average searches for both Flipkart and Snapdeal have gradually slowed. Barring the spikes,
which occur during the holiday sales, both Flipkart and Snapdeal are less popular than they
were two years ago.

This is in stark contrast to Amazon, the company they both with to emulate. In its early
years, Amazon was losing money, like Snapdeal and Flipkart, but it was also growing.
Global searches for Amazon grew every year in since 2004

Since 2014, as searches for Snapdeal and Flipkart in India fell, Amazon’s searches in India
rose. As the homegrown companies watched, Amazon rapidly ate into their market share.
Things changed so quickly, that Amazon is neck-and-neck with Flipkart, and Snapdeal is
now a distant third.

Snapdeal is now clearly lags behind the big two.

Comparison of snapdeal with its rival on the basis of Mobile E-commerce


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What went wrong with snapdeal?

4.3.10) What led to the SoftBank-Snapdeal fallout?

In 2014, Masayoshi Son, Soft Bank's maverick billionaire founder tasked Nikesh Arora, a
hotshot Google executive, who was about to join the Japanese telecom and internet major,
with closing out a prospective investment in India.The deal was stuck on differences in
valuation between SoftBank and the young entrepreneur. Masa, as he is popularly known,
had poached India-born Arora at the time and was in the midst of reinventing his
organisation. SoftBank 2.0 is what the project was called, the vision was to make the group
more global and take bets on technology startups. India was one such market the sprawling
technology group was eyeing, and Arora was the man to take Masa's plan to fruition.On his
India trip almost three years back, Arora met Kunal Bahl, the founder and CEO
of Snapdeal, an online marketplace which Masa was keen to invest in.

At the time Snapdeal was competing with Flipkart in India's hot e-commerce market which
was about $6 billion in size. Arora convinced Bahl to agree to take SoftBank's money by
offering a slightly better valuation.October 2014, marked the arrival of SoftBank as
Snapdeal's largest investor as it led a $627-million financing round valuing the online
marketplace at $1.2 billion and got itself a 33% stake in the company .

Bahl and his co founder Rohit Bansal grew up in Delhi as school friends, went through
multiple pivots (a startup jargon which means the change of a company's business model)
since they began in 2007. In its latest avatar, Snapdeal wanted to be the Alibaba of India.
Having backed the Chinese internet giant in its infancy, and having gained unprecedented
returns after the much-ballyhooed Alibaba IPO, SoftBank's bet on Snapdeal wasn't
surprising at the time.

Just a few months before Snapdeal's funding round was announced another seminal event
had unfolded at the Bengaluru-based Flipkart which racked up $1 billion from a clutch of
investors, valued at $7 billion. The e-commerce sweepstakes were only starting to play out
with such an enormous and never-seen-before slug of capital chasing the Indian online
retail story.

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What went wrong with snapdeal?

Snapdeal's Rise Between 2014-15

After raising its largest financing round, Snapdeal started pushing the pedal. It wanted to
compete head on with Flipkart, the country's largest online retailer which was growing on
the back of massive smartphone sales. Gross merchandise value -or GMV ,a proxy
indicator for growth in the e-commerce sector -was gaining currency rapidly and was being
used to burnish the valuations of these companies.The Seattle-based online behemoth
Amazon, which so far had been testing the India market, decided to throw down the
gauntlet. In September 2014, its visionary founder Jeff Bezos famously stood on a truck
outside the company's Bengaluru headquarters along with his India chief Amit Agarwal,
waving a $2-billion cheque.

From here on, the Indian ecommerce story started to change. Snapdeal reported a 301%
jump in GMV for the year ended March 2015, according to documents put up by SoftBank
during its earnings results. Between 2014 to 2015, the Indian e-commerce market almost
doubled from $6 billion to $11.5 billion as discounting peaked. Still the No. 2 player,
Snapdeal went on to successfully raise more money on the back of its growth.

