Sunday 10 July 2016

Is Snapdeal on the verge of fading out or profitability?

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With Amazon tightening its grip on Indian ecommerce, industry experts believe that in the coming years out of the two national players – Flipkart and Snapdeal, only one can survive. And if we look at the recent developments, then the chances of Flipkart’s survival are high compared to Snapdeal.
Silent murmurs of Kunal Bahl’s company gradually fading away have begun.

Snapdeal hardly in sight

Of late, majority of the big ecommerce news & reports, whether positive or negative, are related to Amazon and Flipkart. Everyone is glued to Amazon VS Flipkart war.
Both the players are always neck-to-neck whether it is launching seller services,ad-campaigns, product categories, alterations in commission rates, visitors’ traffic, and app traffic. It is almost invariably about who is ahead today- Flipkart or Amazon, with Snapdeal falling way behind.
Take for instance:
  • RedSeer’s E-tailing Leadership Index (ELI), in which Flipkart’s score was 91 and Amazon’s 4 point less at 87. Whereas, Snapdeal scored 60
  • Flipkart and Amazon’s GMV increased but Snapdeal’s GMV decreased, which has opened a window for Shopclues to grab the 3rd position
  • In Afaqs Buzziest Brands 2016 list, Amazon was at 1, Flipkart at 3 and Snapdeal was far behind at 8
  • While Amazon and Flipkart’s net promoter score (NPS) is 88% and 85% respectively, Snapdeal’s score is 69%
“Snapdeal has been having an identity crisis for the last couple of years. Flipkart has the advantage of a strong logistics infrastructure that they have developed in-house. And Amazon has long years of experience and deep pockets. But Snapdeal has not solved the logistics problem and it will suffer because of the lack of ecosystem,” according to Sanchit Vir Gogia, Chief Analyst at Greyhound Research.

Only one national player can survive

When the American etailer wasn’t around, Snapdeal had more market space and the luxury to be little complacent. But ever since Jeff Bezos brought his business to India and backed it with billions of dollars, Snapdeal is finding it tough to stay ahead in the competition.
Nikesh Arora, former President & COO of Softbank (largest investor in Snapdeal) who resigned in June 2016 said in one of his interviews,
“In the last two years what has happened is that Jeff Bezos has come out and said he wants to win India at all cost. He will spend billions of dollars in India and that’s a new competitive fact. You have to figure out a way to compete with that. The question is does it become like an Alibaba JD, a two-player China market, or a multi-player market? That depends on execution.”
He also said,
“Snapdeal has to compete with Amazon and Flipkart for a while which will be a tough fight.”
Experts are predicting that given the circumstances, only one global and one domestic player will survive in the Indian ecommerce industry.
“I don’t believe the Indian market will be able to sustain two big domestic players and one big international player. In about three years, I believe, the Indian market will have to consolidate into one international and one domestic player. So it will be Amazon, and either Flipkart or Snapdeal,” asserted Anindya Ghose, Director of the Center for Business Analytics at NYU Stern.

Bahl says the company will turn profitable soon

But according to Snapdeal’s co founder and CEO Kunal Bahl, the company will soon touch profitability contrary to what reports suggest. He recently said,
“Snapdeal is well positioned to turn profitable in the next two to three years.”
Bahl admitted that the company has rectified its strategy and is moving away from the GMV obsession. Some of its realigned strategies are adopting customer-centric approach, limiting discounts, cutting back seller commission, and acquiring start-ups.
“There comes a point when you recalibrate and I am glad we did a recalibration, otherwise one will run out of resources… Net revenue is the key metric that we will look at… GMV is so 2015,” said Bahl.
It is also true that though Flipkart is ahead of Snapdeal in many ways, Bansals’ firm is also struggling on many fronts. So it’s quite possible that the one domestic player can be Snapdeal. Also, with China’s Alibaba and Japan’s Rakuten entering India, isn’t it too soon to declare that Amazon will be the sole international player?

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