Why Snapdeal Slipped & What It Could Have Done To Circumvent It

1. Excessive focus on ‘vanity’ metric: Snapdeal, took decisions to maximise– Gross Merchandise Value (#GMV).

a. Suggestion: It should have, instead focused on maximising ‘Net Promoter Score’ (#NPS).

2. Competitor-focused: Snapdeal, till recently was obsessed with a burning desire to overtake Flipkart, and be crowned the ‘numero uno’ of e-commerce business!

a. Suggestion: It should have, instead, focused on winning over trust of its customers & strove to become the 1st choice among them!

3. Unintentionally, went to bed with a few investors who took a short-term perspective on their investment: Therefore, some of these investors encouraged Snapdeal to recklessly pursue the vanity metric – GMV, with an ulterior motive of pumping up valuation & exiting!

a. Suggestion: It should have wisely chosen investors whose mindset & values were aligned with it & were willing to work alongside to make it stronger by taking a long-term view of their investment!

4. Invested ‘raised’ funds in ‘bribing’ customers & / or creating ‘white elephant’ overheads: Indian customers place order with e-commerce platforms that offer the most attractive discount. Bowing to this reality, Snapdeal indiscriminately invested a lion’s share of the funds raised in bribing customers! Another chunk of the funds went in creating ‘expensive’ overheads – hiring people at ‘ exorbitant’ salary, then renting office space to house them!

a. Suggestion:

i. It should have judiciously utilised funds to:

a. Build & deepen relationship with customers.

b. Create infrastructure to help deliver a pleasurable

experience to its customers!

5. Pursuing opportunities, instead of reducing / eliminating customer’s pain points: The founder’s mindset seems to be leverage opportunities in e-commerce space, in India, to make money.

a. Suggestion: Entrepreneurs should start a startup with an objective of solving a customers' ‘pain point’! And, if they can succeed in either reducing or eliminating the pain point then the customers’ will reward them by giving them business. Result: business will boom!

6. Blindly copying a successful formula: Snapdeal, like Flipkart, fast followed #Amazon & #Alibaba, & adopted their business model without understanding its essence!

a. Suggestion: E-commerce players, in India, at various times got inspired by Amazon or Alibaba’s business model and tried to replicate it in India. But they replicated the visible part of the business model – boosting revenue. But what they did not 'copy' was their obsession to keep cost under control! Take Amazon - One of its stated values which is lives dictates that it not spend a single dime on any initiative, which does not enhance customer’s experience!

7. Throwing money & people to solve a problem: Many Indian companies’, including e-commerce companies’, intuitive response on facing a problem is to ‘throw people & money’ to contain – if not solve – it. Snapdeal too has adopted this formula! Whenever sales showed signs of slowing down it threw in more discount & / or added more people on its roll!

a. Suggestion: Throwing people & money at problems does not necessarily solve a problem. On the contrary it may just aggravate it as Snapdeal has discovered to its horror! It should have utilized the money to build infrastructure to deliver an awesome experience to customers, which results in deepen of relationship.

Do you agree with my analysis? Please feel to share your views & add value to the discussion!