Snapdeal confirms layoffs, founders not to take salaries
NEW DELHI: Online marketplace Snapdeal has confirmed that it is undertaking layoffs within the organisation, but declined to specify the exact number of employees affected by the decision, as the company looks to turn around its fortunes after a dismal 12 months.
"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," an official release stated.
Separately, in an internal email sent to employees, which was accessed by ET, the SoftBank, Foxconn and Alibaba Group-backed company's founders, Kunal Bahl and Rohit Bansal, have pledged not to take a salary, for an unspecified period.
"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% salary cut," the email stated.
Further, other top company executives are also expected to take a pay cut as well.
"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," the email stated.
In an earlier interview with Reuters, Snapdeal's Chief Executive Bahl had said he expected the company to turn profitable in the next two years.
The latest announcement comes on the back of a disappointing 15 months for the company, which at one point, was seen as a top contender for the number one ecommerce company, in terms of sales, in the country's highly attritional, discount-fuelled online commerce space.
However, the Gurgaon-based company has been hit hard by a combination of mounting losses, ongoing churn of its top leadership in the company and the rapid growth of rival Amazon over the same period.
"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," the email stated.
The announcement also follows ET's story earlier in the month that stated that the company was in the process of significantly trimming its workforce, a move that could affect about 1,000 employees.
While the company did not explicitly deny the layoffs, its spokespersons had contested the number of employees that could be affected by the decision to cut its workforce. It has also said that Vulcan Express, its logistics unit, which is also believed to see a reduction in workforce, will turn profitable by the middle of this year. News agency PTI quoting sources has said the number of people facing the axe is at about 600.
"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 press release said.
Snapdeal's employee-related expenses rose to Rs 911 crore in FY 2016, up 148% from the previous fiscal. Employee expenses is the largest cost for the company, after marketing and advertising. But unlike the latter, which is a variable cost, wages is a fixed cost.
For the financial year 2015-16, the company's total sales grew 56% to Rs 1,457 crore, but losses more than doubled to Rs 2,960 crore.
Earlier this month, Mint reported that Jasper Infotech, the parent entity of Snapdeal, had about Rs 1,100- Rs 1,200 crore left in the bank at the end of 2016, while its digital payments platform FreeCharge had about Rs 300-Rs 400 crore left in the bank during the same period.
"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," an official release stated.
Separately, in an internal email sent to employees, which was accessed by ET, the SoftBank, Foxconn and Alibaba Group-backed company's founders, Kunal Bahl and Rohit Bansal, have pledged not to take a salary, for an unspecified period.
"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% salary cut," the email stated.
Further, other top company executives are also expected to take a pay cut as well.
"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," the email stated.
In an earlier interview with Reuters, Snapdeal's Chief Executive Bahl had said he expected the company to turn profitable in the next two years.
The latest announcement comes on the back of a disappointing 15 months for the company, which at one point, was seen as a top contender for the number one ecommerce company, in terms of sales, in the country's highly attritional, discount-fuelled online commerce space.
However, the Gurgaon-based company has been hit hard by a combination of mounting losses, ongoing churn of its top leadership in the company and the rapid growth of rival Amazon over the same period.
"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," the email stated.
The announcement also follows ET's story earlier in the month that stated that the company was in the process of significantly trimming its workforce, a move that could affect about 1,000 employees.
While the company did not explicitly deny the layoffs, its spokespersons had contested the number of employees that could be affected by the decision to cut its workforce. It has also said that Vulcan Express, its logistics unit, which is also believed to see a reduction in workforce, will turn profitable by the middle of this year. News agency PTI quoting sources has said the number of people facing the axe is at about 600.
"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 press release said.
Snapdeal's employee-related expenses rose to Rs 911 crore in FY 2016, up 148% from the previous fiscal. Employee expenses is the largest cost for the company, after marketing and advertising. But unlike the latter, which is a variable cost, wages is a fixed cost.
For the financial year 2015-16, the company's total sales grew 56% to Rs 1,457 crore, but losses more than doubled to Rs 2,960 crore.
Earlier this month, Mint reported that Jasper Infotech, the parent entity of Snapdeal, had about Rs 1,100- Rs 1,200 crore left in the bank at the end of 2016, while its digital payments platform FreeCharge had about Rs 300-Rs 400 crore left in the bank during the same period.
