Snapdeal Case Study

Snapdeal, a very well-established ecommerce industry in India. Snapdeal’s story is one prime example that recounts how the story of a company can be meaningful in understanding its downfall. As Jackma quotes “Instead of learning from other people’s success learn from their mistakes”, the story of Snapdeal in the Indian ecommerce industry surely is a worthy testimony for others in the industry to avoid such mistakes.

The company was actually founded way back in 2010 but the high valuation that the company was receiving was in February 2016. At this point in time, the company was valued at about $6.5 billion. It was the time that marked the peak valuation of Snapdeal. The downfall however started cropping up towards the latter part of the year 2016 and continued into 2017. There were numerous problems such as funding issues, increased competition and also not-so-good customer experience and satisfaction issues. The Indian government’s decision to abolish the cash-on-delivery payment mode during the cashless economy drive led to a bad effect on the revenue generated by Snapdeal.

However, it played an important role in promoting the usage of electronic payment modes such as debit cards and credit cards

Factors responsible for the early success and growth of Snapdeal :

MoneySaver, an offline couponing business, was created by Kunal Bahl and Rohit Bansal in 2010. Three months down the line, they had to sell 15,000 coupons, and hence the business took a new level as they will take operations to that level. This led to the birth of Snapdeal on 4th February, 2010, essentially a daily deals platform which later evolved to become an online marketplace in 2011. Currently, Snapdeal is one of India’s largest online marketplaces and of course, famous for its exciting offers coupled with abundant discounts. Success of Alibaba, coupled with other factors, motivated the founders to shift the company from being a mere couponing startup to an e-commerce firm. Penetration of smartphones and government efforts to improve internet access contributed in large numbers to encouraging brand-conscious Indian BOP customers to venture into online shopping. E-commerce companies, such as Snapdeal, reaped the success of such emerging markets, where the notion of online shopping was fueled by the youth population. Snapdeal capitalized on this trend, which is very soon becoming a norm; its offering exclusive deals and discounts as part of consumer coupons was coupled with the boom of the online shopping industry. The company picked up soon enough by a wide array of products and quick deliveries. Online shopping is gaining much thrust in the e-commerce sector, due to various strategic partnerships with merchants. Combining over 100,000 merchants, Snapdeal collaborated and made sure that the product catalog was diverse and extensive enough to cater to the needs of a lot of customers.

High Competition and Market Movements:

The Indian e-commerce landscape was at its peak growth in early 2010, when Flipkart and Amazon made tremendous inroads into the market. Thus, the company, Snapdeal saw themselves also to be immersed in this period of fiercest competition for grabbing market share and attention from customers. Intense marketing moves, deep discounts, and an attempt to tread the path ahead strongly characterized this battle for supremacy. More than this, the changing market landscape, consumer preferences, and technology challenged Snapdeal to manage and respond or take full advantage of this change because otherwise it would be dumped. However, with the growing demand of e-tail platforms, intense competition with such emerging players like Amazon, Flipkart, and ShopClues kept on raising tough competition for Snapdeal to stand out in market space by differentiating its product offerings. On the other hand, Snapdeal failed to cope up with the rising expectations of customers. The company was unable to provide an uninterrupted and customized shopping experience apart from facing security issues associated with electronic payment systems. This further means that constant changes, say in general environments, impose a lot of pressure on the survival and prosperity of such e-commerce platforms as Snapdeal.

Funding Challenges and Strategic Decisions:

Snapdeal had been receiving robust financial backing, with a series of gigantic fund-raising rounds propelling its growth. Snapdeal has managed to raise significant investments from major venture capital firms and investors and also boasts a high valuation. However, after a more aggressive playing field and after getting successive setbacks piling up the challenge was quite challenging to be maintained at this pace.

At the beginning, it performed outstandingly as Snapdeal was highly funded with big rounds of funding putting extra fuel into the boat for massive growth. It had investments by prominent venture capital firms and investors in its pockets which increased the valuation several fold, but it was a long haul for continuous sustainable progress in this race.

Snapdeal was funded with heavy fund injections right from the beginning, and large rounds of funding ensured that the pace has been just incredible. The venture capitalist firms and the investors that have nurtured interest in its growth have also valued it impressively. However, as competition is picking up and challenges are cropping up, it is becoming very hard to sustain such a momentum.

Customer Experience and Seller Relations:

Snapdeal’s Journey: Enhancing Customer Experience and Strengthening Relationships with Sellers.

