STRTAEGIC FAILURE

OF

SUBMITTED BY: GROUP 6

ADITI VIKRERAM 17IB303
KESHAV GARG 17IB323
LAKSHIKA RANAWAT 17IB326
NARENDRA GUNTAKA 17IB332
SAHIL SANAN 17IB344
SHALINI ARYA 17IB349
PROBLEM STATEMENT:
How did Snapdeal, once among India’s top two contenders to e-commerce dominance, flame out
so spectacularly over less than 12 months?

WHAT WENT WRONG WITH SNAPDEAL

 No differentiation

Busy building too many warehouses and burning cash, Snapdeal never built any category as their
USP like Flipchart did with fashion and electronics, and Amazon with Prime and Pantry.

“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.

 Acquisitions for nothing

Many of Snapdeal’s acquisitions turned out to end poorly. The exception is logistics firm
GoJavas; but Snapdeal failed to capitalise it long term, and it fell into the hands of Pigeon
Express despite Snapdeal's 20 million investment in it. Snapdeal's own logistics arm Vulcan
Express was also rumoured to be in talks for sale.

If Flipchart 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 capitalize on demonetization like
Paytm. FreeCharge is now rumoured to be close to acquisition by Paytm.
Snapdeal could have had the upper hand in fashion, a high-margin category, had it acquired
Jabong. In fact, after Flipchart-owned Myntra acquired it, Snapdeal had tried acquiring
affordable fashion marketplace Voonik and luxury e-commerce platform Zapyle—according to
sources with direct knowledge of the talks—but failed to take the talks to a serious level.

Snapdeal’s earlier acquisition of Exclusively.com, for luxury fashion, bombed in less than a year
and was shut down a few months ago.
  Omni channel downfall

The failure of Snapdeal’s Omni channel 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. Organized retail in the country itself is becoming increasingly Omni channel, 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 service was not available for cash-on-delivery
purchases.)

Indian retail is evolving to blur the lines between online and offline channels.

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.
A former senior executive at Snapdeal tells that the Omni channel team had faced chaos
inside the organization
. “The leadership team had little power. They were unable to resource it to culmination
because it needed a dedicated tech team of engineers which it was not provided with.”

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. Yet, Snapdeal was able to reduce
returns from over 10 percent to minimal for large electronics with this initiative, according to the
person mentioned above. Its supply chain costs were also cut by one-third at the pilot level.

“Around Rs 10 crore only was invested in it since it was a low-key effort. But it needed creative
partnerships and technology hacks. For inventory in offline network, they used order fulfillment
software Unicommerce. But it stuck on the main tier-1 Snapdeal stack. Every time an update
happened, the Unicommerce system went for a toss as it was not well integrated. Net promoter
score (NPS) in those categories went up to 25–50 percent. Customer experience bettered while
delivery time decreased; costs were minimal as return was almost zero,” says the senior
executive. But due to “egos at play,” this person adds, there was no collaboration between the
technology and business, and the opportunity was lost.

 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 kirana network and Amazon Pantry, and was reportedly in talks
with online grocery market leader Big Basket for its acquisition.)
Online furniture market is nowhere near saturation and yet to be explored fully.

Supply chains work very differently for grocery than they do for other items; but Snapdeal had
GoJavas—one logistics firm which experts swear by. The Delhi-NCR region could have been a
great place to pilot, say experts, as Grofers - which currently has an upper hand- started only in
late 2013.

Snapdeal also had the highest number of fulfilment centres for any online retail platform in the
country—69 across 25 cities, while Amazon currently has 27 and Flipkart 26. This could have
been a major strength had they attempted to push the furniture category—one which demands
impeccable logistics due to the possibility of damage. Also, Snapdeal being based in Gurgaon
had an advantage considering the fact that the furniture manufacturing industry is concentrated in
the Rajasthan belt. The category is yet to make profit; but there is no denying that it is one of the
highest margin categories, and the online market is nowhere near saturation.

 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.
According to this person, the money was not shared with anyone—not even the exit money,
which was promised to the leaving employees. “The founders took it all. In contrast,
Flipchart is more democratic and inclusive. Snapdeal was never bothered about building a
culture; it never focused on its people,” says this person.

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 Flipchart,” says this person. (Anand
Chandrasekharan, who was hired as CPO from Silicon Valley, left the company a year after
joining.)

 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 demonetization 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.

 Multilingual tragedy

The vernacular app was lauded at the time of launching. However, either rural India was 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 not the biggest barrier to e-commerce; customer experience was.

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.
  Late Entry into Mobile Payments

Snapdeal has ventured into mobile payments a bit too late with Free Charge Wallet. Paytm’s
wallet services have already paved their way far ahead.

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.

 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 capacity.”

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.

 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.
  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.

 Struggle in Raising Funds

The company has been struggling to raise fresh funds due to the intense competition with
Amazon and Flipchart.

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.
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.

Discount & Marketing, at the same time, it rejected at least two funding offers because of
differences at the board.
  Snapdeal Mass Lay-Offs (Cost-cutting measures)

Snapdeal laid off 500-600 employees amongst its e-commerce marketplace, its firms, mobile
wallet Freecharge and logistics part Vulcan Express, with ‘100% salary cut’ take.

Snapdeal shut its consumer-to-consumer marketplace ‘Shopo’ recently and disbanded SD

Instant, its express delivery service. Categories like beauty and FMCG have been discontinued
too.

Kunal Bahl founder of Snapdeal wrote an email, “with all the capital coming into this market,
our entire industry, including ourselves, started making mistakes. We started growing our
business much before the right economic model an market fit was figured out.”

“We also started diversifying and starting new projects, while we still had not perfected the first
or made it profitable. We started building our team and capabilities for a much larger size of
business than what were required with the present scale.”

“Sadly, we will also be saying really painful goodbyes to some of our colleagues in this
process,” he wrote without giving the actual number of layoffs.

Following the founders’ email, Snapdeal is being widely criticized for the lack of focus on
profits, excessive spending on advertising and rebranding, and over-hiring.

 Snap chat- Confusion costs against Snap chat

After Snap chat’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 Snap chat
app.
It sparked off a boycott movement for ‘Snap chat’ 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.
“We are getting non-stop calls since Sunday evening. I have never seen this kind of social media
outburst for wrong news,” said an official from Snapdeal.

What’s next for Snapdeal?

Inventions can’t work without a decent business model. Sources claim that Alibaba would enter
the scene by merging Snapdeal and Paytm’s e-commerce portal.

The next trend of startups has now initiated. In the backdrop of high valuations and lack of
success shown by many players in the e-commerce sector will take a backseat now and many
venture capitalist will start to focus on data-driven startups.

Investment decisions will be made on a business model, tech, and vision.

OBJECTIVE

To critically evaluate all the short comings and strategic failures of Snapdeal, and find out the
loopholes in its strategy management. Along with it the objective here is also to define where
things went wrong, and could have been corrected and suggesting the ways that could have been
adopted then. A complete 360 degree evaluation of entire process is to be undertaken to explain
the failure of company and pinpoint the short comings accompanied with recommendation about
relevant corrective measures.