A day doesn’t go by when someone doesn’t ask me this question – “So, how are things now at Snapdeal?” I do my best to answer the question, and usually get responses that range from skepticism to extreme positive surprise, and everything else in between. What I am unable to give in these short discussions is context, and all the details that have made this journey excruciating, yet special.
Earlier this month, The Economic Times did an interview with us, where for the first time we shared some details of Snapdeal’s turnaround. While all of this is well known within Snapdeal, it led to a flurry of external requests urging us to share more.
We’ve happily stayed under the radar for over a year. However, taking cue from these recent messages, I feel it is time we said something. There is a story to be told here that can be instructional for some and hopefully inspiring for others. Most importantly, for the incredibly resilient team at Snapdeal, that has worked so immensely hard to turn the ship around, it is time to give credit where it is due.
An unforgettable summer
The summer of 2017 brought more than just soaring temperatures. It brought uncertainty for Snapdeal in the form of an on-going, protracted merger discussion that wasn’t going anywhere. The view across shareholders and board members was divergent. Key business decisions had been put in abeyance for many months, as the company awaited a conclusive outcome of merger discussions. The uncertainty was costing Snapdeal money, morale, momentum and more. It was clear to us that we were hurtling towards a full-blown crisis.
Seven months into the process, by mid of July 2017, it became obvious that efforts to drive a merger were crumbling under the weight of irreconcilable differences. With a perplexed team in the office and critics crowing from roof tops, it was much easier for Rohit and I to move away, washing our hands off a toxic situation. That, however, was farthest from our minds. This was an M&A process that had dragged on for more than half a year without an end in sight, with many discords outstanding, while at the same time, the business was losing money and cash reserves were depleting fast. We were going to fall off a cliff if a call was not taken immediately to continue to build the business. Urgent discussions ensued within the Board to determine a way forward. Rohit and I were clear that in light of all the friction and delays around the merger process, Snapdeal’s best bet was to go forward as an independent company – with a clear business plan, christened Snapdeal 2.0. Any further delay in taking a categorical decision, one way or the other, was guaranteed to be fatal for the company. The Board agreed with our conviction. The date was July 31, 2017 and Snapdeal had just a few months of money left.
It was an audacious move. To say that e-commerce in India is a high intensity and high cash burn endeavour would be an understatement. I recall during that period, I woke up one morning to a well wisher’s message that a VC told him that “Snapdeal will not see a day of 2018, and will definitely shut down before the end of 2017“. It would be fair to say that every possible odd was stacked against us – both in reality and perception. We had witnessed adversity in early 2013, when we had one month of money left in the bank in the midst of a hard pivot from selling online coupons to physical products, and yet had come out of it stronger. But this time it was different. It was at a much larger scale, very public and the stakes were very very high.
That said, contrary to common perception, Snapdeal 2.0 was not a cold start in August 2017. Over the previous many months, we had started the implementation of many parts of it. But now, with the decision made to stay independent, we launched into it with an acute sense of clarity, specific goals and a detailed plan.
In brief, Snapdeal 2.0 is all of below:
- Single-minded focus on our core business – only running a pure-play marketplace
- And hence, divest non-core assets. We were clearly moving away from the approach of being in multiple businesses at the same time, each with their own moving parts, competitive pressures and demand on resources
- Fix the economics of the business, and then resume growing it
- For that, go back to our roots of catering to the needs of the value conscious buyer, because that’s why our most loyal consumers came to us over the years
- Continuously improve the experience for our buyers and sellers, keeping the guardrails on economics in place
- Stabilise the culture and ensure everyone in the team was aligned to the company’s plans
- Time bound plan to reach positive cash flow and liberate the company from fundraising cycles
A path filled with uncertainties
The first thing that the leadership team did was to start an intensive outreach with all members of the team. For Snapdeal 2.0 to get off to a solid start, conviction and confidence of each team member was super important. In July 2017, many team members were barely coming to work for just a few hours a day and I don’t blame them. They had no clarity about whether or not they would have a job if a merger happened, and as a company we had been unable to give them that clarity. Hence, after the merger discussions were called off, all of August, September and October ‘17, we organised a continuous loop of engagements – company-wide town halls were followed by teamwise meetings and dozens of 1:1s with 100% of the team covered. Each individual was spoken to by one or more members of the leadership team. Personalised copies of contextual motivational books, monthly newsletters and progress updates went out regularly. Rohit and I gave presentations to the teams about the strategy, execution plans as well as the uncertainties.
