Snapdeal to layoff 30% of its staff in 2 months; What made Snapdeal face such an worst situation: Analysis

Gurgaon-based e-commerce company Snapdeal is reported to trim its employee count by 30% in next two months according to a report by ET.

Snapdeal plans to drastically cut down the operations costs as the growth of e-commerce market in India slowed down and the investors are showing reluctance in investing.

The move from Snapdeal will affect 1000 on roll employees directly and around 5000 contract employees working in its logistics subsidiary Vulcan Express. 

Jasper Infotech which owns Snapdeal last raised funds in August 2016 and is valued at $6.5 billion. Soft bank, which is the major investor in Snapdeal, is continuously assessing the resource allocation in Snapdeal. Soft bank, over the last few years, lost $350 million invested money in India.

Jasper Infotech has around 10,000 employees across all the operations - Snapdeal, Freecharge and Vulcan Express.

Snapdeal is facing financial crisis since a year where it did not receive any fresh round of investment after August 2016. Snapdeal has also stopped paying referral fees to affiliates for which Snapdeal said it is in a process of cutting down the costs of operations.

Snapdeal, last week reported that it will take another two years of time for it to report profits. But, looking at the scenario going on, for Snapdeal with no fresh investment flowing in, decrease in offers and deals, it will be difficult to battle against Amazon and Flipkart in the year ahead. This can also be attributed to the lack of exclusiveness in the product offerings. Mobiles, which have the largest share in total business is mainly driven by the flash sales and exclusive offering. In this regard, Amazon and Flipkart are already two steps ahead to Snapdeal.

Flipkart is also very soon entering to grocery space where players like Big Basket, Grofers and Amazon has established their footprint. It is not too late for Flipkart as the segment is in very nascent stage and there is a large room capacity left for it to conquer.

Snapdeal did not expand its product portfolio for many years. Instead, it is shutting down its sister companies. Very recently, Snapdeal announced that it is shutting down Shopo, an online marketplace for quirky and handicraft product only after one and a half years of operations.

Freecharge, another sister company of Snapdeal, failed to cash the demonetization crunch. PayTM and Mobikwik are the major companies in wallet segment benefited from the demonetization. Freecharge failed to create a room in the public as people got PayTM in their mind when it came to making transactions or paying to a shop. Freecharge is remembered by the people as a mere recharge website rather than a wallet company like PayTM. In this regard, Freecharge totally failed to monetize its offerings to the public.

Snapdeal failed to create a wow thing in its offering which made see one among the several such companies.