9B16E039

SNAPDEAL: A NIGHTMARE OR A BENEFIT IN REVERSE LOGISTICS?1

Poonam Garg, Rashmi Kumar Aggarwal, and Vaibhav Garg wrote this case solely to provide material for class discussion. The authors
do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.

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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2017-01-03

On July 20, 2015, Vaishali, a student of an engineering college in Delhi, had set a reminder on her mobile
phone to buy a gift for her mother’s birthday. She was sure that a gift of a traditional silk saree2 would elate
her mother. The proposition, though exciting, was difficult, as she was unsure of her mother’s colour choice
in sarees. Vaishali’s friends suggested that she should shop online, which would give her wide colour choice,
ease of delivery to her hometown (Chennai in South India), and an easy option of return. She was convinced
by her friends, who were regular online shoppers, to buy a saree from Snapdeal, a trusted online shopping
portal known for its variety and quality of brands. The saree was delivered on time; however, Vaishali’s mother
had bought the same saree from a local vendor a week earlier. She hesitantly asked Vaishali if the saree could
be easily returned because she could not return her saree to the local vendor. Vaishali assured her mother the
saree could be returned online, as the request was within the timeframe from Snapdeal; however, she
wondered whether the company would be able to give a refund.

For Snapdeal, product return was an integral part of improving customers’ shopping experience, boosting
customer loyalty, and acquiring new customers. Assured product returns and positive exchange experiences
secured 95 per cent of customers returning to an online merchant and making additional purchases in the future.3
According to an Invesp infographic, approximately 30 per cent of products ordered online were returned
industry-wide.4 In the fiscal year ending March 31, 2015, online shoppers in India returned goods worth an
estimated US$800 million to US$1 billion.5 The rate of returns of online products was alarming for e-commerce
firms, and the adding of logistics costs to each product return was hampering the industry’s growth. Snapdeal,
like all other e-commerce companies, promised product returns through reverse logistics. Reverse logistics dealt
with all procedures, including picking up the product from the customer and returning it to the seller.

Would Snapdeal sustain the non-serious buyers or those who ordered goods “just for fun” or those who
were window-shopping (i.e., not intending to make a purchase) on e-commerce sites? Would reverse
logistics give a strategic advantage to Snapdeal? Would it be a nightmare or a boon? Would Snapdeal need
to alter its strategy and guidelines to reduce customer product returns? Could the company indemnify itself
through the terms and conditions of its contract with the customer and vendors in cases where the returns
were made with bad intentions?
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COMPANY BACKGROUND

Snapdeal, an online marketplace, was incorporated as a private company in February 2010 by Kunal Bahl
and Rohit Bansal, who set up their headquarters in Okhla, New Delhi.6 It soon emerged as the biggest online
commercial portal in India. It offered more than four million products in more than 500 categories, including
apparel, baby products, electronic appliances and gadgets, home furnishings, games, toys, and footwear.7
It dealt with 150,000 dealers, catering to more than 500 urban communities and towns in India. It had a
wide, versatile exchange stage as a result of securing FreeCharge, an online payment service, in 2015. The
company had raised capital seven times from January 2011 to August 2015.

The seven investments were $12 million, $45 million, $50 million, $133 million, $105 million, $647
million, and $500 million. These investments were made by Nexus Venture Partners and IndoUS Venture
Partners; Bessemer Venture Partners, Nexus Venture Partners, and IndoUS Venture Partners; eBay,
Bessemer Venture Partners, Nexus Venture Partners, and IndoUS Venture Partners; eBay, Kalaari Capital,
Nexus Venture Partners, Bessemer Venture Partners, Intel Capital, and Saama Capital; BlackRock, Temasek
Holdings, and PremjiInvest; SoftBank; and Alibaba Group, Foxconn, and SoftBank, respectively.8 In 2016,
Snapdeal raised an additional $200 million as a result of funds raised from the Ontario Teachers' Pension
Plan and funds advised by Iron Pillar. As of February 2016, Snapdeal's total market value was $6.5 million.9
These changes were reported in the profit and loss statements of the company for the financial years 2012–
13, 2013–14, 2014–15 (see Exhibit 1).