In these vulnerable times, it was important that the team did not feel disheartened by the speculation surrounding the company, and could instead focus on the goals and plans. We installed screens all over the office, where live dashboards transparently displayed in real time our progress vis-a-vis targets. With the results speaking for themselves, the team’s morale followed the upward trajectory of the business metrics and wasn’t undermined by the negativity of the external world.
This wasn’t all smooth sailing given the externalities. We had done a very painful resizing in February 2017 (our toughest decision as entrepreneurs till date), and we were very clear that it wasn’t necessary to further reduce the team size to meet our goals as a company. The big fear, oft expressed by the team, was whether there would be further job cuts and our assurances of no such plans were met with skepticism. We were also acutely aware that given the fragility of the then prevailing sentiment, even a single position being cut would be the proverbial last straw breaking the camel’s back. I vividly recall one day, early in August 2017, we were in the middle of a group discussion following a presentation to the team about the strategy and plans around executing the same. Suddenly, one team member in the room mentioned that a business daily had flashed an article that Snapdeal will be firing 80% of the workforce. My heart just sank. We were working around the clock trying to rebuild confidence in the team and credibility for the management, and then this ill-informed, speculative article comes out. Needless to say, for the following many weeks, we continued to face frequent questions in this regard from understandably pensive team members.
Another task that we picked up speed on quickly was cost optimisation. E-commerce is a thin margin business. These margins can very quickly be devoured by inefficient business processes. We looked at each and every bit of what we do – sharply reducing logistics costs, re-negotiating technology contracts, converting fixed costs to pay-as-you-use and optimising our establishment costs. Anything that lost money had to either go or had to be recast in a profitable mould. We were clear that while the arc of building a company is long, it needs to bend towards profitability. Complex and demanding as the task was, we went about it with quiet determination.
While we made good progress with optimising costs, it was also important to create cash reserves, so that we could execute our strategy without the overhang of money worries. In the last week of July, we had sold FreeCharge to Axis Bank but the money was still to be received pending RBI’s approval for the transaction. The FreeCharge sale was an important part of Snapdeal 2.0 and without that capital, our survival as a company would have been at risk. It took a few visits to RBI to sensitise the decision makers to the gravity of this deal for the survival of the company. When we finally received the money in October‘17, with not much money left in the bank, I knew that we had turned the corner on our money worries.
There is tremendous value in Focus
With the FreeCharge money in the bank, we doubled down on our efforts to drive key profitability initiatives. From October‘17, we started setting monthly targets for how much margin we would like to earn in the current month. The entire team could see how we were faring as the margin pools gradually filled up each month. Each decision that we took as teams and individuals would take us either towards or away from our margin goals. Having a visible goal that was consistent and well understood across the company really helped us align all our business decisions. The year 2017 ended on a positive note, with three consecutive months of target achievement.
In January 2018, we were successful in finding a good home with the Future Group for our logistics company, Vulcan Express. This brought us closer to our aim of focusing exclusively on the marketplace. In hindsight, I would say that we used to spend much more time on solving logistics related issues than solving for building a robust marketplace, our primary business. While one could argue that owning a captive logistics setup was table stakes in light of the competitive dynamics, in hindsight it is clear, that opening new fronts as a business, adds complexity in geometric progression, with an inevitable dilution of focus.
As we moved into 2018, with green shoots starting to emerge, the initially tentative efforts at reshaping the business became confident strokes. Not only were our economics in good health, we were also growing the business – something hitherto unknown in the e-commerce market in India, where more growth usually means more losses.
This process of churn that we went through over the previous months clarified to us and to our buyers and sellers, who we are – a platform that offers good quality merchandise for the value conscious Indian consumers, along the lines of what one would get in the offline bazaars in India. Buyers were using our platform to find the products that best suited their individual price-quality equation and sellers were happy to stock more of the same, since this was selling fast. With all our operational cost optimisation, we were able to fulfil all these orders and also make a margin on them. Sounds elementary, but it wasn’t easy. All parts of the business had to be optimised for this one final outcome and it was far from simple. It was a rigorous conquest that involved making/saving one rupee at a time.
