The markets is till buzzing with what is being touted as one of the biggest mergers in the Indian e-commerce industry, in which Flipkart gets set to acquire its rival, Snapdeal. While the two companies are negotiating valuation details, other players are feeling the heat with this development and many of them are re-analysing their strategies in a bid to stay afloat.
According to experts, Snapdeal had started moving towards a cash crunch since July 2016 when it had only $500 million of the $1.4 billion raised since October 2014, left in its kitty. The company, however, continued to offer heavy discounts, spent exorbitantly in marketing and rejected two funding offers. One of the biggest baits adopted by e-commerce companies was offering products at almost dirt cheap prices.
Taking a cue from Snapdeal's fate, brands like Zapyle and Shoptox are re-enforcing their business models. "I agree that we are operating in difficult times but it is too quick to write an obituary of the industry. There is still enough potential and we are focusing on building a strong customer base instead of just luring them with freebies, discounts and cashbacks. So it a well-rounded approach towards product quality, customers' requirement and entire operating-delivery system," says Jimmy Kaul, CEO, Shoptox.
Meanwhile, Rashi Menda, founder and CEO, Zapyle says the lure of discounts after some time can prove disastrous for the company. "Hence, we are only focusing on creating an experience for every user and provide high value in his life. Interestingly, none of the discounts are funded by us – they are straight from the designers and stores. We get the products at considerate prices from the vendors and pass on the discounts to the users," she said.
Inspite of the bravado that companies are showing in the face of this recent development, they are quick to acknowledge that it had affected the overall morale of employees and general sentiment in the market. "The merger, even before it has happened, has had a huge impact on the sector. Employees no longer have any job security. Due to huge valuation and funding, most of the times they were paid more than double of what they were getting or what they deserved. Now working on lesser packages, or with lower amenities, would be tough for them if they move to new organisations," feels Shiv Rattan Goyal, managing director, Richlook.
At the same time, companies are also not pinning the downfall of top players and mergers with rivals only on discounts and a "hook the user at any cost" outlook. "Lack of differentiation in business models and products, overhype around the businesses, and high expenses are the reasons for the e-commerce players' sudden downfall. In the absence of uniqueness of products and efficiency of operational system, major e-commerce players fail to build a sustainable subscriber base; hence either they fall or merge with other strong players," says Kaul
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