After several offers and proposals, Snapdeal has refused to merge with Flipkart and in fact, has completely canceled its plans to sell its stakes, and now plans to implement its ‘Plan B’, which involves more job-cuts and running the business at a much lower scale than ever before.
Apparently, the implementation of the plan is already in full-scale with the recent appointment of new CEO and COO of Snapdeal’s e-commerce management unit Unicommerce; Rajiv Makhija and Ankit Khandelwal. A boost to this new plan comes in the form of the recent sale of Freecharge, an acquisition of Snapdeal to Axis Bank at Rs. 385 crores.
The conflicts with Flipkart which finally led to the cancellation of the acquisition talks of Snapdeal was the low value at which Snapdeal was being sold at. Flipkart was ready to offer nearly $900 million for the purchase of Snapdeal, but the latter firm, which was valued at around $6.5 Billion almost a year ago, was not ready for that and was thus”uncomfortable” with this deal. So much that the company finds it a better option to make all efforts possible to raise this sinking boat called Snapdeal back towards the shore.
A major investor of Snapdeal, Softbank is also game for the new plan and has trust in the ability of Snapdeal to revive its profits, albeit at a much lower scale and level. As per the report, the Company plans to sell off its core assets, cut nearly 600 of its jobs from its over 1000 employee pie, which would make their total remaining employees around the 250-300 figure.
What could Snapdeal possibly be able to do with the business scale lowered to such an extent? They might not have many liabilities and debts pending thanks to the sale of Freecharge and the laying-off of employees. Even so, the e-commerce market in India does not seem to have much to offer for new players or newer techniques for business. In such a case, would it be possible for Snapdeal to grab a share of profit from the leaders Amazon and Flipkart through a new and different marketing practice or a business model?
Well, Snapdeal’s business model could turn from e-commerce oriented to a marketplace oriented model. What would it mean? Well, if the number of employees are reduced to merely 200-300, then the warehouse and logistics departments of Snapdeal might have to be shut down as well. When that happens, the company might look up to third parties to provide such services.
Also, Snapdeal might allow sellers to control their own inventory and products, which reduces the need to maintain and control warehouses. So without having to deal with investments to buy and store products for deliveries, Snapdeal could well become an online marketplace for Consumer-to-Consumer business (C2C) in which the website would only serve as a portal for purchase and sale of products rather than a complete e-commerce website like Flipkart or Amazon, which rely on B2B and B2C business models.
So would Snapdeal really be able to revive its fortunes and create a unique success story? Only time will tell. As of now, one thing is confirmed. Snapdeal isn’t getting sold anytime soon, and the Snapdeal 2.0 strategy would be a make or break kind of a situation for the Company. They might choose to lower-down the scale of business and try to make it profitable as much as possible. Then, after the growth reaches a substantial rate, the decision would be either to continue business or to end it there.