Snapdeal built a movement that was centered at optimally delivering spectacular customer experiences and fostered relationships with sellers, but such scaling aspirations eventually became its Achilles’ heel while scaling in an ever-changing Indian e-commerce world.

Improving Customer Experience: Snapdeal has started to focus more on customer satisfaction, using innovative methods and offering discounts for appealing to more customers. But scaling up such efforts was challenging. Issues related to delayed delivery and low-quality products further eroded the trust and loyalty of consumers regarding Snapdeal.

Build Seller Relationships: Snapdeal did manage to get a multiplicity of sellers at the beginning but could not manage the expectations or coordinate their ends while dealing with them. Issues with payments and logistics congested the balance required between satisfying the selling ends and fulfilling those of end-consumers.

Deteriorating customer experience and strained relations with sellers were the flux that snapped Snapdeal to pieces. Negative churn in customer opinions, coupled with the tremendous competition needed to maintain a robust marketplace, caught up with Snapdeal’s position. It was aggravated by strategic investment moves from competitors.

The history of Snapdeal, in a nutshell, illustrates how delicate it is to set the complex balance between pleasing customers and pleasing vendors. This subtle handling is crucial to navigate the dynamic world of e-commerce, where there can be flexibility that differs a company’s trajectory.

Business Model and Differentiation:

SnapDeal had over 100,000 sellers in the network when it was active.

To enhance the engagement of the sellers, they are compelled to add products to the site and accept SnapDeal’s terms and conditions, which include a negotiated selling commission ranging from 5% to 30% of the sale value, depending on the listed item. When a customer places an order, SnapDeal relays the order to the seller and coordinates pick-up and delivery if fulfilled by SnapDeal, or the seller directly ships the product to the customer. After a pre-agreed period, SnapDeal consolidates the total sales achieved by a specific seller and initiates a wire transfer of the remaining funds to the seller, after deducting the sales commission and service tax.

Ad-space revenue model:

SnapDeal was very popular in India as an online site, and much traffic accrued both during sale and non-sale periods. SnapDeal tapped into this and capitalized on the market demand for advertising slots by monetizing ad spaces. At this juncture, there were thoughts, but Invest in Komli Media for ad space know-how, the deal was valued and priced too high thus didn’t work out Samsung, ClearTax, Tata Housing, Housing.com, Windows, Mahindra Commercial Vehicles, ClearTrip, BankBazaar, and Uber paid SnapDeal to share space for advertisements The payment structures were different. It mainly managed because of the flexibility of SnapDeal to accommodate almost all advertisers. In addition, SnapDeal would charge Listing fee model from which it charges its sellers for visibility on its high-traffic platform that augmented its revenue. Snapdeal earns not only the profit through the sale of products and services but also a small amount of revenue comes from the companies acquitted by them. Some of the notable ones are Grabbon, Esportsbuy, FreeCharge, Unicommerce, Smartprix etc.

To put it in a nutshell, SnapDeal’s revenue streams were diversified and hence, include:

Sales of commodities and services through various portals, of which one can point out the main portal of SnapDeal, deals, and EsportsBuy.

Charging fees from the sellers for listing their products on the platform-which gave them greater visibility and made it easier to transact.

Listing particular sellers on the landing page in order to increase the visibility.
Tapping the heavy traffic by giving ad space to brands, some of which have been reputed brands like Samsung, ClearTax, and Uber paid to display their advertisements on this platform.
Revenue from the money-making business of FreeCharge, payment gateway associated with it, through which it provided smooth transactions.
Through UniCommerce, SaaS offering, another dimension is added to its diversified business model and reeled revenue.

Mergers and Acquisitions:

Merging with the leading e-commerce sites, Snapdeal faced a long chain of issues in attempting to merge with some of the larger players such as Flipkart. In fact, one of the primary issues that came along was valuation, which needed long-time negotiating to set something that would be reasonable and acceptable for the new value of the merged entity. The operations merge was quite complex where all the integrated systems require a detailed approach so that there are no hassles in making a smooth transition without any kind of conflict that results in disruption of the user experience.

Besides stakeholder alignment, it also introduced another complex level because it required extensive negotiation to align their different visions, priorities, and expectations among both investors and the leadership teams. The regulatory environment, too, contributed to complexity-the e-commerce sector had intricate regulations requiring time-consuming approvals and compliance measures.