2015: Tencent Turned Down, Alibaba Comes In

When Snapdeal was racing ahead on the GMV front, Alibaba's arch rival, China's Tencent,
expressed interest in the company. The internet major had offered to put $350 million at a
$5-billion valuation, people privy to the talks said.We found out from sources that
SoftBank wasn't keen on having Tencent on board and pushed for an Alibaba entry into
Snapdeal.In the meantime, the web retailer went out and snagged the mobile wallet startup
Freecharge in a $400-million deal, largely done through a share-swap to build its payments
business. Then in August 2015, the e-tailer closed a fresh financing round of $500 million
with Alibaba and Foxconn, valuing it at $4.8 billion. Tencent was ke pt out. Significantly
enough, last month, the internet behemoth behind WeChat messenger invested in Flipkart.

2016: From GMV Race To Turning Profitable

Snapdeal's revenue growth started to slow down sharply from 450% for the year ending
March 2015 to 56% at Rs 1,457 crore a year later. Amazon was weaning away market share

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What went wrong with snapdeal?

while Flipkart was stagnating. The overall industry had become sluggish, GMV numbers
were flat at $11-12 billion.
Now, Snapdeal had begun talking down GMV . Instead, it wanted to draw up a path to
profitability -Bahl had been quoted as saying this publicly. Even as the change in strategy
was starting to play out, Snapdeal got some more funds, this time from one of the world's
largest pension funds,Ontario Teachers Pension Plan at a $6.5 billion valuation. The new
investor had bought $150 million of secondary shares from Snapdeal's early investors and
put $50 million into the company. By the middle of 2016, the e-tailer changed tack
completely and figured fighting the war chest of Amazon wouldn't be easy, but the sudden
news of Arora's departure in June last year from SoftBank was going to alter Snapdeal's

The Nikesh Arora Factor

We'd met Arora at SoftBank's Silicon Valley office a few days after he'd resigned. He'd
said the Indian companies SoftBank had funded during his tenure will find support from
Masa. But the Indian e-commerce sector had changed, he'd admitted. "In the last two years,
what has happened is that Jeff Bezos (Amazon founder) has come out and said he wants to
win India at all cost. He will spend billions of dollars in India and that's a new competitive
fact. You have to figure out a way to compete with that. The question is does it become like
an Alibaba JD, a two-player China market, or a multi-player market? That depends on
execution," he said. Arora was of the view that Snapdeal was moving from negative to
positive gross margins. "I know Snapdeal has started focusing on profitable GMV instead
of just GMV ,".Nikesh Arora's moving out of SoftBank was a big blow for Snapdeal

A person close to the company said, "His ( Arora) moving out of SoftBank was a big blow
for Bahl and Snapdeal. The present team is trying to obliterate his legacy and his
investment calls were being questioned. This is why SoftBank asked Snapdeal to chase
growth, the opposite of what Arora was telling the company to do." After Arora, who was
anointed by Masa as his successor, departed, others in his team like Deep Nishar, Kabir
Misra (who's now on the Snapdeal board) and Alok Sama began actively liaising with the
Indian e-commerce company . Masa also stepped in. He was now keeping himself abreast
with what was going on at one of his earliest bets on India internet.

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What went wrong with snapdeal?

While Arora was still around, he along with the Snapdeal founders had strung together a
$350-million financing from existing investor eBbay, which would have valued the e-
commerce company at $6.5 billion, sources said. This deal would have involved folding up
eBay india into Snapdeal. But this didn't come through. Last month, eBay India, which now
has only 4-5% holding in Snapdeal, invested in Flipkart, and sold its local unit in the

Sale To Alibaba Falls Through

After Arora's exit, SoftBank started to press for a sale to Alibaba. People who were privy to
the goings-on said SoftBank wanted to merge Snapdeal with Paytm's e-commerce
marketplace and Freecharge with Paytm's payments play. This is when Snapdeal made
another so-called pivot with a Rs 200 crore brand relaunchtargeting smaller town

While the discussions were on in full swing, the Jack Ma-led Alibaba didn't agree to the
final deal, and after Diwali spends, Snapdeal found itself staring at its fast depleting cash
reserves. Alibaba and its subsidiary Alipay are investors in Paytm.

