DNA Money Edit: Vendor interests should be kept in mind in e-commerce mergers

E-marketplace operator Snapdeal is headed for a possible acquisition/merger with industry leader Flipkart. The due diligence will start once a Letter of Intent (LoI) is signed this week. A business that was valued at $6.5 billion until February 2016 lost steam in a little over 12 months and might get sold at less than 25% of the valuation it garnered last year.

Both Snapdeal and Flipkart are understood to have agreed upon a certain valuation for the business – the final number will be arrived at in a month. While investors in Snapdeal are driving this consolidation, the company founders, are reportedly rewarding employees who have stood by the company since long.

While the interest of co-founders, employees and investors are being taken care of, the Snapdeal seller community is still a concerned lot. Citing lack of laws to safeguard their interest, the All India Online Vendors Association (AIOVA) – a group of more than 2,000 sellers doing business on Snapdeal, Flipkart, Amazon etc – has alleged that more than 500 sellers are concerned about unsettled financial matters with the current management of Snapdeal.

“Our members are already riling with losses faced with Askmebazaar. Now they feel they will face loss in Snapdeal under the new management,” said AIOVA in a statement addressed to Tapan Ray, secretary of corporate affairs at department of electronics and information technology. Seeking government's intervention, the seller's body has requested to put on hold the winding up / sale / merger subject to approval by 75% of sellers doing active business on the platform.

It's time policy makers also took a serious look at vendor concerns and put together rules to safeguard business interests of micro, small and medium enterprises and help them grow without the fear of losing money.