SUPPLY CHAIN MANAGEMENT IN SNAPDEAL

Snapdeal, a pure-play e-marketplace model, provided a platform for various vendors to showcase their
products and for consumers to find their desired products (see Exhibit 2). The supply chain at Snapdeal
comprised multiple functions, including procurement, warehousing, inbound logistics, and outbound
logistics.10 Snapdeal promised to provide quality products, the best customer experience, and cost efficiency.

In 2013, Snapdeal launched a fulfillment platform named SafeShip for sellers to list their products on
Snapdeal.com.11 For vendors who wanted to sell their products online through fulfillment centres, SafeShip
offered various assistance, including logistics and courier services. With an anticipated further investment of
$300 million after 2016,12 Snapdeal had automated all its retail processes as a part of its supply chain
management.

To have a wide geographical reach, Snapdeal had 63 fulfillment centres in key locations across 25 cities in
India.13 These centres provided a facility for vendors to stock their inventory. The company ensured
rigorous quality checks, strong packaging, easy returns, and fast delivery of products. The company signed
partnership contracts with 20 specialized logistics companies to reach 2,800 PIN codes (i.e., Postal Index
Number codes, an Indian postal code system). On May 10, 2016, the company claimed to provide the fastest
deliveries in Indian e-commerce with 99 per cent delivery accuracy.14

REVERSE LOGISTICS AT SNAPDEAL

Reverse logistics were as important as sales in the company’s supply chain. Reverse logistics in the company
dealt with all the procedures to return a product from the customer to seller and reuse the returned product.
An effective reverse logistics process optimized storage and distribution costs and gave intangible benefits in
terms of customer satisfaction. The reasons for returned products included the following: rejection of the
delivered product, unavailability of the buyer to receive the product, receipt of the wrong product, receipt of
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a damaged or low-quality product, receipt of a product that was no longer required, a mismatch between the
product received and the online version, discovery of a better product with better functionality after the
original purchase, or misuse of the return policy and a return without any reason.

Generally, the processes of reverse supply chain management in the e-marketplace began with a return
request from a customer. To quantify the returns, the customer care centre asked the customer a series of
questions. The customer care centre then prepared a pickup list and forwarded it to the e-marketplace return
centre. The return centre then forwarded the return request to the logistics partner to pick up the product
from the customer. After the collection of the product, the logistics partner delivered the returned shipment
to the return centre, where the product was inspected. After the recipient team verified and validated the
returned product, this team shared feedback by checking the results with the supplier. Supplier feedback on
the processing result was shared with the recipient team. Then, the e-marketplace return centre informed
the customer of the return status and initiated the process of refund or replacement. The returned product
received from the customer was sent back to the supplier, based on the terms and conditions with that
supplier. Damaged products received from the customer could sometimes lead to a dispute between the
seller and the logistics partner, wherein one or both parties maintained that an undamaged product had been
supplied or delivered (see Exhibit 3).15

To drive maximum value from the returned product, the seller had the discretion to move the returned
product to an appropriate recovery type—re-stock, refurbish, part recovery, or scrap/recycling.16 In the
simplest terms, re-stock could be undelivered products with unopened boxes that were sent back to
inventory. Refurbish referred to repackaging the returned, opened, sealed box to be as good as new and
returning it to stock with a reduced price. This was a multibillion-dollar market, especially in a price-
sensitive market such as India. Part recovery could also be carried out on the products that were once
valuable but could not be resold in the e-marketplace. The damaged or obsolete goods could be sent to scrap
or recycling to recover the losses incurred from the returned products.17

E-COMMERCE: PRODUCT RETURN STATISTICS AND INDUSTRY TRENDS

The e-commerce market in India was on an upward spiral. According to the Associated Chambers of
Commerce of India (ASSOCHAM), e-commerce revenues had grown from $3.8 billion (in 2009) to $17
billion (in 2014) to $23 billion (in 2015) to an estimated $38 billion (in 2016).18 Further, India’s e-commerce
revenues were projected to accelerate to $120 billion by 2020, thus registering growth at an annual rate of 51
per cent, the highest in the world, according to a joint ASSOCHAM-Forrester study paper.19

E-commerce product returns in India comprised 20–30 per cent of total sales, which meant that for every 10
products sold, two to three were returned. By 2020, approximately 400 million products would be returned
annually.20 According to TrueShip, 20 per cent of returns were attributed to a damaged product, 23 per cent of
returns were due to the wrong item being delivered, and 22 per cent of returns were the result of buyers
receiving different products from what they ordered. In short, “65 per cent of all returns are as a result of
mistakes by the seller, and 35 per cent of buyers return products because of other reasons.”21