Foxconn, Paypal Bid For Freecharge Stake

Even as SoftBank was trying to pull off the Alibaba Snapdeal transaction, Freecharge,
which had been scouting for funds since 2015, was closing in on a deal with Foxconn
sometime around July last year. The Taiwanese manufacturer of Apple iPhones was ready
to pump in $300 million, valuing Freecharge at around $800 million. SoftBank was willing
to participate with half of that sum, but the deal never closed.Then came American
payments giant PayPal, which had been wanting to get a slice of India. In November last
year, PayPal proposed an overall $500-million funding in Freecharge, giving it a 51%
stake. This would involve buying out investors in Jasper Infotech to get shares of
Freecharge and putting about $300 million of capital in the mobile wallet firm at a
valuation of $800 million or so. Jasper Infotech is the parent of Snapdeal and Freecharge.
The deal had a term which would give PayPal a put option to take over the remaining 49%
stake in the e-wallet venture over the next few years. This transaction, too, fell through.

"It started to look like SoftBank was stalling external investors because they wanted
Snapdeal to merge with a bigger entity and Alibaba was a preferred partner. But post
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What went wrong with snapdeal?

Diwali they figured Alibaba was not interested and by that time there was urgent need for
capital at Snapdeal," said another person with knowledge of the matter.

SoftBank Proposes To Sell Freecharge To Paytm

After both these deals did not materialise, SoftBank put on the table a $1-billion funding
proposal for Snapdeal in December last year when Masa was on an India visit.This would
entail SoftBank buying Freecharge for $600 million, selling it to Paytm and subsequently
pumping $400 million into Jasper Infotech, the parent of Snapdeal.At this time SoftBank
valued the e-commerce player at around $3 billion. This would also let SoftBank get a 10-
15% stake in Paytm, which was reaping the benefits of the Indian government's
demonetisation move announced in November. But the funds did not come.

SoftBank was still pushing for growth asking Snapdeal to bulk up its GMV. There had also
been talks of a Freecharge sale to Ola Money, the payments platform run by another
SoftBank portfolio company Ola-- the transportation startup which is fighting Uber in
India. Masa had offered a $1-billion funding proposal to the taxi app but at a reduced
valuation of $3 billion (compared to its $5 billion post-money valuation from its previous
round). Ola didn't agree and only took $250 million, not wanting to give massive control to
SoftBank, multiple people said.

By now, the cash position at Snapdeal was starting to look worrying and order numbers
were slipping. The company was left with about $200 million in the bank and no new
capital had come in for about a year while they were being asked to continue spending to
grow in the last few months of 2016.

"Snapdeal was asked to spend $50 million every month on marketing and promotions even
until January. Somewhere around then they wanted to re-engage with eBay but Flipkart had
already started negotiating with the online auction site. SoftBank had started engineering a
Snapdeal sale by then," another source said.

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What went wrong with snapdeal?

Early Investors Block Investment At Lower Valuation

At the start of 2017, there was another possibility being drawn out. A $50-million-per-
month offer by SoftBank, out of which $30 million was allocated to Snapdeal and $20
million would go to Freecharge.Snapdeal would be valued at $2.5 billion. That comittment
was changed into a $150-million debt financial proposal which was being dished out by
SoftBank. There was chatter building up at this time about how the online retailer's early
investors Kalaari Capital and Nexus Venture Partners, which together own about 18% in
the company , were blocking the capital infusion from SoftBank on the issue of lower
valuation. They'd opposed the $50-million monthly installment, saying a drip feed by
SoftBank was going to stir up more uncertainties, some people said.

SoftBank Pushes For Merger With Flipkart

While none of the SoftBank capital came in, by February-March SoftBank had initiated
talks with Tiger Global to sell Snapdeal and get a substantial holding in the country's
largest e-commerce company. We first reported this in our March 28 edition.

