A significant of the people in the startup ecosystem, if not a majority, have been expecting Snapdeal to either shut shop or get acquired at a very low valuation. Yesterday, the media broke with the news of Freecharge CEO, Govind Rajan on his way out. Freecharge was acquired by Snapdeal in April 2015, for a whopping $400 million (at least by Indian standards). More gloom spread when news of Snapdeal laying off 600 people came in.
So has the Indian e-commerce bubble finally burst? The question is too early to be answered. India is a huge market with huge potential; and there is a huge startup ecosystem out there. Many of them still want to launch e-commerce websites, and focus on niches. Probably to be acquired some day? Nothing wrong in that thought process.
But I can say one thing for sure is that failure of Snapdeal will dent the Indian startup ecosystem. It is an important cog in the Indian startup wheel and one of the prominent e-commerce category creators in India. Although it started as a deals site, it moved on quickly to be a full-fledged online marketplace. Snapdeal and Flipkart both not only disrupted retail in India and spoiled the consumer for choice but helped flourish ancillary services — read distribution, fintech, jobs, etc.
If nothing else, what startups can learn from Snapdeal, and of course Flipkart is — How not to be a startup?
The letter yesterday from Founders Kunal Bahl and Rohit Bansal to their team was profound enough, brutal, emotional and most importantly honest.
“…a large amount of capital with ambition can be a potent mix that drives a company to defocus from its core. We feel that happened to us. We started doing too many things, and all of us starting with myself and Rohit, are to blame for it,” the founders said in the mail.
They sure have learned their lessons and these lessons will be taken up by the industry; and Management institutes will publish reams of papers on case studies. What is worrying though is that lessons come at a cost. Around 600 people will be losing their jobs. That is an unconfirmed number though. Real figures can be far bigger than that. As the company goes lean, it could have a domino affect on the ancillary services as well and rub on to other e-commerce players too.
Of course — both Bahl and Bansal are taking a 100% cut in their salaries. But am sure with the voyeuristic figure of salaries they and the other top executives were getting, they would’ve saved enough to sail them through for another year without a salary. That’s debatable though, because, the e-commerce culture only taught one thing to consumers — spending. A discount here, but still spend; and culture starts at home.
My heart goes out to people who’ve lost their jobs. Probably these are people who didn’t get these ridiculous salaries. If they did, hope they saved enough to sail them through till they find some other job, which probably would be at a far lesser salary.
Snapdeal founders are positive and have their foreign competition — Amazon — on their benchmarks’ list.
“… there is almost no successful company on the planet, which hasn’t gone through this phase in their lifetime – Apple, Amazon, Netflix, Tesla, Lego, Spicejet, you name it! Each one of them had painted themselves into a corner many times over before they became as wildly successful as they are today. A quick look at their stock prices over the last 15 years will show you what we’re talking about. The formula to revive the company is uncannily similar for almost all of them – focus on only your core, stop all non-core activities, reduce costs drastically, turn profitable as soon as you can, and use those profits to spur further growth and new projects. We must do the same…”
I hope the course correction taken by Snapdeal does bring it back to its glorious days. Its failure not only dents the consumer trust and faith, but the Indian startup ecosystem sentiment as well. We can expect slowdown in investments in the e-commerce sector in India. Last week, Urban Ladder, an online furniture store, got a funding $15 million, which should uplift the sinking startup sentiments. Seems investor confidence is not entirely lost. However, Urban Ladder will be investing much of this money in brick and mortar stores.
“These are tough times, no doubt. But, I am supremely confident, that like we have done before as a team, we will prevail. The greatest companies in the world got built in many interesting patterns – we just can’t tell the pattern while are in the midst of it. For now, we need to keep our heads down, focus all our energy on execution that delivers on our two focus areas – best customer and seller experience, and profitable growth. This will mean tough choices and a conscious departure from a me-too race to the edge of the cliff. Let’s remember – GMV is vanity, Profit is sanity,” the founders further wrote in their mail.
Both Bahl and Bansal cannot leave it to others — read acquisition, that probably is the easiest route out — to do the dirty work of cleaning up the culture within. They have been the poster boys of the Indian e-commerce industry, and the Indian startup ecosystem as well. They will have to lead from the front to show how to clean up the mess. It starts from the point of acceptability of having done mistakes, which Snapdeal has done. Hopefully, we will see Snapdeal sooner or later amidst profits. Over to you Flipkart. We are watching when you take the plunge into course correction.
Note: This is an Opinion piece