Snapdeal Set to Raise Prices, Seek Higher Mar­gins from Sell­ers

Co pre­par­ing to lay off over 1,000 em­ploy­ees

The Economic Times - - Disruption: Startups & Tech - Payal.Gan­guly@ times­group.com

Ben­galuru: Snapdeal is set to in­crease prod­uct prices in cat­e­gories such as fash­ion as well as raise com­mis­sions it charges from mer­chants as it bat­tles mount­ing losses and ex­penses.

The on­line mar­ket­place, which is also pre­par­ing to lay off more than 1,000 em­ploy­ees as it strug­gles to con­serve cash, this week in­formed its mer­chants via email that it had re­vised its lo­gis­tics fee, nor­mal pack­ag­ing fee, stan­dard mar­ket­ing fee and gross mar­gin rates.

“Im­ple­men­ta­tion of the re­vised fees would re­sult in change in the Sell­ing Price of the Prod­uct listed by you, but your Seller Pro­ceeds will not be im­pacted,” Snapdeal said in the email, which ET has seen.

“The net im­pact will set us back by 3-4% on the sell­ing price of the prod­uct,” said the man­u­fac­turer of an ap­parel brand sold on Snapdeal, de­clin­ing to be iden­ti­fied. The ap­parel cat­e­gory, which is a part of Snapdeal fash­ion, con­trib­utes about 40% of the mar­ket­place’s sales vol­ume.

For clothes sold on the mar­ket­place, Snapdeal now has an ad­di­tional pack­ag­ing charge of Rs 17.25 per ship­ment. It has also in­creased the com­mis­sion it levies from sell­ers to 17% of the sale price from 15%. The com­pany, how­ever, has re­duced lo­gis­tic charges from Rs 57.5 to a flat Rs 46 per ship­ment.

“All in all, it will in­crease the (gross mer­chan­dise value) for the plat­form and our pay­outs will fluc­tu­ate by a small mar­gin,” said a spokesman for the All In­dia On­line Ven­dors As­so­ci­a­tion. “How­ever, we might have to end up pay­ing higher (value-added taxes) as the mar­ket­place will in­crease the pri- ce of the prod­uct on the plat­form on its own.”

While prod­uct prices will in­crease, dis­counts will re­main as a re­sult of Snapdeal’s dy­namic mar­ket­ing fee, he said. “The dy­namic mar­ket­ing fees set by Snapdeal on all prod­ucts can be re­duced to 0% at any time by the mar­ket­place, which is then passed on as dis­count to the con­sumer,” said the spokesman for the mer­chants’ as­so­ci­a­tion.

These changes to Snapdeal’s cost struc­ture ahead of the close of the fi­nan­cial year are among mea­sures un­der­taken to ra­tio­nal­ize costs. The com­pany has also sus­pended its af­fil­i­ate in­cen­tives pro­gramme to con­trol costs. Snapdeal has been in talks with ex­ist­ing in­vestors to raise fresh fi­nanc­ing at a sig­nif­i­cantly lower val­u­a­tion from its peak worth of $6.5 bil­lion when it raised $200 mil­lion from On­tario Teach­ers Pen­sion Plan and oth­ers in Fe­bru­ary last year.

Snapdeal’s losses dou­bled to Rs 2,960 crore in the year to March 31, 2016. The com­pany spent Rs 911 crore in em­ployee wages and pay­outs that fi­nan­cial year.

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