This would give Tiger, Flipkart's largest investor, the much needed liquidity after having
ploughed $1 billion into the 10-year-old company. Tiger would part-sell its shares to
SoftBank and get the Japanese group to infuse fresh cash in Flipkart. The Bengaluru-based
online retailer got itself $1.4 billion recently from two of the investors Snapdeal had
engaged with (Tencent and eBay), along with Microsoft. In the recent weeks, Kalaari has
agreed to sell its shares to SoftBank to get the sale through, Nexus is still fighting for a
bigger payout.

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4.3.11) Snapdeal Flipkart Merger.

The deal valuing Snapdeal at around $1 billion, a steep fall from its peak of $6.5 billion last
year, signals the biggest consolidation in the sector and fierce competition between Jeff
Bezos-led Amazon and the poster boy of Indian e-commerce, Flipkart.

Japan’s Soft Bank is pushing for a possible merger between ecommerce majors Flipkart
and Snapdeal next month, potentially laying the foundation for the biggest consolidation in
the bleeding domestic e-retail market.A report in the Times of India on Tuesday quoted
sources as saying that Softbank was likely to invest $1.5 billion in the merged firm – a
stake of around 15%.

Flipkart is the market leader in the ecommerce sector but a better-financed international
rival, Amazon, is breathing down its neck. Indian Snapdeal has struggled to keep pace and
is currently third. The Indian ecommerce sector has seen explosive growth in recent years,
riding on growing internet usage and more customers willing to transact online. But deep
discounts and all-season offers to lure more people online has left companies crushed under
huge losses.If the merger goes through, the new entity would be the primary competitor to

SoftBank is learnt to have drawn up three options for Snapdeal- merge with Flipkart,
combine with Alibaba-led Paytm, or a writedown of SoftBank’s investment to zero, the
Times of India reported. The Japanese giant is the leading investor in Snapdeal.

Both Kunal and Rohit put together have only 6.5% of stake at Snapdeal. In spite of getting
two back to back offers from Flipkart of USD 800 million and USD 950 million, plus
having Softbank go ahead for the deal, they managed to prevent this merger from

Was this a masterminded plan to stay in control of their company despite of investors and
employees wanting it other ways?

How did they use their veto power in construing this great deal breaker?

Here is a detailed insight on how Snapdeal was always cultured to stay as a personal startup
and never meant for sharing or in building a great ecommerce story.

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What went wrong with snapdeal?

The string of pearls opportunity:

Bahl has always thought that he is destined for great things. One company was not enough
for him. He wanted to be an ecosystem creator - sort of an Indian Jack Ma. He called it his
favorite String of Pearls theory, which like most other things that he has done, is a concept
directly ripped off. So much for original thinking.

In order to seize this opportunity, Snapdeal eroded the money chest of billions in buying
out multiple companies and either closing them down or selling them for peanuts -,,,, luxury fashion products
discovery site,, GoJavas,Unicommerce, RupeePower, FreeCharge, Reduce
Data, Den-TV etc. All these acquisitions failed or were either shut down, or scrapped like
FreeCharge. If you buy something for $400 million, burn additional $100 Mn on it over 2
years, call it a crown jewel and then sell it off for $50 million, it is a scrap sale.

The gravy train opportunity:

Internal sources say that some of these acquisitions were conducted with the motive of
personal gain.

For example, Unicommerce was a company part owned Bahl & Bansal and as luck would
have it, was acquired by Snapdeal. The $400 Mn freecharge acquistion (at that time the
largest ever) seems to have never been put under any kind of scrutiny. One of the co-
founders over-ruled an internal due diligence report to buy GoJavas. Much has been written
about this acquisition.

The sharing opportunity:

In the history of Snapdeal, the only people who have made real money, and boat loads of it,
are Bahl& Bansal. Old timers and senior executives have had negligible share of any stock
sales. Seasoned executives like Head of M&A Abhishek Kumar, HR Head Saurabh Nigam,
Head Technology Amitabh Misra, Head Marketing Sandeep K, SVP Alliances Tony Navin,
ex CFO Aakash Moondhra, Vijay Ajmera etc - a number of whom were with Snapdeal
from the early years, quit in disgust at the obstinacy and unwillingness of the co-founders to
share wealth. More are following with nothing but broken promises and ESOPs with zero
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What went wrong with snapdeal?