There is tremendous value in having sharp focus – it is first felt within and then radiates out. Unlike our approach in the previous years, instead of trying to be everything for everybody, we focused on listing what our audience wanted and then made sure they found it as soon as they came to our app and also in all our advertising. In quick time the sales of such products surged. By March 2018, the seller community was taking notice of the steady increase in sales at Snapdeal. Sellers who had gone dormant revived their listings and added more of what was selling on our platform. Word of mouth led to tens of thousands of new sellers joining us over the subsequent few months.
Re-energising our Culture
The roller coaster journey of last two years first churned and then crystallised our culture. Well stocked pantries and after-office parties create temporary highs, nothing more. Culture is built on a shared sense of purpose, clarity of goals, prompt feedback and genuine appreciation. When done well, this is demanding, and requires effort from every person in the company to keep the momentum going.
We set up various forums for rewards and recognition for the team members, who were performing well and hitting their goals. Each opportunity to appreciate the incredible work of the teams became an impromptu celebration. At “Chai Pe Charcha” with Rohit and I, top performers gathered around each month and chatted – we discussed everything – our personal lives, issues about work, short term worries and long term hopes. These sessions also brought the high achievers together – the work paths of a data scientist who made a change to an algorithm that reduced returns the previous month and a call center agent who routinely delighted customers by going beyond the call of duty would otherwise not have crossed. The enthusiasm of each member of the team is the building block of our business, and the waning despair being replaced by growing positivity was becoming quite visible.
The senior members of the Snapdeal team have done an exceptional job in galvanising the team with enthusiasm, week after week, month after month. They identified winners, shared their stories with the team and made them feel truly, authentically special. The “Machate Raho” Awards, recognised the steady out-performers and screens all around the office proudly showcased the winners.
The senior team also bonded well. We started going out for dinner once a month, where we barely talk about work, and have gotten to know each other so much better as people, than just coworkers who only discussed targets and achievements.
The average tenure of a team member at Snapdeal is 3.5 years, which is much longer than what one sees in Indian startups. Those with us now are there because they know the company has the resilience to weather storms and emerge stronger and better each time. We also have colleagues who have been with the company for over 10 years – from the time we worked out of the basement of a house in Delhi’s furniture market selling coupon books!
Strengthening Team Snapdeal
The passion and resolve that the leadership team exhibited was plain incredible. Without bothering about the uncertainties, they simply dug in their heels, rolled up their sleeves and started the hard turnaround process. If the turnaround was faster and more pronounced than everybody’s expectations, it is because of this zeal that laid a solid foundation for all that followed.
Strengthening our leadership team in the first few months of 2018 was also an interesting process of reverse interviews. We pitched our projections and aspirations to the candidates and then answered all their questions. I recall opening up our monthly financials in the interviews with CFO candidates, and laying bare the hard facts of our business that this is not a big GMV, big loss game. I shared with them that this was going to be a fast growing, sustainable business that focuses on margins and volume growth. GMV was going to be an outcome of this strategy. We were no longer afraid to take a path just because we were scared what people were going to say about us. People would judge us no matter what.
Snapdeal’s leadership team’s tenacity and agility is a big part of who we are as a company and it was important that new members of the leadership team shared the same grit, ethos and sense of purpose. The missing positions in the leadership team were filled by new members, who were carefully selected to match the talent and dedication of this team. They came with rich experiences at leading enterprises including Google, Motorola, Pine Labs, Makemytrip, Oyo Rooms, Zomato and many others.
Over the last year, we have also added about 100 members to the team. Nearly 50% of them are former colleagues who rejoined us – a very positive sign given they have the most symmetric information around how the business is doing by talking to current team members. Not a week passes now, when Rohit and I don’t receive emails, messages through Linkedin and Whatsapp, from former colleagues looking to rejoin Snapdeal. To us this is one of the most heartwarming outcomes of this turnaround story.
