After merger, Snapdeal brand could disappear
Flipkart might dissolve it; similar fate awaits FreeCharge
After its proposed merger with Flipkart, rival Snapdeal might have a very different fate from the marketplace’s other acquisitions, Myntra and Jabong. For its brand, the journey is very likely to end. Flipkart acquired Myntra and Jabong in 2014 and 2016, respectively. These are being run independently as part of the group. However, according to sources close to the Snapdeal board, within a year of the merger, the legacy of the once secondlargest e-commerce player in the domestic market might end abruptly. Other companies owned by Snapdeal’s parent, Jasper Infotech, such as online wallet FreeCharge, acquired in April 2015 for $400 million, might suffer a similar fate. Neither Snapdeal nor Flipkart responded to email queries on this.
The merger of the Gurgaon-based online marketplace with Tiger Global-backed Flipkart would begin as soon as the Snapdeal board signs a non-binding term sheet, giving the green light.
“No formal discussion has taken place yet, as the non-binding term sheet has not been signed. However, initial feedback we have got from Flipkart as well as its investors tell us that the Snapdeal brand might be dissolved within a year of the merger,” said a source close to the Snapdeal board.
Snapdeal founders Kunal Bahl and Rohit Bansal have been in talks with SoftBank, its biggest investor and initiator of the merger, to retain the remaining 1,200-odd employees in the merged entity. Sources said the founders might be able to bargain for a few months’ relief before retrenchment and shutters.
According to brand experts, unlike Myntra and Jabong that have unique selling points, Snapdeal provides no such benefits to Flipkart. “Myntra and Jabong are specialised brands, while Snapdeal and Flipkart are perceived to be of the same type by customers. For Flipkart, it is anyway a strategic acquisition,” said Samit Sinha, managing director, Alchemist Brand Consulting.
Shutting acquired companies is not new to the e-commerce sector. After only 18 months of acquiring Taxi For Sure for $200 million, Ola dissolved the brand and merged the operations with itself. About 700 people were laid off.
Paytm might do the same with FreeCharge after acquiring it. The Vijay Shekhar Sharma-led financial technology major has signed a non-exclusive term sheet to acquire FreeCharge.
“If MobiKwik had bought FreeCharge, they would keep the brand for the optics or exposure it would get from buying the second-biggest player in the mobile wallet space. However, Paytm — a bigger player — does not need that,” said a former senior vicepresident at FreeCharge.
There might be a slim chance of Snapdeal’s survival though. “There are two possibilities. Its operations might be scaled down or they can create it into a separate differentiated product,” said Amarjeet Singh, partner, tax, KPMG.