Bengaluru/New Delhi: Snapdeal co-founder Kunal Bahl on Wednesday accepted that the start-up had made errors in execution at a time when the e-commerce firm is in dire need of funds.
In an email to employees, a copy of which was seen by Mint, Bahl said on Wednesday that co-founder Rohit Bansal and he will take a “100% salary cut". Last year, Bahl and Bansal drew total compensation of about Rs40 crore each (including stock sales).
Bahl added in the email that Snapdeal (Jasper Infotech Pvt. Ltd) had started to expand its business much before “the right economic model and market fit was figured out".
Bahl wrote to Snapdeal employees after the company said that it will cut jobs without specifying a number. Apart from the job cuts, Snapdeal has also seen the departure of senior executives, including Govind Rajan, chief executive of its payments unit Freecharge, and Tony Navin, head of partnerships and strategic investments.
“Has our company and industry been going through a troubled time? Absolutely. Did we make errors in our execution? No doubt about that. Over the last 2-3 years, with all the capital coming into this market, our entire industry, including ourselves, started making mistakes," Bahl said in the email.
In August 2016, Flipkart co-founder Sachin Bansal made a similar admission to company employees, indicating that he had lost his job as chief executive officer because of performance issues. As with Snapdeal’s Bahl, he was trying to placate his employees after Flipkart announced a few weeks prior that it cut some 600 jobs. Bansal was replaced as CEO by co-founder Binny Bansal in January 2016; a year later, Binny Bansal himself was replaced as CEO by Kalyan Krishnamurthy—a representative of Tiger Global Management, Flipkart’s largest investor.
“We also started diversifying and starting new projects while we still hadn’t perfected the first or made it profitable. We started building our team and capabilities for a much larger size of business than what was required with the present scale," he wrote in the email. “Ambition is critical, because that’s what motivates us to give our very best every single day —to achieve the undoable. However, a large amount of capital with ambition can be a potent mix that drives a company to defocus from its core. We feel that happened to us. We started doing too many things, and all of us starting with myself and Rohit, are to blame for it," he said.
As cash dries up and fresh funds seem elusive, Snapdeal is conserving cash by cutting the workforce and salaries and shutting some business verticals.
Mint reported on 17 February that Jasper Infotech Pvt. Ltd, which runs Snapdeal, had Rs1,100-1,200 crore cash left in the bank and Rs300-400 crore at its payments unit Freecharge at the end of 2016.
Talks for a bridge round of funding with existing investor SoftBank Group Corp. were deferred because of differences over valuation, Mint had reported.
On Wednesday, the company said that its logistics unit, Vulcan Express, is expected to turn profitable by the middle of the year. Vulcan currently counts Snapdeal and Abof.com as its only two clients.
“On our journey towards becoming India’s first profitable e-commerce company in two years, it is important that we continue to drive efficiency across all parts of our business, which enables us to pass on the value to our consumers and sellers. We have realigned our resources and teams to further these goals and drive high-quality business growth," said a Snapdeal spokesperson.
Here are the excerpts from Bahl’s internal email sent on Wednesday, addressed to “Dear Team".
“Over the last few years, we’ve had a phenomenal journey, with many well-timed pivots and a constant drive to work towards our core mission of building India’s most reliable and frictionless commerce ecosystem. We’ve succeeded in many aspects of our journey, and also failed in a few. But that never stopped us from getting up and trying harder again. We probably hold the record for the company that got written off the most number of times by Internet pundits..."
“We believe every resource of the company should be deployed for driving us towards profitable growth and with this announcement, both Rohit and I are taking a 100% salary cut. Many of our leaders have also stepped up proactively and offered to take a significant cut in their compensation, which is an excellent sign of how galvanised the team feels in this shared quest for profitability."
“These are tough times, no doubt. But, I am supremely confident, that like we have done before as a team, we will prevail. The greatest companies in the world got built in many interesting patterns—we just can’t tell the pattern while (we) are in the midst of it. For now, we need to keep our heads down, focus all our energy on execution that delivers on our two focus areas —best customer and seller experience, and profitable growth. This will mean tough choices and a conscious departure from a me-too race to the edge of the cliff. Let’s remember—GMV is vanity, Profit is sanity."
GMV is short for gross merchandise value, a much-hyped e-commerce metric that refers to the value of goods sold on a site but does not account for discounts or sales returns.