New Delhi: Softbank-backed online merchant Snapdeal will lay off 500-600 employees across verticals as co-founder Kunal Bahl admitted to making mistake in growing much before it could figure out right economic model.
Struggling to raise fresh capital, Snapdeal will stop all non-core activities, reduce costs drastically and handover pink slips to employees to turn profitable.
In a bid to soften the blow of the drastic decision, Bahl and co-founder Rohit Bansal will take "100 percent salary cut".
Jasper Infotech Pvt Ltd, which runs Snapdeal, will lay off 500-600 employees across the e-commerce marketplace and its subsidiaries, mobile wallet Freecharge and logistics wing Vulcan Express, sources privy to the development said.
In an internal mail to the employees, Bahl said, "with all the capital coming into this market, our entire industry, including ourselves, started making mistakes. We started growing our business much before the right economic model and market fit was figured out."
"We also started diversifying and starting new projects, while we still had not perfected the first or made it profitable. We started building our team and capabilities for a much larger size of business than what was required with the present scale," he wrote.
The formula to revive the company, he said, "focus on only your core, stop all non-core activities, reduce costs drastically, turn profitable as soon as you can, and use those profits to spur further growth and new projects."
The company, earlier this month, had announced shutting down of its consumer to consumer marketplace Shopo.
As part of the revival plan, Snapdeal will reorganize into "a lean, focused and entrepreneurial one" by combining teams, reducing layers, eliminating non-core projects and strengthening focus on profitable growth.
"Sadly, we will also be saying really painful goodbyes to some of our colleagues in this process," he wrote without giving the actual number of layoffs.
Snapdeal, which faces intense competition from Amazon and Flipkart, had last reported an employee strength of 8,000.
Announcing that he and Rohit Bansal will take a 100 percent salary cut, Bahl said many senior leaders have "offered to take a significant cut in their compensation."
Earlier in the day, Snapdeal announced that Freecharge's CEO Govind Rajan had resigned, after nine months of becoming the chief executive at the mobile wallet company, which was bought by Snapdeal in 2015.
No reasons for Rajan's decision was given but it is said that Snapdeal was struggling to raise USD 150-200 million for FreeCharge at a valuation of over USD 1 billion.