With the team and culture very much back on track, our resources shored up, the team’s efforts were now focused exclusively on growing Snapdeal. Finally, we were in a position we wanted to be in – Building ONE growing, healthy, economically viable business, that has the potential to generate substantial cash flows, before embarking on any new adventures, however tempting they may seem.
Seeking out help and the value of being there for someone
There are times in each of our lives where we feel that everything that could go wrong is going wrong, and there is just no respite. One of the most incredible lessons from the last year or so was the concept of fair-weather friends. It’s easy, but not correct to judge – for good or bad – a story by the chapter one walks in on. When the big investments came in, Snapdeal’s journey was widely celebrated – and with that came a lot of inbound requests for introductions, Linkedin invites, awards and jury participation requests, etc. Everyone was singing praises and wanting to shake hands and be friends. Funnily, a lot of these people that we called for help and support last year, wouldn’t even return calls or emails.
However, some did, and I am glad we never hesitated asking for help. In the most unlikely of situations, I was able to get the guidance and counsel from some of the most respected and leading business persons in the country. Two of them are leading bankers, one of them runs a leading airline, one of them runs a large Internet company, and one of them heads one of the largest charitable trusts in the country. In our time of need, it was those who had the least to gain, and most to give, that came to our help. Not with money. But with their wisdom and encouragement. I recall sitting in the room with one of the above persons in August 2017, staring down the barrel with only months of money left in the bank. The gentleman, probably seeing how dire our situation was, picked up the phone and called six of the top business people in the country in quick succession explaining our situation to them – that we were good guys stuck in a bad situation – and requesting them to meet me to see if there were any synergies with their businesses, that could give us a financial parachute. Thankfully, things worked out in the end, and we didn’t need to take up any of those offers.
Needless to say, I shall forever be grateful to all those who helped us in our time of need. You know who you are – thank you for taking my call, responding to my email or meeting me. It has made me realise the value of being there for someone, when no one else will. I have learnt that even if you don’t know somebody – but feel you can do something for them, even if it is offering words of encouragement – don’t think twice, just do it. You may be the glimmer of hope and positivity that they have been looking for but are unable to find anywhere. It may just mean the world to that person on that day.
The Tide Turns
The completion of nearly a year of rebuilding was also when we hit the first waves of positive cash flow. For the first time in our history, our business generated cash in June’18. Being cash positive for us is not a relative term – it is an absolute addition to our cash reserves through income net of ALL variable and fixed expenses.
Being able to reach a cash flow positive position is an incredible feeling. It is one thing to know it can be done conceptually and feel hopeful of getting there and another to actually achieve it. Having accomplished this on our own terms and in accelerated timelines, gives us the absolute confidence to calibrate our journey forward. We will reinvest our earnings to fuel faster growth, secure in our knowledge that we can traverse the continuum between generating cash and accelerating growth and shift gears in either direction as and when needed.
As we exited July’18, we had finished 10 consecutive months of achieving all our goals and despite all the odds, had more than doubled our monthly orders and revenues in the same period, while cutting down our cash burn by 100%.
While the current scale is significant, there is clearly a lot of headroom to grow with hundreds of millions of new online buyers coming joining the wave in the coming years. In the coming year, 20 million Indian consumers will buy on Snapdeal.
From near death to generating cash, from despondency to resurgence – it took a lot of courage, focus and discipline to turn the ship around sharply. And we achieved all this with a nimble 800+ member team – in a flat, agile structure responding in real time to external and internal needs. Healthy, rejuvenated and in control of its own destiny, Snapdeal is now sailing ahead towards brighter horizons (and we also just moved into our brand new, open plan office, which means no cabins for anyone).
The milestone of earning money from our business is an incredible achievement for our company and industry – it puts us on the path to financial independence and the freedom to pursue long-term growth on our own terms, with no current or future dependency on any external funding. We have over $125mn in the bank and runway that extends to a decade. We know we can turn the knob back to cash generation if we want to, given we have done it before. This is incredibly liberating and makes the team extremely long term oriented in its execution decisions.
And, as we wrote to the families of all team members in July‘18, this success and special milestone belongs not only to all of us in the office, but equally also to the families at home, whose immense support has played the most critical role in keeping the team’s spirits high and our execution focused, especially in times when it would have been easy to move to greener pastures.
