Tale of Revival

After being on the verge of shutting down in 2017 following a failed merger with Flipkart, Gurugram-headquartered Snapdeal has seen revenue surge and unique customers grow with its focus on value ecommerce

MANU BALACHANDRAN

Kunal Bahl doesn’t like to give up easily. And certainly not without a fight.

A pioneer in the Indian e-commerce industry, Bahl co-founded Snapdeal—one of the country’s earliest unicorns—in 2010, when he was just 24. Within six years, it became the second-biggest e-commerce company in the country, with a market valuation of $6.5 billion. In that period, apart from becoming a darling among investors—Snapdeal boasted some heavyweights as investors, including Ratan Tata, eBay, SoftBank, and Nexus Venture—it also acquired 11 companies, the most notable being FreeCharge and Unicommerce.

Then, in the summer of 2017, the dream run came to a screeching halt. Seven years after it was founded, an imminent shutdown loomed over the Gurugram-headquartered company after a failed merger with Flipkart. It was left with inadequate funds, enough to barely last a month. Bahl and co-founder Rohit Bansal were in a similar situation sometime in 2013 when the funds had run dry, but 2017 was different. Raising money wasn’t going to be easy and it would only mean the end of the road, as Amazon and Flipkart tightened their grip over the Indian market. Even the planned sale to Flipkart was at a fraction of its peak valuation of $6.5 billion.

Bahl and Bansal, however, weren’t ready to leave without a fight. “With a perplexed team in the office and critics crowing from rooftops, it was much easier for Rohit and I to move away, washing our hands off a toxic situation,” Bahl wrote on LinkedIn in 2018. “That, however, was farthest from our minds.”

Now, three years later, perhaps as the last surviving entrepreneurs with the reins of their e-commerce business firmly in their hands, Bahl and Snapdeal are starting to script a turnaround. Over the last three years, Snapdeal has reduced its loss by an incredible 95 percent, while revenue from operations grew by 85 percent. Traffic, the company claims, has seen a 100 percent growth. Last year, more than 27 million unique buyers bought on the platform, and amid the pandemic, it added another six million users and 20,000 new sellers, apart from its already-existing 500,000 sellers.

“We are the last large entrepreneurial Indian e-commerce company left,” Bahl tells Forbes India over Google Meet. “Outside of us are large global or Indian corporations. One has to wonder why that can’t be just happenstance. It’s because we have been sharp about what we work on, and what we don’t want.”

Of course, much of that is because of a reinvigorated energy, vision and focus that the company calls Snapdeal 2.0, and more importantly, a deeper understanding of what it doesn’t want to do. And also, a guard rail that it claims to have put in place, ensuring it doesn’t deviate too far away from where it wants to focus, unlike earlier when it spread too fast too early.

“It’s about focusing on very few things and doing those very well,” Bahl says. “That’s a big learning for us as a company, as an entrepreneur, as a management team… that excellence comes with focus and doing very few things really well.” That focus on specialisation is what eventually brought Snapdeal to find a niche and shift its attention to what it calls value e-commerce. The segment, Bahl claims, provides a $163 billion opportunity in India and involves selling unbranded or lesser-known brands with very high value to the consumer, particularly in the low and middle-income categories.

“It is about unlocking aspirations for those with less money,” Bahl says. “These customers are looking to make a discretionary purchase online but are fairly value sensitive. What they care more about is not for the big brand logo, but whether what they are buying is of value.”

PIGGYBACKING ON VALUE E-COMMERCE

Bahl’s latest gamble towards betting on the value e-commerce category is largely a result of India’s growing mobile phone and internet penetration. India currently has some 504 million active internet users, of which about 70 percent are daily users, according to the Internet and Mobile Association of India. The country’s smartphone base is expected to swell to some 820 million by 2022, according to consultancy firm KPMG.

“With Jio entering in 2016 and the 4G penetration growing quite dramatically, it brought online hundreds of millions of new internet users who were earlier not online,” Bahl says. “A large number of them belonged to the low- to middle-income demographic in the small towns of India, whereas earlier it was mostly consumers from the big cities who were affluent and buying online. Also, what we saw was that a lot of smaller regional manufacturers and traders started coming online in the last four years.”

That meant taking a step back and devising a different tactic to its earlier version. “Prior to 2016, mostly what would sell online and what would be bought online were brands,” Bahl says. “It’s not that the buyers don’t want to buy an iPhone or make some very expensive purchase. But they lack the ability to do so. However, they don’t lack any aspiration to look good or to feel good.”

To do that, Snapdeal began by building a portfolio of products that aren’t expensive or could potentially dissuade buyers. “We don’t do any discounting because most of our selection is incomparable,” Bahl says. “We have 200 million listings on our platforms. When comparability comes in, that’s when discounts become a critical element.” It also helped that the company found numerous manufacturers, who were looking to sell directly, unlike the traditional structure of selling through wholesalers and retailers.