SoftBank-backed Snapdeal will lay off around 600 people across its e-commerce, logistics and payments operations over the next few days. Its co-founders Kunal Bahl and Rohit Bansal have taken a 100 per cent salary cut, while many others at the firm have “proactively” offered significant reduction in compensation.
In an e-mail to employees, Bahl conceded that over the last 2-3 years, with all the capital coming into this market, the company and the entire industry “started making mistakes”.
“We started growing our business much before the right economic model and market fit was figured out. 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 said.
Bahl cited examples of global companies like Apple, Tesla, Amazon, Netflix, Lego and Spicejet that “painted themselves into a corner many times over” before they became successful.
He said Snapdeal is being re-organised into a lean, focused and entrepreneurial company.
“We are combining teams, reducing layers, eliminating non-core projects and strengthening the focus on profitable growth. Sadly, we will also be saying really painful goodbyes to some of our colleagues in this process,” he said.
According to sources, the company started the process last week and will lay off 500-600 people across Snapdeal, Vulcan (logistics) and Freecharge (digital payments business).
“…both Rohit and I are taking a 100 per cent salary cut. Many of our leaders have also stepped up proactively and offered to take a significant cut in their compensation,” he said.
The sources added that the reduction will include employees across levels and the process will be completed in the next few days.
A Snapdeal spokesperson said: “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.”
Snapdeal has already taken a number of steps to increase optimisation of operations that resulted in 35 per cent lower delivery costs and 25 per cent lower company fixed costs.
Snapdeal has also seen its net revenues increase 3.5x this fiscal.
“Building on all of these substantial gains, Snapdeal expects to be the first profitable e-commerce company in India within two years,” the spokesperson said.
It also expects Vulcan Express to turn profitable by the middle of this year.