But this is more than just a milestone. Going from just a few months of money left in the bank in August 2017, to now being completely in control of our destiny a year later, has been an exhausting yet exhilarating experience – one that has brought our team and culture closer.
As a result, the morale in the company is at its all time high. We do an internal team survey, called Pulse, that measures the pulse of the culture. The most recent survey, in June 2018, witnessed the highest participation and and highest score, EVER in the history of the company.
Most importantly, it is a reaffirmation that one can build an economically viable digital business at scale in India, with a model that is built for India and aligned to the needs of its aspirational buyers and enterprising sellers. It is vindication that disruptive need not be destructive.
Building Snapdeal, pivoting it and then rebuilding it from the brink has been a character building experience for Rohit and I, as it has been for members of the team, who have stood rock solid weathering every twist and turn.
Here is what we learnt about building a business
- Focus Focus Focus. Build one high quality business before doing too many new things
- One successful business helps build others, but in a sequence, not in parallel
- Clear communication to the team is the best antidote to anxiety
- Consistent execution gets better results than spiky achievements
- Aim to drive improvements every day, the step functions will happen
- Keeping costs low is everyday work, not a periodic initiative
- Nothing that sells at a loss can be finally good for business. The business will run into a wall eventually
And here are the things we learnt about ourselves
- Entrepreneurship is lonely. A great co-founder is often the difference between hope and despair. Rohit and I are fortunate to have each other – we couldn’t have done this without each other.
- Family support is key. Some of the most stressful times at work melt away in the simple joyful moments at home. Your family will always be your oasis.
- Leadership under fire is who you really are. Tough times bring out either the best or the worst in you. Strong leadership is not about being hard in harsh times. It is about being clear, calm and confident in challenging times.
- Don’t let skeptics discourage you. Recently, someone asked me, “So, what are you upto these days?” – suggesting that there must not be a lot of work left to do at Snapdeal (or even better that there may no longer be a Snapdeal!) and that I may have shifted focused onto other endeavours. I smiled and moved on to the next item on my task list. It’s not my intent to convert people, and I don’t let their ignorance or indifference deter me either.
- The culture that will last the test of time and adversity takes a lot of consistent physical and emotional effort to build. Invest time happily, willingly and excitedly with the team by constantly communicating with them. It’s the best investment one could make.
So, what’s next?
We are well aware of the fact that we are building a company in the most hyper competitive e-commerce market in the world, up against not one, not two, but three multi-hundred billion dollar global e-commerce behemoths. If there was an exaggerated practical metaphor for David vs Goliath(s), this may be it. We recognise that we are now the only horizontal e-commerce company at scale left in India that is independent and not owned/operated by a large multi-national corporation. Every day requires us to be sharp with our execution, and mindful with our decisions to start or stop initiatives. We can’t afford to do too much, and at the same time, we can’t afford to do too little. It’s that delicate balance that we need to strike every day as we build the company, while ensuring that we are catering to the needs of our buyers and sellers to the best of our abilities. Focus means having the confidence of saying no – to buyers, sellers, team members, shareholders, board members, other partners. We have learnt to do that as a company. It’s the things you don’t choose that make you who you are. This is now one of our biggest strengths and is now deeply assimilated in our culture.
There are enough examples of companies that have successfully coexisted with the big global companies, across industries and geographies. There are often multiple large, successful private and public companies in automobile, steel, financial services industries that continue to grow profitably. Even in e-commerce, in mature markets like the US and China, new marketplaces keep emerging that breakout and challenge the incumbents, given their acutely sharp focus. Pinduoduo, Wish would be recent examples.
Our goal is to keep building methodically, brick by brick, a long standing institution that hopefully gives inspiration to entrepreneurs across our ecosystem, that while success is not permanent, failure is also rarely fatal. What one needs to muster, right when you are at the bottom of the abyss, is the grit and courage to continue. That spirit to keep moving ahead, resolute and steady, is both liberating and energising at the same time.
The journey of Snapdeal will continue. There are many mountains left to climb and together as a team, we know that we will rise to each challenge – there will be days when we will sprint and some days we will hunker down to ponder the best way forward. We want to thank everyone who has been a vocal or silent cheerleader for our team. You inspire us to do our best every day and keep moving forward. Thank you! ??