Employee issues mainly revolved around job security, roles, and potential restructuring for restructuring their employees

Moreover, it complicated the negotiation process. These issues became important for a positive workforce transition. Snapdeal’s case in considering such mergers is illustrative of the complex aspects, financial and human resource-related, that define strategic initiatives in an ever-changing e-commerce industry

Cash Burn and Operational Challenges

Financial performance analysis: Snapdeal was in a series of rapid cash erosion, and it revealed gross divergence between the organization’s spending and its cash generation activities. The company was restricted by financial constraints and could not invest enough in technological moves, marketing initiatives, and other significant sectors. Such cash erosion was temporary as far as current financial health was concerned but had long-term implications for Snapdeal’s strategic versatility and market position.

Operational Barriers: Operational barriers created a great test for the company’s onward movement. The marketplace was becoming larger; the logistics had to be managed efficiently; and customer services were vital, all of which raised the company’s operational capabilities. The failure of the proposed merger and the subsequent attempts to continue running the business independently created more intense challenges for Snapdeal, making the need for the company to restructure and adjust its operating system strategically.

Impact on competitiveness: In its turn, the financial stress and operational hurdles have turned the competitiveness of Snapdeal within the landscape of e-commerce into severe pressure. The constraints failed to allow the company to stay competitive regarding innovative and aggressive strategies being deployed by competitors, especially the industry giants Flipkart and Amazon. As such, the competitiveness of Snapdeal went lost- something that translated into lost market share and a lowered position in the fiercely competitive market.

Limitations on Innovation: The financial constraint affects the innovative level of e-commerce like Snapdeal. The lack of finance restricts the company from investing much on advanced technologies, improving the user’s experience, and other strategic alliances. With this, Snapdeal lags behind the larger ones and cannot fulfill the market demands.

Customer Trust and Reputation:

It is through the never-ending world of online trade that the factor of trust and reputation really dictate success or failure in a company. Snapdeal was once associated with values and reliability. However, due to years of continuous service related issues and operation-related problems, the strong trust among the customers is now fading away. Delayed deliveries, qualitative deficiencies in the products, and failures in customer service all worked towards tainting the image of the company in the imagination of consumers and sellers alike and made the latter lose their respect for the former.

This result of degradation went beyond immediate level challenges to cause a severe hit on customer retention, acquisition, and perception of the brand in general. The losses were borne by Snapdeal as its erstwhile faithful customers deserted it due to shifts in consumers’ loyalty towards other sites that offered a much more dependable and predictable experience of buying and selling.

Restoration of Brand Position: This was a task of gigantic proportions for the company with an added problem of regaining back consumers’ trust to restore its brand image.

The digital era changed consumer behavior and preferences very rapidly. This forced Snapdeal to adapt rapidly to the market dynamics that began to shift. Mobile commerce, changes in shopping patterns, and the growing need for customized experiences transformed the world of e-commerce. Resultantly, companies had to adapt to changing customer demands.

Nevertheless, Snapdeal did not find it easy to align its offerings with the new tide of consumer behavior. The company’s inability to keep pace with evolving preferences by its customer base, given the investments required to be made in technology and user experience, really strained the company’s resources and derailed its capacity to stay ahead of the curve. The change in consumer behavior posed a stiff test for Snapdeal, as it was compelled to re-orient its strategic approach and make the necessary adjustments to remain relevant in an increasingly competitive marketplace.

Regulatory and Compliance Issues:

Aside from the dynamic market environment and competitive pressures, there were many other issues at work on Snapdeal. The Indian e-commerce industry is driven by several other complex regulations in such diverse areas as foreign direct investment, taxation, consumer protection, and intellectual property rights. To get to expansion into profitability, Snapdeal had to move through the web of rules-that is quite more than the complicated dynamics of operations.

Many of these regulatory and compliance issues often required huge expenditures on legal and regulatory compliance that took away precious company resources from core business-related activities. In addition, Snapdeal had to constantly evolve in keeping with changing regulatory mandates and ensure strict compliance with the dynamic legal framework that existed. This imposed a strain on the operational capabilities of the company and made it a consistent source of friction obstructing smooth growth.

Changing Chiefs and Internal Shocks:

It’s a minor major reshuffle,” said co-founder Rohit Bansal of the online marketplace Snapdeal.

