Why Flipkart’s Failed Pursuit of Snapdeal Isn’t Really a Bad Bet
The much anticipated deal in the Indian e-commerce space failed to materialise after much deliberation.
Flipkart reportedly made a bid of $950 million to finally get their hands on Snapdeal. But long discussions failed to get the deal through for Binny Bansal and Co. Many experts believe that Flipkart could have absorbed Snapdeal’s existing e-commerce capability, giving them the push to fight of Amazon’s challenge in India.
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But when you look at the numbers being discussed, it shows a different story. A detailed report from Kalagato suggests that Snapdeal was going nowhere with its business strategy amid falling user base, app downloads and transaction volume. So folks at Flipkart might not be losing sleep over the failed transaction after all.
Everyone knows that while Flipkart could use Amazon’s wealth injection (Jeff Bezos was ranked as world’s richest person, for a brief while), it seems buying Snapdeal wasn’t going to solve that puzzle for them.
Rapid Fall of Snapdeal
As you can see below, Snapdeal’s fortunes from December 2016 to June 2017 show us the reason why Kunal Bahl and Co had to trim down the head count at the company, and even sell off Freecharge to Axis Bank for around Rs 385 crore.
The app installs might not be the sole reflection of how things were going for the online marketplace entity, but a drop of over 8% in market share over such a short span is hard to ignore. Investors wouldn’t have been pleased to see where their money was going.
In the mean while, both of its competitors, Flipkart and Amazon continued to rake in the numbers.
If that isn’t enough to illustrate the problem at hand for Snapdeal, then if you look at the rate at which Snapdeal’s transaction volumes have seen a drastic fall, that should’ve got the alarm bells ringing at the company for sure.
Snapdeal has lost more than half of its market share between July 2016 and May 2017. Presumably, this is a trend that will continue unabated if no one throws the reverse gear (which we hear is going to happen now with Snap Deal 2.0).Kalagato report
When you look at their numbers, and see that Flipkart was willing to pay up to $950 million for the brand, it wouldn’t be shocking to see them having no regrets with this one.
For this money, Flipkart was getting Snapdeal’s meagre 5% market share, and its falling market value would have given them less to cheer in terms of value of assets.
The market share gains Flipkart would have made from this transaction have reduced for every month that the deal has been in negotiation. At this point, Flipkart can afford to let this transaction slideKalagato report
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