Snapdeal Set to Raise Prices, Seek Higher Margins from Sellers
Co preparing to lay off over 1,000 employees
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.