Himanshu Chakrawarti, CEO of Snapdeal, reveals how the e-commerce platform is quietly working on fulfilling the value lifestyle aspirations of 64% of Indians residing in Bharat, in its new avatar. But will its latest pivot work, is the million-dollar question
New Delhi: Snapdeal – that once featured among the country’s top three alongside Flipkart and Amazon is currently trying to find a winning formula and stage a comeback through the value push, a segment that is already very competitive.
“For the last two and a half three years, we have been building the new Snapdeal 2.0 version and this is about creating the finest lifestyle destination for Bharat,” Himanshu Chakrawarti, chief executive officer of the company told IndiaRetailing.
With 64.13% of India’s 1.4 billion population living in rural areas as per World Bank data, Bharat seems to be a good bet for the platform’s second innings after its downfall. But here as well Snapedeal will confront its old nemesis of Flipkart and Amazon who sell the majority of their products in the same tier-2 and 3 markets that Snapdeal seeks to target. Shopclues, Snapdeal’s once rival, also pivoted to target the value consumers with very limited success so far, according to market watchers.
Will Snapdeal’s latest pivot work is a million-dollar question.
A quick backgrounder
Founded in 2010 by Kunal Bahl and Rohit Bansal, Snapdeal was valued at $6.5 billion in 2016 and was considered the country’s second-biggest e-commerce company after Flipkart. It was also a favourite of investors, attracting funds from the likes of eBay, Kalaari Capital, SoftBank, Nexus Venture and even industrialist Ratan Tata.
Fast forward one year and the company was facing a shutdown, following a string of acquisitions that didn’t work. The company also tried a merger with Flipkart as a last-ditch effort, which didn’t fructify.
In 2020 as Covid-19 struck, Snapdeal faded from the market while competitors Amazon and Flipkart raced ahead and solidified their positions amid an increasing number of Indians taking to online shopping post covid. But the founders refused to pull the plug on their dream. Instead, they got back to the drawing board and rewrote the script to unveil Snapdeal 2.0, a strategy the founders are banking on to help them reclaim their past glory.
The new focus
Chakrawarti describes the new Snapdeal as a value lifestyle destination. From assortment to post-purchase experience, everything is meant for the value lifestyle audience—essentially the audience that stays in Bharat.
Bahl and team zeroed in on the value segment as it offers a massive potential with the number of internet connections on mobile set to double from the existing 600 – 800 million (as per various estimates).
“Out of that, at least 90%, if not more, will come from the value segment. And a large proportion of this, will be from Bharat,” explained the CEO who joined Snapdeal in November 2021.
Recalibrating the business
The change in its positioning and target audience required a total recalibration of every aspect of the business.
“We had to completely recalibrate ourselves. The categories changed. Like all the large horizontal e-commerce players, mobiles and electronics used to be our primary categories. We had to pivot ourselves out of those,” shared Chakrawarti.
Now AceVector Group-owned Snapdeal sells fashion—which comprises apparel, accessories and footwear; home textiles, electronics, auto accessories, books media & music, sports and fitness products, gifts and stationery and a whole lot of other general merchandise and hobby products.
“Fashion is almost close to 60% plus of our business, contributing almost two-thirds,” shared Chakrawarti, who added that Snapdeal sells products in the price range of Rs200 to Rs700.
“We had to drop all the branded higher-end merchandise,” elaborated Chakrawarti. This meant delisting almost 75% of sellers from its platform while adding an equal number of sellers that fit its new focus.
Selling to Bharat
“Almost 74-75% of our business comes in from tier 2 and beyond,” shared Chakrawarti who was the president at Snapdeal before taking the reins of the company as CEO.
Consumers in Bharat are distinctly different from those in the metros. Typically, they own basic to medium-range smartphones which they use to access WhatsApp, social media and audio and video content.
When shopping online, they do not use either filters or the search feature. “That essentially means they are relying on the homepage feed that is customized for them. This requires the algorithm to be extremely evolved,” explained Chakrawarti who said that Snapdeal’s artificial intelligence (AI) and machine learning (ML) ensure that the feed is relevant, precise and intuitive.
The navigation guides are customized too.
Almost two-thirds of Snapdeal’s traffic comes from its app—which has 2 million downloads—and one-third comes from its mobile site or M site. Therefore, the visuals are big, the font is large, and the text is less, making it easy for rural shoppers to browse. The shopping journey too is simple. “Our entire team works on removing any kind of complications. For example, the address field is a free text field. The AI figures out the address, if it is not able to do so, it automatically triggers a call from the call centre, in the language of the customer,” explained Chakrawarti adding that Snapdeal is available in eight regional languages—Gujarati, Tamil, Marathi, Bengali, Kannada, Telugu, Malayalam and Oriya with English being the default language.
“Even the English is simple and there’s a full team working on removing any difficult words,” explained the CEO revealing that English, followed by Hindi are the most used languages on the platform. “But we have significant traction in Tamil, Telugu Marathi, Gujarati and Bengali as well,” he added.
Furthermore, prompts and pop-ups appear automatically when people seem to be struggling.
Delivering to Bharat
As per Government data, there are 29 states, 720 districts consisting of approximately 6 lakh villages, and over 8200 cities and towns in the country. Each locality has been assigned a Postal Index Number (PIN) for ease of location.
“In terms of the PIN code serviceability, we service 95% plus of the PIN codes in India, which depending on the season, would be anywhere from 23,000 to 26,000 PIN codes,” explained Chakrawarti.
According to him, there are three unique challenges when delivering to Bharat: One is that it’s a large cash-on-delivery (COD) segment, unlike the metro customers, which is a prepaid segment. “In our case, almost 88% of the customers are COD customers. Which means that the chances of a return to origin (RTO) are higher,” the CEO explained adding that Snapdeal’s RTO rates are at the low end of the industry average which is in the range of 20 – 30 %.
“Number two is that many customers are located in smaller cities, which means that we have to move the packets longer distances,” he said implying that this increased complexities in terms of delivery costs and chances of RTOs.
Number three is the complexity in terms of delivery routes.
Once again, Snapdeal uses AI and ML to make the right delivery decisions, including deciding the best partner from its logistics ecosystem to carry out the that is cost-effective yet good for the customer. “This is an algorithm which works at scale. It works with a mind-boggling 65 million data points,” he said.
Having burnt its fingers once, the team’s focus is firmly set on achieving profitability.
In financial year (FY) FY22, Snapdeal’s losses stood at Rs413 crore while its consolidated revenue was Rs563 crore. In April 2023, the e-marketplace told the media it had managed to slash its losses by 93-94% on a year-on-year basis in FY23.
“We went into becoming unit comics positive almost two years back. And now are at the cusp of profitability at an overall level,” shared Chakrawarti.
The company appears to be doing all the right things, but will Snapdeal be able to bring itself back into the limelight?
Management consultant Harminder Sahni, MD of Wazir Advisors, said, “The focus on Bharat is right. But Bharat lives in urban areas too because of the migration. There is a huge value in serving those people and value can be created for them and as well as the stakeholders. However, serving that market is not easy, ticket sizes are small and expectations are high. But there are businesses like V-Mart who have done it. So can Snapdeal, but the key lies in execution.”
House of Brands
While Snapdeal had to sell its distribution and other businesses to cut out the losses, it has invested in launching a house of brands with the name Stellaro which houses six brands selling ethnic wear to accessories.
“Almost a year back, we created a large team of buyers merchandisers, planners designers, sourcing, QC, content, along with the ability to market on third-party marketplaces, like Amazon,” Chakrawarti said.
Snapdeal has listed these products on Amazon, Ajio and Myntra and has received an encouraging response.