Snapdeal sales growth slowing: SoftBank

Online marketplace Snapdeal has reported slower sales growth in the second half of the last financial year, highlighting the challenges faced by the company that is struggling to keep pace with rivals Amazon India and Flipkart Ltd.

Snapdeal’s gross sales, which exclude discounts and product returns, slowed to 90% in the year ended 31 March from 301% in the previous year, according to a presentation by SoftBank Group, Snapdeal’s largest investor. In the first half of last year, gross sales at Snapdeal grew by more than 220%, previous presentations by SoftBank show. That implies sales growth slumped in the second half of last year.

In an emailed response to a query, a Snapdeal spokeswoman said: “At Snapdeal, we are driving growth in a concerted manner by adding and retaining high-frequency users, offering them the widest assortment of products and a superlative experience every time they interact with us. All our growth initiatives are aligned with our vision to have 20 million daily transacting users (DTUs) on our platform by 2020.”

Snapdeal’s monthly revenues have declined since November, partly because the company has been forced to cut spending on discounts and advertising since then, Mint reported on 14 April. Snapdeal has held funding talks with several investors over the past six months, all of whom have refused to invest in the company at its preferred valuation of $6.5 billion, Mint had reported.

Snapdeal denies having held these talks. “We are well capitalized for the long term and we are not looking to raise fresh funds,” the Snapdeal spokeswoman said.

With sales growth slowing and investors souring on e-commerce, Snapdeal, which also owns payments firm FreeCharge, has been forced to conserve cash over the past few months. The company is trying to persuade its sellers to fund a larger part of the discounts on its site.

Snapdeal and bigger rival Flipkart have also been losing market share to Amazon India since the start of 2015.

A spokeswoman for Amazon India said the company’s sales grew by more than 250% in calendar 2015 over the previous year.

While sales at Snapdeal slumped in the second half of last year, Amazon generated more sales in the December quarter than it did in the whole of 2014.

“We have witnessed tremendous growth in less than three years of our operations in the country and are already the leader on things that matter to customers including selection, value and convenience. We continue to see tremendous momentum and growth despite a larger base,” said the Amazon spokeswoman.

Snapdeal denies the company is ceding market share despite the slowing of sales growth in the second half of last year and Amazon’s faster expansion.

“We have seen rapid growth year on year, followed by a doubling of business on a much larger base. This is an indicator of the pace at which we are growing. Our shipment volumes have grown rapidly and in the period Jan-March 2016, the shipment volume was 1.96 times of the volume in the same period last year. Not only volume, but our share of shipments has also grown,” said the Snapdeal spokeswoman.

Snapdeal had set a target of overtaking Flipkart in terms of gross sales by March this year but the company failed to achieve that target, Mint reported on 29 April.

Jasper Infotech Pvt. Ltd, which runs Snapdeal, reported a loss of Rs.1,328 crore for the year ended 31 March. The company did not disclose revenue numbers. Snapdeal operates a marketplace, connecting third-party sellers with customers; its actual revenues are primarily commissions it charges on every sale and listing fees paid by sellers.

Founded in 2010 by Kunal Bahl and Rohit Bansal as a deals site, Snapdeal has become the biggest local rival to Flipkart and India’s second most valuable e-commerce company. Snapdeal has raised roughly $2 billion from SoftBank, Alibaba Group Holding Ltd, Foxconn Technology Group, eBay Inc., Kalaari Capital, Nexus Venture Partners and others.