Snapdeal cuts workforce as India's ecommerce market becomes unforgiving

Image: Shailesh Andrade/ Reuters

Snapdeal, an online marketplace provider, is cutting an unspecified number of jobs as losses mount and competition heats up in India’s nascent ecommerce market. A company spokesperson confirmed that Govind Rajan, CEO of its payments unit Freecharge, has also quit.

Snapdeal is “rationalising” its workforce, the company said in a press release, confirming recent media reports. The Gurugram-based online shopping company, near New Delhi, didn’t say how many people would lose jobs.

The company would be cutting as many as 600 jobs, mostly from its logistics unit Vulcan and Freecharge, Press Trust of India reported earlier on Wednesday, citing unnamed sources.

India’s biggest startups including Snapdeal, Flipkart and ride-hailing services provider ANI Technologies, which operates the Ola cab smartphone app-based service, have all had their value reduced by investors. The fear is that the overall market for their services isn’t growing enough for them to to start cutting down expenses on gaining market share.

Early calculations that these companies could spend their way to market dominance and then make money have completely gone wrong, especially with the entry of global giants such as Amazon and Uber. China’s Alibaba Group is ramping up its investments in India, which only makes matters worse for the local companies.

Snapdeal says it wants to become profitable in two years. “The Company has made substantial upfront investments in building e-commerce infrastructure, such as marketplace, payments and logistics platforms.  Snapdeal will further leverage these technology assets and realign its resources to become a leaner and more efficient business,” it said in its release.

Snapdeal has completed a number of cost cutting measures, which has led to its earnings before tax and other cuts increasing by 40 percent in the first nine months of this financial year. It delivers packages at 35 percent lower costs and has cut its data-hosting costs by 75 percent by deploying its own data centre and reduced fixed costs by 25 percent, according the release.

In the same nine months, the company has seen its net revenues — meaning total sales minus the cost of sales such as discounts on smartphones for instance — increase 3.5 times. Snapdeal’s wholly owned logistics company, Vulcan Express, is expected to turn profitable by the middle of this year. In addition to being Snapdeal’s main logistics partner, it now services third-party clients as well, the company said in the release.