Snapdeal, flipkart

Due to slowed growth and ongoing battles in the Indian e-commerce ecosystem, Snapdeal is starting to give in to the surmounting pressure. The SoftBank-backed company has now reportedly started taking drastic measures to cut costs and streamline operations. This move might also resolve around the lack of fresh capital investments into such unicorn startups, who’ve gobbled up hefty sums of money in the past.

Citing four people aware of the developments, an Economic Times report says that Snapdeal is looking to layoff as much as 30 percent of its workforce in the coming two months. This restructuring exercise is expected to directly affect more than 1,000 employees working with the marketplace division, employed by Snapdeal themselves. The market managers, through an internal memo, have already been instructed to “right-size” their respective teams. The first round for handing out pink slips began last week, say sources.

Further, the said reshuffling is expected to extend its grips into the logistics and operations part of the business as well. A significant number of contract workers in the company’s logistics divisions, especially Vulcan Express, are expected to feel the heat of this massive layoff streak. Shedding further light on the layoffs, a company executive says,

5,000-odd contract staff employed by the company’s logistics subsidiary Vulcan Express will be pared down as well as about 3,000 people on the rolls of the logistics company.

Another source aware of Snapdeal’s current business situation says,

The company now has an investor which has suddenly gone cold on India and is looking to right-size operations by reducing discounts, which in turn will reduce orders and requirement of staff,

Additionally, this speculation has surfaced on the heels of recent top-level executive exits and the closure of their marketplace Shopo, which it acquired back in 2013. Snapdeal had decided to lead a massive investment of $100 million over the next two years but that’ll no longer be the case as February 10 marked its demise. The operations of Shopo have now been merged with FreeCharge, another entity acquired by the company in August 2015. Talking about the exits, one of the source says,

These senior-level exits are on account of the executives looking out for better opportunities. The layoffs are primarily directed at mid-level employees and new hires about to complete a year.

The e-commerce giant is currently stuck in a pit of rising losses and lacking investments, a looming problem being faced by companies that were once the poster boys of India’s burgeoning startups ecosystem. Such is the case with another homegrown e-commerce giant, Flipkart. Both the companies are witnessing increasing losses, which have caused them to reel away due to expansion efforts launched by Amazon. It is currently tackling not only the e-commerce market but also targeting the hyper-local space with Amazon Now.

But, if you know how to put one and one together then you will realize that Snapdeal is streamlining operations to achieve efficiency. It is now going for a much leaner business model, suitable for an e-commerce startup of their magnitude. They are trying to consolidate their business operations and the layoffs are affecting redundant teams at the company.

On reaching out, a Snapdeal spokesperson did not confirm the company’s layoff plans. But the linguistics of the statement shared definitely hints toward business consolidation to keep the company afloat. In the statement shared via electronic medium, the spokesperson said,

On our journey towards profitability, it is imperative that we continue to drive efficiency in our business, which enables us to pass on the value to our consumers and sellers.

As in the past, and like all good companies do, we will continue to assess resource allocation in furtherance of our goals of enhancing customer and seller experience while driving high quality growth.

Additionally, this business consolidation can be seen as their effort to attain the ambitious goal of achieving profitability in the coming two years. Snapdeal CEO Kunal Bahl just recently stated that the company is not looking to generate profits immediately but is now working in the said direction. Talking about the same, he further added,

I see a relatively clear line of sight to (profit) and we have been making great progress in that direction also. We needed capital to build the infrastructure which we have, now we have to take control of our destiny.

This speculation goes hand-in-hand with the decision to layoff a massive chunk of the workforce. The company has recently also brought in former Housing CEO Jason Kothari to court investment opportunities from investors — a necessity for them. Till date, Snapdeal has raised nearly $1.6 billion at their last-standing valuation of $6.5 billion. Their investor bouquet includes SoftBank, Foxconn, Intel Capital, Alibaba, Kalaari Capital and many more.

We’ve contacted Snapdeal for more information on this report and will update you once we hear back from them.

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