India: Flipkart, Snapdeal slash hiring in bid to cut costs

Pic: Reuters

India’s largest e-commerce companies Flipkart Ltd and Snapdeal, which are struggling to raise fresh funds, have slashed hiring, along with spending on discounts and advertising, as they seek to cut losses amid a sharp slowdown in sales growth. Apart from hiring a few senior leaders, both companies have reduced hiring to a trickle over the past two months in order to cut costs, four people familiar with the matter said.

Flipkart chief executive Binny Bansal has asked new human resources head Nitin Sethi to directly look at all hires at mid and senior levels, the people cited above said. Sethi is asking all business unit heads to justify hiring more people and is only allowing recruits that are judged to be “absolutely necessary”.

Flipkart has put on hold hiring for many roles, including vice-presidents, that it had previously opened up in its supply chain, product and advertising teams, the people cited above said.

Snapdeal, on the other hand, has upped performance targets for employees and wants to cull the bottom 10-15% of its staff, one of the four people cited above said, adding that the firm doesn’t plan to replace them.

A Flipkart spokesperson said by email, “Your information is incorrect. Hiring at Flipkart has always been a function of business requirement and quality talent. Our hiring plans are in line with the business goals and we are continuing to hire rich talent in our areas of focus. Over the past years, we have built a team of outstanding global professionals. This year, we are also emphasizing focus on internal development of the rich talent we have already acquired.”

A Snapdeal spokesperson didn’t respond to an email and a call seeking comment.

In the 18 months to the end of last year, Flipkart’s workforce expanded to more than 35,000 people from roughly 14,000. More than half of these people work in the company’s logistics business eKart, delivering products to customers across India.

Snapdeal, too, at least doubled its staff to 7,000-9,000 people in that period. (There are far fewer people on Snapdeal’s books compared with Flipkart, primarily because it doesn’t have full ownership of a logistics unit.)

Last year, however, Flipkart and Snapdeal lost significant market share to rival Amazon India. At the same time, margins at the firms didn’t improve.

Flipkart entities reported net loss of Rs.2,000 crore for the year ended March 2015 and Snapdeal posted a loss of Rs.1,328 crore for the same year. In the last financial year, losses at both firms are likely to have risen, according to analysts and investors.

Mint reported on 14 April that Flipkart and Snapdeal have held funding talks with several investors over the past six months, all of whom have refused to invest in the firms at their preferred valuations of $15 billion and $6.5 billion, respectively. Mint also reported then that Flipkart’s sales haven’t grown month-over-month since November, while Snapdeal’s monthly revenues have declined since then.

With sales growth slowing and investors souring on e-commerce, Flipkart and Snapdeal have been forced to conserve cash over the past few months. They have already cut spending on discounts since late last year and are trying to persuade their sellers to fund a larger part of the discounts on their sites.

Apart from discounts and advertising, employee costs happen to be the largest expense for e-commerce companies.

“Both companies hired so many people thinking that their GMV (gross merchandise value) would be at a certain level. But clearly, that hasn’t panned out. Now, there is a very sharp focus on cutting costs and conserving cash,” one of the four people cited above said.

Last year, Flipkart and Snapdeal were at times hiring people first and finding work for them later, another of the four persons said. “This kind of frenzy has totally stopped in the last three months. Roles are now being clearly defined and so is the exact purpose of hiring,” he said.

Also Read:

India: Flipkart valuation marked down by two more investors

Flipkart’s growing fame comes just when company is facing headwinds

India: Investors refuse to fund Flipkart, Snapdeal at current valuations

This article was first published on Livemint.com

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.