CHALLENGES IN REVERSE LOGISTICS

The main challenge in reverse logistics was the quick and proper identification of the returned product
according to the specifications of the original purchase by the buyer. These specifications included (a) who
returned the product, (b) what product had been received, (c) what state the returned product was in, and
(d) whether the returned product matched the original purchase. These specifications were necessary to
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ascertain the origin of return, the tracking of defective products, and the tracking of transit losses or
damages. The challenges were profound, even when the customer caused the damages, which did not match
the expected possible defects; this situation in turn created a huge loss, leading to confusion and ambiguity
in logistics and warehouse costs associated with a returned product.

NEXT STEPS

Snapdeal had some tough questions to answer. Should Snapdeal have “strive[d] to not give customers a chance
to return”?22 Using the best reverse practices, should Snapdeal have connected organizations and retailers with
customers and derived valuable feedback from them? Would Snapdeal need to alter its product return policy
in favour of a “no questions asked” return policy? Would corrective action be required for the e-commerce
industry? Could Snapdeal create a recall value for its services for customers such as Vaishali who had
purchased a saree for her mother?
Page 5 9B16E039

EXHIBIT 1: SNAPDEAL—PROFIT AND LOSS, 2013–2015 (IN US$ MILLIONS)

DESCRIPTION March 2015 March 2014 March 2013

Currency Rate 62.29 59.97 54.29
Number of Months 12.00 12.00 12.00
INCOME:
Operating Income 123.05 25.70 5.44
Less: Interdivisional Transfers
Less: Sales Returns
Less: Excise Duty
Operating Income (Net) 123.05 25.70 5.44
EXPENDITURE:
Increase/Decrease in Stock
Raw Material Consumed
Power and Fuel Cost 0.76 0.22
Employee Cost 58.95 14.48
Operating Expenses 7.51 1.52
General and Administration Expenses 18.13 4.57 27.91
Selling and Distribution Expenses 262.61 49.12
Miscellaneous Expenses 12.71 1.68
Less: Expenses Capitalized
Total Expenditure 360.66 71.59 27.91
Operating Profit −237.61 −45.89 −22.47
Other Income 27.49 2.34 0.77
Operating Profit −210.12 −43.55 −21.70
Interest 0.14 0.16
Profit before Depreciation and Tax −210.26 −43.71 −21.70
Depreciation 1.54 0.42 0.41
Profit Before Taxation & Exceptional Items −211.80 −44.13 −22.11
Exceptional Income / Expenses
Profit before Tax −211.80 −44.13 −22.11
Provision for Tax
Profit after Tax −211.80 −44.13 −22.11
Extra Items
Adjustments to Profit after Tax
Profit Balance −76.66 −35.51 −17.11
Appropriations −288.46 −79.63 −39.22
Equity Dividend %
Earnings per Share −7,238.46 −1,976.58 −990.50
Adjusted Earnings per Share −7,238.46 −1,976.58 −990.50

Source: Ace Equity, Database, accessed July 2, 2016.

Page 6 9B16E039

EXHIBIT 2: SCHEMATIC BUSINESS MODEL OF THE E-MARKETPLACE

Source: Created by the authors.

EXHIBIT 3: SCHEMATIC PROCESS FLOW OF REVERSE LOGISTICS OF THE E-MARKETPLACE

Source: Created by the authors.