The theater opportunity:

In February, in an email to employees, Bahl and Bansal, pledged to take a 100% salary cut
with immediate effect. The truth is they were making 50 crores each prior to that - perhaps
the highest paid founders in the start-up world around. So much for employee first,
conserving cash and cutting costs to turn around the fortunes of the firm.

And an opportunity for Snapdeal Board:

It is difficult to understand why the board has not protected the shareholders interests. How
has it allowed the cash burning, people churning founders who have a track record of
destroying value and flushing a billion dollars in the drain not been fired by the board of
Snapdeal? How has it allowed the co-founders leeway for such degree of mismanagement?

A very senior ex-employee speaking on the condition of anonymity said "The equation is
very simple. On one hand you have a bulk of employees getting assured employment &
board approved $30 Mn bonus.They become a part of a group rated as one of the best
places to work. The investors recover some of their investments. The plan B option benefits
only 2 people."

A current employee said, "Plan B does not make any business sense. No one believes it. It
is amazing that neither the investors, nor the board has seen it fit to discuss it with a wider
group of employees or understand its feasibility. It is doomed from the start and will erode
investor wealth even further."

An observer from the VC /PE circles commented "Kunal Bahl led ecosystem is peculiar as
it made money only for 2 people and surprisingly the board has left them in charge inspite
of all the sins of omission and commission. It has left a bad taste in the mouth of investors
and employees. I am sure this is not what the government wanted as an example of Start Up

Another employee said "Many members of my team have resigned and the ones who are
left were staying hoping for a positive outcome of the merger. This was promised by Kunal
in his email to employees. With this drama going on and on, it is increasingly obvious that

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What went wrong with snapdeal?

Kunal was lying yet again and did not let the deal happen. My team and I are fed up and
very soon there will be no one left."

Bahl has come up with a “Plan B”, in case the merger doesn’t go through.

Central to his plan is turning Snapdeal into a frugal operation, much smaller in size, and
keeping away from directly going up against bigger competitors Flipkart and Amazon.
“The plan is to become a much smaller organisation, bring down the cost of operations and
run it profitably,”

Some of the areas that Bahl has identified is lifestyle and general merchandising. “Both
these areas are highly profitable… Fashion makes money, general merchandising makes
money. These markets are so fragmented that the longtail is really, really long,” the source

A second source said that Bahl had told the board that he wouldn’t need to raise any
funding to run the business. The money required would come from selling off non-core
businesses such as mobile wallet business FreeCharge, and delivery firm Vulcan. The
proceeds would be used to turn around Snapdeal and make it profitable in the next couple
of years.

An expert was dismissive of Bahl’s new idea, pointing to how many times Snapdeal under
Bahl and co-founder Rohit Bansal has changed its business plan in the past. “They have
pivoted many times, a reason why investors have lost hope,” says Arvind Singhal,
Chairman of Technopak Advisors, a consultancy firm. “There can be a Plan B, C or D but
Bahl and Bansal have insignificant stake in the company. So the decision needs to come
from the investors or the board. Also, it is very easy to scale down a venture but what
happens to the value lost and the money put in by the investors, which is not the founders’
A third source said that Bahl had presented his Plan B to the Snapdeal board when the
merger discussions with Flipkart had just started but it didn’t pass muster among the board

“He had taken the plan to the board, but the board rejected it. SoftBank just wants to do the
merger,” the source said. “The plan is little fuzzy, but a plan is definitely there.”

the merger has seen multiple challenges — it started with differences with Nexus Venture
Partners and Kalaari Capital, and then with rising objection from smaller shareholders. The

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What went wrong with snapdeal?

latest one happened on Tuesday when the SoftBank board rejected the offer made by
Flipkart of $850 million, down from $1 billion it had agreed to, earlier.
The deal is being spearheaded by SoftBank, Snapdeal’s largest investor, and Tiger Global,
Flipkart’s largest shareholder, which is also running the show at India’s largest startup.

