The Union Commerce Ministry intends to investigate the complaints lodged by online vendors against e-commerce biggie Snapdeal for allegedly defaulting on payments due to them, a top official disclosed on Thursday.
"Yes, there are lot of people telling me about it. Lot of people have approached me through the social media. I need to work together with the Consumer Affairs Ministry on this," Commerce and Industry Minister Nirmala Sitharaman told journalist. She said the government needs to ascertain whether it is commercial transactions going wrong or there are violations of policy. There are too many angles to it, she added.
Sitharaman said this while replying to a question about the complaints of vendors regarding non-payment of dues. ``Its not just the Commerce Ministry which has to do it, maybe, one or two more departments and ministries will have to come on board. I am conscious of what has been coming through in the market. I am working with them to find out how we can respond,'' she added.
After Snapdeal recently began laying off hundreds of employees as part of its cost-cutting, online sellers appealed to Sitharaman to help safeguard their money that the company holds in the form of outstanding dues. The All-India Online Vendor Association has written to Sitharaman that in any given month as much as Rs 300 crore-400 crore of their funds is held by Snapdeal either in the form of outstanding dues and goods in transit or as refunds.
The e-Commerce Sellers Association of India has also cautioned its members to either stop selling on Snapdeal, or to ensure that their dues from the company do not accumulate. The Softbankbacked e-tailer has started laying off hundreds of employees across verticals as cofounder Kunal Bahl admitted to making a mistake in growing much before it could figure out the right economic model.
Struggling to raise fresh capital, loss-making Snapdeal has decided to stop all non-core activities, reduce costs drastically and sack employees to turn profitable. In a bid to soften the blow of the drastic decision, Bahl and co-founder Rohit Bansal have decided to take a 100 per cent salary cut. This has sparked a fear among the vendors that the company is facing a cash crunch and may not be able to pay the dues. 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 had recently announced shutting down of its consumer to consumer marketplace Shopo as part of its move to cut losses.