Snapdeal may die a slow and painful death
SWIM OR SINK
Snapdeal may die a slow and painful death
Struggling? (Reuters/Anindito Mukherjee)
Itika Sharma Punit
July 07, 2016 Quartz india
On June 8, American e-commerce major Amazon announced an additional $3 billion investment in India, making clear its intention to dominate the Indian market and posing a massive challenge for the country’s homegrown e-commerce companies, among which Snapdeal could be hurt the most.
The Gurgaon-based firm lags Flipkart on most metrics, and currently has Amazon India (Amazon.in) nipping at its heels for the second position in an overcrowded market.
Launched in 2010 by Wharton graduate Kunal Bahl and IIT-Delhi alumnus Rohit Bansal, Snapdeal has around 300,000 sellers and delivers in over 6,000 cities and towns in India. In March 2016, its gross merchandise value (GMV, or the total worth of merchandise sold through a marketplace) stood at around $4 billion.
The company is backed by Japan’s SoftBank, the Alibaba Group, Taiwan’s Foxconn Technology Group, American e-commerce firm eBay and Tata Sons chairman emeritus Ratan Tata, besides venture capital and private equity investors such as BlackRock, Nexus Venture Partners, Intel Capital, and Kalaari Capital.
“Snapdeal has been having an identity crisis for the last couple of years.” Despite such strong backers, Snapdeal is increasingly losing relevance among customers and needs to find its unique selling proposition (USP) soon.
“Snapdeal has been having an identity crisis for the last couple of years,” said Sanchit Vir Gogia, chief analyst at Delhi-based Greyhound Research. “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.”
Flipkart vs Snapdeal
Snapdeal was founded three years after Flipkart, which launched in 2007. Even six years after its inception, though, the company has failed to bridge the gap with its older rival. If anything, the gap has only widened in recent years.
The two companies do not share most of their financial figures publicly, but, based on available information, here’s how they stack up:
Valuation: Earlier this year, Flipkart was devalued by multiple investors to anywhere between $9 billion and $11 billion. Even then, it is valued higher than Snapdeal, which was reportedly worth $6.5 billion in February.
Funding: Flipkart is among India’s most-funded startups, having raised around $3.5 billion in 12 rounds, according to online startup database CrunchBase. Snapdeal has tapped the market 11 times, but could raise only $1.7 billion.
App stats: The number of downloads of Flipkart’s android app far outnumber those of the Snapdeal app. The Flipkart app is rated 4.2 on a scale of 5 by users on the Android Play Store; Snapdeal’s is a tad lower at 4.1.
Seller recall: Amazon is the favorite e-commerce brand among Indian sellers, followed by Flipkart, a study by New York-based market research firm Nielsen said in June. Sellers are important because firms with a greater variety of products attract more buyers.
The Amazon threat
Amazon, which launched its Indian arm in 2013—six years after Flipkart was founded and three years after Snapdeal—already has a formidable presence in the country.
The company’s investment commitment to India is now higher than the total funds raised till now by both Flipkart and Snapdeal together.
And it looks like Amazon is rapidly rising to the top.
On May 28, it had 24.1% monthly active users (MAU), way higher than Snapdeal’s 13.1%. MAU represents the share of mobile users in India who open a company’s app at least once in a given month.
Nikesh Arora, former president of SoftBank, which is an investor in Snapdeal, recently acknowledged Amazon’s threat to Snapdeal.
“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,” Arora told The Times of India in an interview.
However, Snapdeal itself is confident about its position. “Amazon’s ‘threat’ to Indian e-commerce players is being overstated by media,” a company spokesperson told Quartz. “We spend less time thinking about what our competition is doing than thinking about what we can do for customers. ”
Historically, internet-based businesses have often had a single dominant market leader—like Facebook in social networking and Google in search.
“I don’t believe the Indian market will be able to sustain two big domestic players and one big international player,” said Anindya Ghose, director of New York University’s Center for Business Analytics. “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.”
Based on current data, then, it is not hard to call the winner among Flipkart and Snapdeal.
However, Arora, who was on Snapdeal’s board until recently, disagrees on this count.
“In India, you will have a dominant player and others will exist, too. It won’t be a winner-takes-all market, either in e-commerce or in ride-hailing,” Arora told a newspaper. “The question is who will be the big and the small players, (and) with what market share?”
In the meantime, Snapdeal, like rival Flipkart, has been grappling with internal challenges.
Among other things, the company has missed its sales targets. Snapdeal’s GMV of around $4 billion in March 2016 was far below CEO Bahl’s $10-billion target.
There have also been several top-level exits in 2016. In January, senior vice-president of marketing Srinivas Murthy resigned. In May, it lost its prized Silicon Valley hire Anand Chandrasekaran, who was its chief product officer. In June, the business head for electronics, Saif Iqbal, quit.
At the other end, the company is going slow on hiring. “We plan to remain very close to our current employee strength over this year,” a Snapdeal spokesperson said.
In May, The Economic Times reported that the company had scaled down operations in its regional offices at Bengaluru, Mumbai, Kolkata, and Hyderabad, and may even shut down a few if it fails to raise a fresh funding round. Snapdeal, however, trashed these reports as “incorrect, baseless and misleading.”
