Snapdeal turns cash-flow positive in June, to fuel growth with reinvestment

Eleven months after talks with Flipkart for a possible merger fell apart, Snapdeal claims it has met its goal of profitability.

In an internal letter shared with employees and their families, founders Kunal Bahl and Rohit Bansal said the ecommerce firm had turned cash-flow positive in the month of June, becoming the only Indian e-commerce firms to achieve this. “It is with great pleasure and pride that we share that Snapdeal was cash-flow positive in the month of June 2018. Simply put, we now have achieved the milestone of earning money from our business,” founders Bahl and Bansal wrote in a letter to employees’ families.

The email and letter to employees and their families respectively, copies of which have been seen by ET, state that the firm has achieved this ahead of “demanding timelines” that Snapdeal had set for itself. “As you know, we had originally planned to reach this milestone in September. However, given we have been beating our goals for many months in a row, we have achieved it three months in advance,” wrote Bahl in an another email to employees.

In the missive to employees, Snapdeal said it will look to reinvest the capital to fuel growth again as the firm looks to boost volumes which have now almost doubled since its troubled days in 2017.

“At this point, given Indian ecommerce is still in its infancy, we should seriously be considering investing in rapid growth of the business. While we have grown very well since August last year, there is likely further headroom to accelerate our growth and prudently invest behind it, especially given we have significant resources available and practically infinite runway,” Bahl wrote in the email. The development comes after ET reported in May that the firm had more than doubled its order volume to over 45,000-50,000 from a dip of 20,000-25,000 in 2017 during its slowest period.

The growth in order volumes and the recovery in the financials has come even as Snapdeal changed its strategy to focus on selling highfrequency, low-price products to price-sensitive customers, instead of on gross merchandise volume (GMV), a proxy for gross sales, according to people aware of the company’s renewed strategy, as reported by ET previously.

However while the renewed strategy for Snapdeal 2.0 has seen order volumes increase, the average order value has halved to ₹1,000-1,200 from its peak of ₹2,000-2,500 earlier. The move has also seen the marketplace reduce its assortment of products across low-margin categories such as smartphones and instead focus on consumables such as general merchandise, apparel, budget phones, refurbished phones and small appliances. A focus on non-branded good with high margins and low prices along with a steady reduction in operational costs has helped Snapdeal bring down the monthly cash burn to nil from about $8-10 million in 2016 and early 2017.