It is not about Flipkart or Snapdeal, neither about the board of Snapdeal. It is about
SoftBank and Tiger Global,” said the first source. “The valuation is too low. Tiger Global
has not given any reason why there has been a drop in valuation from the earlier agreed
billion-dollar valuation.”

There are other problems, too. “For those who will get shares in Flipkart after the share
swap, it is not problem. But for those who are cashing out, they want the money as soon as
the deal happens,” said this source. Due to above reasons merger of snapdeal with flipkart
did not take place.

The hyped Flipkart-Snapdeal merger has fallen through after six months of intense
discussions and speculations over what could have been the largest merger in Indian e-
commerce. According to various reports, the stakeholders on both sides failed to reach a
mutual agreement on valuation and other conditions for a deal.

4.3.12) Snapdeal 2.0

The hyped Flipkart-Snapdeal merger has fallen through after six months of intense
discussions and speculations over what could have been the largest merger in Indian e-
commerce. According to various reports, the stakeholders on both sides failed to reach a
mutual agreement on valuation and other conditions for a deal.The development follows the
acquisition of Snapdeal-owned digital wallet FreeCharge by Axis Bank last
week.Snapdeal’s vision has always been to create life-changing experiences for millions of
buyers and sellers across India. We have a new and compelling direction – Snapdeal 2.0 –
that uniquely furthers this vision, and have made significant progress towards the ability to
execute this by achieving a gross profit this month.

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What went wrong with snapdeal?

“In addition, with the sale of certain non-core assets, Snapdeal is expected to be financially
self-sustainable. We look forward to the support of our community, including employees,
sellers, buyers and other stakeholders in helping us create a designed-for-India commerce

The details on Snapdeal2.0 has not been revealed although there are speculations that it
would be modelled under Alibaba’s Taobao in China – which may be a risky step
considering Snapdeal’s earlier attempt in this direction –‘Shopo’- had failed to make waves
and shut down in around two years.

Just a few days ago, Snapdeal was also reportedly in talks with e-commerce Infibeam as
both co-founders could possibly have a higher control in the entity, unlike with Flipkart in
which both would have had minimal or zero significance.

After multiple debates on the valuation, Flipkart had reportedly agreed on $850 million for
Snapdeal, which was not acceptable to the latter. Snapdeal’s largest investor SoftBank had
been pushing for the sale to Flipkart for the past four months and managed to get Naspers
and Kalaari Capital on board. (It was obvious that Flipkart was keen on the deal with the
sole point of getting SoftBank on board – “Snapdeal is the dowry”, as one industry observer
calls it.)
In an email to employees, Co-founders Kunal Bahl (CEO) and Rohit Bansal (COO) has
claimed that although a lot of time and effort has gone into the strategic discussions,
Snapdeal will continue its journey as an independent company. The e-mail explains that the
reasons for this decision go beyond the complexity in executing the deal. It says:
“In every market, there are multiple successful e-commerce businesses, and as long as
one’s strategy is differentiated and has a clear path to success, there is a great company that
can be built.
We firmly believe in our new direction – Snapdeal 2.0 – part of which is a laser focus on
being a champion for all sellers in India, enabling anyone to setup a store online in a few
minutes and focusing on providing a large selection of products at great prices to
Secondly, we have made tremendous progress towards this new path over the last few
months and are already profitable at a gross profit (a.k.a. net margin) level, with clear
visibility to making upwards of Rs.150 Crores in gross profit in the next 12 months.
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What went wrong with snapdeal?

Finally, with the ongoing streamlining of costs and sale of some of our assets, such as
Freecharge, we are financially self-sufficient as a company and don’t need to raise
additional capital to reach profitability. Needless to say, we will need to keep a tight control
on our costs and work towards becoming a hyper efficient culture delivering profitable
growth, month on month.”

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What went wrong with snapdeal?