These include elevation of key executives into new roles and consolidation of several categories under this company. According to internal emails reviewed by the sources, Bansal views these changes as essential to achieve better business outcomes. This restructure has placed market development and category management beneath the umbrella of Vishal Chanda, who is now Senior Vice President of Business at Snapdeal. The multiple verticals that this new structure contains comprise mobiles and tablets, fashion, general merchandise, electronics, food, as well as refurbished products. Functions such as central merchandising, seller services, business development, and pricing and analytics reporting would report to Chanda. Bansal said: “There will be a shift into a business unit structure with category managers, key account managers, brand partnership managers, and other functions related to a category all aligned within the same business unit. Other moves include Supra Bansal, Vice President and Head of Category Management, moving to oversee Snapdeal Instant.”.

The pricing analytics team would report to Anup Vikal, and Tony Navin, senior executive at Snapdeal, would lead the teams for strategic partnerships and new initiatives. This restructuring would align perfectly with the festive season, which is an important time for e-commerce players. The transition process is expected to be completed soon. Bansal admitted that these changes might send a few executives looking out for opportunities outside the company. Downsizing and Restructuring: Snapdeal faced intensifying pressures and operational complexities, resulting in significant downsizing and restructuring efforts.

Such moves aimed to streamline the operations and save on costs, but also caused difficulties in terms of dealing with employees’ morale, talent retention, and operational uniformity.

No matter the effort, such necessary moves often led to many disagreements and uncertainty within the company. It proved a very difficult and tight spot for Snapdeal to balance out cost optimization with the preservation of its workforce in trying circumstances while navigating through turbulent times and coming out stronger from the difficulties. Negative Press and Public Perception: The adversities had a huge impact on Snapdeal’s course. This was a major reason the company faced widespread attention, which adversely influenced its market standing, publicity that had plastered many adverse negative stories about operational issues, customer complaints and internal disruptions.

Constant streams of adverse publicity and subsequent public perception not only wrought erosion in Snapdeal’s brand equity but also restricted it from attracting and retaining customers.

The tremendous influence of adverse press on the reputation of Snapdeal became the framing narrative of the company, where consumer sentiment was alarmingly altered. Despite best efforts by the company to neutralize the adverse press and transform perceptions, these moves often failed. The dent it had received in the brand image now became a substantial hurdle that restricted the ability of Snapdeal in recovering from the operational and strategic challenges it was now confronting. Overall and sustained negative press as well as public perception continued to haunt the prospects of recovery.

Lessons Learned and Future Implications:

The cautions of competitiveness and innovation can be found as the highlight of a resilient financial strategy and adaptable operational framework to be successful in this ever-changing world of online commerce. The journey of Snapdeal has offered a set of very precious

Key takeaways and insights for the larger e-commerce landscape:

Adaptability is Crucial
Trust and Reputation are Non-negotiable
Operational Excellence Matters
● Leadership Stability is Key
Regulatory Navigation is a Strategic Imperative
Innovation is a Lifeline:
Effective Crisis Management is Essential

Conclusion:
In short, it was Snapdeal’s life cycle-the rise and the fall-that completed the overall case of the dynamic, highly competitive field in which e-commerce is being promised. So, strategic decisions, considerable funding, and a booming market made Snapdeal successful, but tough reasons of downfall included problematic funding issues and increased competition along with serious concerns about customer satisfaction. Things did not get better with the government’s initiative for a cashless economy and the decision to abolish cash on delivery. Factors that helped Snapdeal in the early days were strategic pivot, penetration of smartphones, and partnerships, among others. Intense competition with market dynamics led to certain differentiations as well as consumer expectations. Funding troubles cropped up, and attempts at mergers and acquisitions were met with roadblocks. The Snapdeal approach to selling to customers and dealing with sellers was important in its rise and fall. Delayed delivery, low-quality products, and payment dispute issues strained relationships and paved the way for Snapdeal’s fall. The complexities of Snapdeal’s journey show the fragility of this e-commerce business.

Niharika Upadhyay

Niharika Upadhyay

Data Science Instructor & ML Expert

Niharika Upadhyay is an innovator in the fields of machine learning, predictive analytics, and big data technologies. She has always been deeply passionate about innovation and education and has dedicated her career to empowering aspiring data scientists to unlock their potential and thrive in the ever-evolving world of technology.

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Niharika has been a transforming mentor for thousands of students who attribute her guidance as an influential point in their career journeys. She has an extraordinary knack for breaking down seemingly complicated concepts into digestible and relatable ideas, and her favorite learner base cuts across every spectrum. Whether she is taking students through the basics of machine learning or diving into advanced applications of big data, the sessions are always engaging, practical, and results-oriented.

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With her blend of technical brilliance, practical teaching methods, and genuine care for her students' success, Niharika Upadhyay isn't just shaping data scientists—she's shaping the future of the tech industry.

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