Snapdeal’s lay-offs show trouble; here’s what’s wrong with Indian startups

By: | Published: February 22, 2017 5:08 PM

SoftBank-backed Snapdeal, will reportedly lay off around 600 employees from the company, which raises a pertinent question of what is wrong with Indian startups?

snapdeal lay off, snapdeal job cuts, snapdeal 600 employees, snapdeal problems, snapdeal funding, snapdeal shares, startup inida, startup india opinion, flipkart, flipkart snapdeal, ola uber, amazon, amazon snapdeal, amazon flipkart snapdeal, startup business model, startup opinion, startup news, tech news, snapdeal news, snapdeal revenue, snapdeal fiscal, snapdeal website, snapdeal indiaSnapdeal job cuts: There is something innately troubled in the way Indian startups, especially e-commerce websites function, and that is reflected not only in the revenue but also in the way they have been treating their employees. (Pictures: Reuters)

SoftBank-backed Snapdeal, will reportedly lay off around 600 employees from the company, which raises a pertinent question of what is wrong with Indian startups? There is something innately troubled in the way Indian startups, especially e-commerce websites function, and that is reflected not only in the revenue but also in the way they have been treating their employees. Reports suggested that Snapdeal will cut almost 600 jobs across Snapdeal, Vulcan in logistics and FreeCharge in the digital payments business. Snapdeal defended the decisions saying that in order to become India’s first profitable e-commerce website it needs to take steps to improve efficiency. Meanwhile, the company has been struggling to raise fresh funds due to the intense rivalry with Amazon and Flipkart.

While there have been reports that it has been a good fiscal year for Snapdeal, one cannot deny the fact that e-commerce in India is full of contradictions. From varying market data to contentious media reports, the companies have used them only to confuse the people about numbers and data. Case in point also is Flipkart, which might be considered a poster boy of Indian startup market. Even Flipkart was devalued for the seventh time in January 2017. The shares have been dropping by around 35-40 percent since the devaluation. Similarly, as if in a domino effect, Ola followed the devaluation suit. Snapdeal has been looking at raising funds at a lower valuation. But is ‘valuation’ the only criteria? It is determined by the firm’s market share, risks taken, trends, growth rate, among many different factors. But is the face value the only way to decide the fortune of a startup?

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When companies like Flipkart and Snapdeal came up in India, people went berserk and treated them as some sort of a magic, which eventually led them to get extraordinary funding. But slowly it turned into a fundraising race. Since 2016, once the global economic dynamics changed, what also declined was funding. This lead to more ‘cost-cutting’ measures. Apart from questions on economics and profitability that have been raised, there are also the issues of internal conflicts, job layoffs, and intrusive investors which has now totally enveloped the whole startup ecosystem in the country. So much so, that people are losing faith in them and the data provided seem even more overhyped.

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One of the biggest issues in Indian startups that we used to admire, is that most of them are a copy of other companies. There are still a large number of people who prefer Amazon and Uber over Snapdeal, Flipkart and Ola. The Indian companies think that they can apply the same strategic model which their foreign counterparts offer, but they don’t realise that they can afford to do so because of they sheer capability they have. There is no intention to cater to the customer directly by competing with features, rather they compete in the structure. Take for example Amazon, it is a pretty old company now and it can afford to cut prices in order to gain industry share. Amazon’s main focus is growth and not profits. But Indian startups simply cannot do that since the have still not made any profit.

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There are many other issues which the startup ecosystem is mired in, including too much inventory despite no domination in market, the app-only feature which does not make sense as reports show only a small fragment of people actually downloading them during festival season, digital payment entry way too late, hogwash data showcase denial, active traffic does not mean profits, high operational costs and machinery, among many more, and all of them in a tough financial climate. So is there a shot at redemption? Maybe if innovation, not only in technology but also in business strategy, walk step by step in a large market potential, especially since most of India still opt for offline transactions.

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