Product, not brand, is the cornerstone of Snapdeal's comeback strategy

Snapdeal’s tenth year in existence comes on a relatively assuring note. In a cash-burning ecosystem, where its bigger and even smaller rivals remain aggressive about customer acquisition, the fiscal years 2018-19 and 2017-18 saw it cut its losses by 70 per cent and 87 per cent respectively.

The founders pitch this sustained momentum as proof of the success of their Snapdeal 2.0 strategy adopted in the year 2017. The strategy rests on identifying the most value-conscious customers, focusing on their needs rather than on pushing brands and nudging them to make the purchase decision without guilt. And while its peak estimated value of $6 billion may still seem like a far cry — it reported Rs 925 crore revenue last year — things seem to be turned from those days two years ago when Snapdeal appeared close to the edge of the precipice.

That year opened with media reports of Snapdeal’s losses widening 150 per cent to Rs 3,316 crore the previous fiscal (it is down to Rs 186 crore in FY19). That was followed by the sale of its two-year-old payment wallet Freecharge for almost 90 per cent less than what it was acquired for. If that was not enough, a controversial statement by Snapchat creator Evan Spiegel about the Indian market confused users downgrading Snapdeal’s ratings on the Google Play Store. 

With all that and (perhaps resultantly) a rumoured merger with rival Flipkart being called off, experts had started to write off the marketplace. In a recent blog, Snapdeal CEO and co-founder Kunal Bahl summed up the purported turnaround as “growth in terms of real revenue with good economics and enhanced customer experience” and attributed it to “disciplined and focused execution”.

Bahl also explained some of the broad contours of this strategy including getting closer to the customers, deeper collaboration with seller partners, aligning the technology platform with company objectives and staying lean and moving fast.

What Snapdeal has done in the past two years, says a company spokesperson, is focus on the “next 400 million online buyers” which it describes as the most value-conscious customer segment. Unlike the English speaking first 100 million, this cohort is scattered in diverse regions and Tier 2 and 3 cities, but there are sub-trends that the firm is harnessing. “It is not always geography. Even within big cities, you have a sizeable number of those who have limited disposable incomes or are not very fluent in English but have to send something to their hometowns. Those consumers too are in our minds and what we try to do is show them relevant products instead of brands,” he says.

To offer a diverse and a more affordable mix, Snapdeal has tried to do a couple of things. One, it has increased the range of products to give people more options within their budgets. Second, it has focused on helping the customer make a decision as they browse the website. “Our customer is mostly not an intent-led one who knows what he or she wants and then comes to the website looking for it; instead, when the customer visits us, we show him or her the products that might be more useful to them. It could be a bag with an in-built charger which grabs the attention of the customer. We then nudge them further by showing them statistics that X number of people in their area have bought that product,” says the spokesperson.

Since the beginning of this year, the company has also introduced short product videos for products where demonstration of functionality is imperative to convert a casual browser to an actual buyer. Falling data prices have helped. In 2018, transacting customers grew 2.2X and traffic surged 2.3X to 70 million unique users/month. “In smaller cities, people have more time to come and explore for longer periods and that is what we want.”

Snapdeal highlights products that are priced low so translation into sales is easier. To that end, the marketplace has had to tweak the assortment as well. “Take refrigerators. Now you will see more of the small ones rather than the three-door ones. Similarly, for a mixer grinder, earlier only some brands were available but now we also feature brands that enjoy a good reputation among local eateries for their rugged products.”

On the supply side, it has done away with its expensive captive logistics as there are specialised players that can do the job more efficiently. “So, instead of spending on a warehouse where we would stock the products sourced from sellers, we have selected third party logistics companies that help us move products faster. We have a smart courier allocation engine which tells us which courier-partner can pick up the packet fastest and deliver it within the promised timeline,” says the spokesperson.

Ankur Pahwa, partner and national leader, ecommerce and consumer internet, EY India, says 2.0 has managed to differentiate itself by bringing a sharper focus on the product categories and markets which is certainly helping it grow its revenues and GMV. 

“So looking at Tier II and Tier III markets and finding the right of assortment of product categories as also branded and unbranded is helping them grow along with improving the procurement supply chain which is certainly getting them the margins. There are challenges for selling to this segment including higher return rates, higher logistics costs given the need for deeper distribution and a price sensitive segment,” he says.