Snapdeal founders to take 100 pc pay cut, firm commences layoffs

E-commerce major Snapdeal on Wednesday reported that its founders have agreed to take a 100 per cent pay cut, even as the firm initiated a process to rationalise a part of its workforce to make the company profitable in two years.
The announcement was made through an email which was sent to the employees by the firm’s co-founders Kunal Bahl and Rohit Bansal. The company was started in February 2010.
However, the e-commerce major did not divulge the number of employees it plans to lay off in its endeavour to become profitable.
Accepting the fact that the company made errors in executing its business plans, the email read: “Has our company and industry been going through a troubled time? Absolutely. Did we make errors in our execution? No doubt about that.”
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“Over the last 2-3 years, with all the capital coming into this market, our entire industry, including ourselves, 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.”
The email cited examples of Apple, Amazon, Netflix, Tesla, Lego, Spicejet as companies which faced similar industry and financial challenges, but are “wildly successful” today.
“The formula to revive the company is uncannily similar for almost all of them – focus on only your core, stop all non-core activities, reduce costs drastically, turn profitable as soon as you can, and use those profits to spur further growth and new projects,” the email elaborated.
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According to the email, the company has initiated a process of combining teams, reducing layers, eliminating non-core projects and strengthening the focus on profitable growth.
“This also comes with some tough decisions in the short term. As part of our overall path to profitability plan that is currently in full swing, we will be reorganizing the company into a lean, focused, and entrepreneurial one. 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.”
The email informed that both Bahl and Bansal will take a 100 per cent pay cut.
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“We believe that 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 per cent salary cut,” the email mentioned.
“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.”
Later in the day, the company released an official statement explaining that the rationalising of its workforce was intended to make the firm profitable in two years.
“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,” a Snapdeal spokesperson was quoted as saying in a statement.
“We have realigned our resources and teams to further these goals and drive high-quality business growth.”
The statement revealed that the company has made substantial upfront investments in building e-commerce infrastructure, such as marketplace, payments and logistics platforms.
“Snapdeal will further leverage these technology assets and realign its resources to become a leaner and more efficient business,” the statement said.
“This comes after Snapdeal has already successfully completed a number of efficiency enhancing measures, which has led to its EBITDA (earnings before interest, tax, depreciation and amortisation) increasing by 40 per cent in the first nine months of this financial year.”
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The company elaborated that efficiencies gained from many business process and operations optimisation initiatives have led to 35 per cent lower delivery costs, 75 per cent lower data hosting costs on account of Snapdeal’s deployment of its private cloud solution, and 25 per cent lower company fixed costs.
“During this same period, Snapdeal has also seen its net revenues rapidly increase by 3.5X. Building on all of these substantial gains, Snapdeal expects to be the first profitable e-commerce company in India within two years,” the statement pointed out.
“Snapdeal’s wholly owned logistics company, Vulcan Express, with its well-developed end-to-end capabilities is expected to turn profitable by the middle of this year. In addition to being Snapdeal’s anchor logistics partner, it now services third-party clients as well.”
The company has partnered with several global marquee investors and individuals such as SoftBank, BlackRock, Temasek, Foxconn, Alibaba, eBay Inc., Premji Invest, Intel Capital, Bessemer Venture Partners and Ratan Tata, among others.