Page 7 9B16E039

ENDNOTES
1
This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Snapdeal or any of its employees.
2
A saree, worn by South Asian women, was a traditional garment that draped around the waist and shoulder.
3
Armando Roggio, “4 Tips for Better Ecommerce Returns and Exchanges,” Practical Ecommerce, December 19, 2013, accessed
May 1, 2016, www.practicalecommerce.com/articles/62302-4-Tips-for-Better-Ecommerce-Returns-and-Exchanges.
4
Stacey Rudolph, “E-commerce Product Return Statistics and Trends [Infographic],” Business 2 Community, April 10, 2016,
accessed May 1, 2016, www.business2community.com/infographics/e-commerce-product-return-statistics-trends-infographic-
01505394#E0rCRS6rGgD7WJb8.97.
5
All currency amounts are in US$ unless otherwise indicated; Harsimran Julka and Payal Ganguly, “Ecommerce Sites Altering
Policies to Avoid Low Returns,” The Economic Times: Retail, April 8, 2015, accessed May 1, 2016,
http://articles.economictimes.indiatimes.com/2015-04-08/news/60942830_1_amazon-india-returns-flipkart-and-amazon.
6
“Snapdeal Success Story,” SuccessStory, accessed May 1, 2016, http://successstory.com/companies/snapdeal.
7
“How to Sell on Snapdeal,” Primaseller, June 20, 2015, accessed May 15, 2016, https://www.primaseller.com/how-to-sell-on-snapdeal/.
8
“Snapdeal Success Story,” op. cit.
9
Jagran Post News Desk, “India’s Snapdeal Raises USD 200 Million Giving It USD 6.5 Billion Market Value,” Post: Business
News, February 15, 2016, accessed April 3, 2016, http://post.jagran.com/indias-snapdeal-raises-usd-200-million-giving-it-usd-
65-billion-market-value-1455521057.
10
“Snapdeal—Supply Chain Manager (3–7 yrs),” iimjobs.com, accessed May 15, 2016, www.iimjobs.com/j/snapdeal-supply-
chain-manager-3-7-yrs-58005.html.
11
Our Bureau, “Snapdeal Launches Platform for Sellers Keen to List Products Online,” The Hindu—Business Line, June 24, 2013,
accessed April 4, 2016, www.thehindubusinessline.com/info-tech/snapdeal-launches-platform-for-sellers-keen-to-list-products-
online/article4846429.ece.
12
PTI, “Snapdeal to Spend Rs 350 Cr on Supply Chain Logistics in FY’15,” The Economic Times: Retail, May 28, 2014,
accessed April 4, 2016, http://articles.economictimes.indiatimes.com/2014-05-28/news/50149467_1_snapdeal-co-founder-
ceo-kunal-bahl-supply-chain.
13
Biswarup Gooptu, “Snapdeal Claims to Offer Fastest Deliveries in Ecommerce, Says It Is Ahead of Flipkart, Amazon,” The
Economic Times: Retail, May 10, 2016, accessed June, 2016, http://economictimes.indiatimes.com/industry/services/retail
/snapdeal-claims-to-offer-fastest-deliveries-in-ecommerce-says-it-is-ahead-of-flipkart-amazon/articleshow/52199650.cms.
14
Ibid.
15
All views and processes of reverse logistics of the e-Marketplace were examined by the authors by analyzing the return
process of products from the e-marketplace.
16
Joseph D. Blackburn, V. Daniel R. Guide, Jr., Gilvan C. Souza, and Luk N. Van Wassenhove, “Reverse Supply Chains for
Commercial Returns,” California Management Review 46, no. 2 (2014): 6–22. Available from Ivey Publishing, product no.
CMR273.
17
Ibid.
18
Press Trust of India, “India’s E-commerce Industry Likely to Touch $38 Billion Mark in 2016–Assocham,” YourStory:
Ecommerce, January 2, 2016, accessed June 2016, http://yourstory.com/2016/01/indias-e-commerce-assocham/.
19
ASSOCHAM India, “India’s E-tailing Growing Fastest in the World, Says ASSOCHAM-Forrester Study,” The Associated
Chambers of Commerce & Industry of India, May 8, 2016, accessed June 2016, www.assocham.org/newsdetail.php?id=5669.
20
Rate Cut Chatter, “Returns Management in Indian E-Commerce: Lesson from the West,” Business World, September 2, 2015,
accessed June 2016, http://businessworld.in/article/Returns-Management-In-Indian-E-Commerce-Lesson-From-The-West/02-
09-2015-85538/.
21
“Protecting Your Bottom Line: 10 Product Returns Statistics All e-Retailers Should Know,” TrueShip, accessed June 2016,
www.trueship.com/articles/protecting-your-bottom-line-10-product-returns-statistics-all-e-retailers-should-know/.
22
Rajdeep Mukherjee, “The Unsolved Problem of E-Commerce Industries: Reverse Logistics!,” The Hacker Street, March 30,
2016, accessed June, 2016, https://thehackerstreet.com/problem-e-commerce-reverse-logistics/.