Chapter 5 Conclusion and Recommendation


After analysing entire case, we understand that the main reason for decline in marketshare
of snapdeal was because of wrong decisions taken, lack of value proposition and highly
competitive business Environment

Technology has made significant progress over the years to provide consumers a better
online shopping experience and will continue to do so for years to come. With the rapid
growth of products and brands, people have speculated that online shopping will overtake
in-store shopping.

Developing countries face many obstacles that affect the successful implementation of E-
commerce compared with developed nation Convenience is one of the benefit that customer
gets from shopping online and thus increasing customer satisfaction. E-commerce business
should give importance to every consumerby giving smooth service and should try to have
many function online. But E-commerce business faces a lot of challenges in flourishing
their business.

As more and more consumers move to online purchasing more and more service providers
are emerging in this field. But, e-commerce from the very beginning has been a very
difficult and loss making sector due to its nascent stage and lack of favourable
environmental factors in order to do business. Even though snapdeal had a good customer
base but due to highly competitive business environment it lost its market share and

Not having a clear focus or losing focus is the biggest crime in every business. Indian e-
commerce giants should come out of the notion that market share is the primary
performance metric. In many ways, Snapdeal is an important lesson for Indian startups.

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What went wrong with snapdeal?


1) E-commerce business should not only focus on its customer’s satisfaction but also try to
satisfy interest of sellers. For the success of any E-commerce business seller play a very
vital role .
2) All E-commerce business should have clear Execution plan and they should set their target
in a realistic manner.
3) Business should try to be innovative rather than replicating other person’s business model.
4) It is the responsibility of owners of business to protect interest of minority shareholders.
5) Obsess over customers, not competitors
6) Organisations should try to build a culture that it is right for the business

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What went wrong with snapdeal?


1) Report on India’s Digital Leap–The Multi Trillion Dollar Opportunity by Morgan stanley

2) Report on E-commerce Retail Logistics India by KPMG

3) Report on Rebirth of E-commerce in India by Ernst and young.



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What went wrong with snapdeal?


Questionnaire: What went wrong with snapdeal?

1. Name *

2. Age *

Below 18
60 and above

3. How often you shop online? *

Once in 7- 12 months
More than once in a month
Once in 1- 2 months
Once in 3-6 months

4. Which of the following are your reasons for shopping online?

Wide range availability
Not applicable

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What went wrong with snapdeal?

5. Which of the following are your reasons that deter you from shopping online?

Concern regarding quality of product

Lag between payment and delivery
I like to feel the products physically before buying
Not applicable

6. Which of the following features you like about snapdeal *

Ease of searching the item you are looking for

Customer Service
Delivery time
Cash on delivery
Exchange offer

7. Which of the following features you do NOT like about snapdeal? *

Less discount as compared to other e- commerce sites

Delayed delivery
Lack of Customer support
Other reasons

8. How do you rate your experience with snapdeal? ( Convenience, delivery time availability of
products, pricing structure) *


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What went wrong with snapdeal?

9. What are the other e-commerce sites you have shopped from?
Check all that apply.

10. According to you, Why snapdeal lost its marketshare ? *

Lack of value preposition

Huge overheads
Competitive business environment
Any other reasons.

11. Why did you stopped buying from snapdeal?

Lack of Customer support

No discounts
Unavailability of products

12. How do you rate amazon as compared to snapdeal?


13. How do you rate Flipkart as compared to snapdeal?


14. Do you still shop from snapdeal?

Yes Stop filling out this form.

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What went wrong with snapdeal?

No Skip to question 15.

15. Why did you stopped buying from snapdeal?

A) No discounts
B) Lack of Customer support
C) Unavailability of products
D) Delayed delivery


Calculation of χ 2

Observed(O) Expected(E) (O-E)2/E

26 52 13
60 40.33 9.5935755
14 7.66 5.2474674
70 52 6.2307692
26 40.33 5.0917158
4 7.66 1.7487728
60 s52 1.2307692
35 40.33 0.7044111
5 7.66 0.9237076

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What went wrong
with snapdeal?

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What went wrong with snapdeal?

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