The company is attempting to tap into the talent pool in Silicon Valley. On May 30, Snapdeal said it has set up a data sciences centre at San Carlos, California, which will help it hire veteran data scientists who could help Snapdeal develop stronger capabilities around analytics and predictive behaviour.
To its credit, Snapdeal has been more aggressive in terms of acquisitions than rival Flipkart. The company is credited with the biggest acquisition ever in the Indian startup space—mobile payments startup, Freecharge, for around $450 million.
Since 2010, Snapdeal has acquired 13 companies, while Flipkart bought nine.
But experts are unsure if all these acquisitions will help Snapdeal find its mojo. “It is incredibly difficult to find a USP in e-commerce retailing. There is only so much one can fight on reducing costs and margins,” Ghose of New York University said.
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In Dallas, the primary argument of the NRA and pro-gun advocates was completely debunked
Narendra Modi’s Africa trip is the latest leg of India’s catch-up race with China
Modi weaves his magic.(EPA/Cornelle Tukiri)
4 hours agoquartz africa
Johannesburg, South Africa
In a Johannesburg concert venue that usually hosts pop stars, Indian prime minister Narendra Modi had the crowd on their feet. Modi is in South Africa as part of a tour of southern and east Africa aimed at strengthening diplomatic and economic ties. Following on from October’s India Africa Summit in New Delhi, India is still playing catch-up to China in the race for Africa. But Modi may have an impressive advantage: the hearts and minds of Africa’s centuries-old Indian diaspora community.
“You are part of the flourishing global Indian family,” Modi said as the crowd cheered, some rising to their feet. “A bond on which we are building the promise of our prosperous future.” After two hours of what seemed like countless song and dance performances, Modi could still whip the crowd into a frenzy. They chanted his name as he entered and left, and cheered especially when Modi referenced their ancestral and current connection to the Indian sub-continent.
The event was organized by SAWelcomesModi, a group representing South Africa’s Indian community of 1.3 million people. Among the crowd were Indians from neighboring Lesotho and Botswana. The first Indians arrived in southern Africa in 1684 as slaves, then from the 1860s, thousands of Indians were brought to South Africa as indentured laborers as part of the British colonial system.
Indian Prime Minister Narendra Modi with South Africa’s most famous Indian resident, Mahatma Gandhi.(AP Photo/Denis Farrell)
The most famous Indian in South Africa is Mahatma Gandhi, whose political activism began in South Africa as a young lawyer horrified by the living conditions of South African Indians. His practice of peaceful resistance inspired Nelson Mandela and Modi made much of this connection as he donned a Madiba shirt, the brightly patterned shirts made famous by Mandela.
This human connection is the foundation in Modi’s plans to create a stronger presence in Africa, as the country tries to match China. India’s trade with Africa has grown from $1 billion in 1995, to $35 billion in 2008, rising to roughly $70 billion last year. It’s not quite the $200 billion trade relationship China enjoys in Africa, but India seems determined to close the gap. Still, despite India’s pronouncement that it is “not focused on an exploitative or extraction point of view,” India has not presented much of an alternative to China.
The more than two million Indians in Africa are a starting point to strengthening these ties. A day
Indian Prime Minister Narendra Modi, foreground, inspects a guard of honour with Mozambique’s President Filipe Nyusi, left, in Maputo.(AP Photo/Ferhat Momade)
earlier, Modi was in neighboring Mozambique where he met with President Filipe Nyusi. Again, Modi reminded his hosts of the Indian community already living in Mozambique for generations. As the first Indian president to visit the Portuguese-speaking country in 34 years, Modi promised that such a gap would never again pass the two countries strengthened their trade and investment ties. Next, Modi will head to Kenya and Tanzania, both of which have large Indian communities.
Earlier in the day, Modi met with Zuma in an official visit, where the two presidents strengthened their ties by pledging to increase trade to $18 billion by 2018, Zuma said in his speech. India is South Africa’s sixth largest trading partner and while that trade deficit benefits India, Indian companies in South Africa have created 10,660 jobs, mainly in tech and financial services, according to Zuma’s office. With a slowing economy, South Africa needs as much foreign direct investment as possible. As India fuels its industrialization, the country needs more raw materials and access to commodities.
But there is one more thing that India wants from South Africa: It’s backing to join the Nuclear Suppliers Group, which it secured by Friday morning. The only African country with a commercial nuclear reactor, South Africa holds some sway in the community. For eight years, India has lobbied to join the elite club that was expressly created to stymie India’s nuclear ambitions. The NSG’s guidelines were first published in the 1970s in response to “India’s diversion of nuclear imports for supposedly peaceful purposes to conduct a nuclear explosion in 1974.”
“India is desperate to emerge from its developing country niche and become a member of the elite group that settles international issues—in other words, a country that matters,” journalist Malik Ayub Sumbal wrote in the Diplomat. “Perhaps inclusion in the NSG represents a step towards this dream.”
Last month, China blocked India’s attempts to enter the group. Before the meeting in Seoul, Modi went on a global charm offensive, lobbying nations like France, Mexico and the United States for their support. When it came to the actual vote, India’s failure to sign the Non-Proliferation Treaty (NPT) and the Comprehensive Test Ban Treaty unsettled some members of the exclusive club who voted against them. At the next meeting of the group, India is likely to renew it’s campaign to join the elite club, this time with South Africa’s backing. As India reinforces its economic relationship with Africa, it’s ties to the continent also strengthen it’s soft power.
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