Ecommerce firms’ survival guide: Downsize operations, fire staff, raise funds

After aggressively expanding and scaling up the operations, Indian ecommerce companies are now downsizing and scaling down. From firing employees, shutting down non-performing units to reducing office space, industry players like Snapdeal, Craftsvilla, and Yepme are radically cutting down their expenses. The current mantra is all about reducing losses and somehow become profitable, instead of burning capital in the name of ‘expansion’.

The abundance of pink slips

• Snapdeal fired 400-600 of its employees with many more to come
• Ethnic fashion e-store Craftsvilla handed over pink slips to approximately 100 employees from its merchandise and technology teams
• Fashion etailer Yepme fired 30 staff members
• Quikr, Freecharge, an Vulcan too have sacked many of its employees

When asked about Snapdeal laying off 600 people at one go, Sanchit Vir Gogia, CEO of Greyhound Knowledge Group said,

“Better planning could have been done. Nowhere in the world do startups lay off so many people (in) one go… At a time when the company was struggling to make revenue, there was no need (for) overindulgence… I believe other startups will follow suit and by March more lay offs will be announced in other firms. There isn’t any choice. Companies will have to “right size” themselves.”

In the recent times, Flipkart and Snapdeal both reduced its office spaces and shut down loss-making units like Ekart C2C courier service. Many such cost-cutting techniques have been implemented by ecommerce firms, be it biggies or newbies.

From saving money to gaining money

Cutting cost would definitely help to bring down the expenses but staying alive and relevant in the ecommerce industry is an expensive affair. For that start-ups need funds.

Ecommerce-focussed logistics company Delhivery is looking to raise $100 million (Rs. 670 crore) from investors before its IPO. The potential investors’ list includes American private equity MNC Carlyle Group, Chinese investment firm Fosun and Goldman Sachs Investment Partners. Industry watchers predict that the money would be utilized to acquire companies in the supply chain industry.

A source close to the fundraising development confirmed,

“The due diligence process is currently underway. It is likely to be Carlyle, Fosun with Tiger Global, its existing investor, also participating. The amount may go up from the present $100 million.”

While investors are running away from etailers due to the piling losses, the logistics players are getting a lot of attention from financiers.