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Why Did Flipkart Walk Away From Unicommerce

Why Did Flipkart Walk Away From Unicommerce

Unicommerce Suffers From Association With Unreliable Snapdeal

Given that the biggest dramatic event of Indian startup history unfolded with Snapdeal and Flipkart locked into a now-yes-now-no game of wooing before reaching its conclusion, I feel it made sense to share some perspectives on one important part of the deal which was on the table. I have been an investor in Primaseller, which started off as a direct competitor to Unicommerce and has continued to thrive.

This gave me a ticket to a ringside view of the story of Unicommerce – their rise as well as their fall over the last four years.

Reasons Why Flipkart Walked Away From Unicommerce

Founders are no longer part of the team: The company started off as a great product company but after they sold to Snapdeal, the founders moved out and the company has lost the spirit of product innovation and service that they were known for in 2012-2014. This is a classic case of what happens when the founder’s skin is no longer in the game and an acquisition kills the ability of the startup.

In 2017, some merchants have actually been offered the product for free, which is a cardinal sin for any B2B product. The intention behind this move seems very unclear.

The Indian ecommerce tech infrastructure was weak: The Indian ecommerce ecosystem was founded and designed for inventory-led models and not marketplace models. The marketplace model has forced down everyone’s throat due to legislation. This means that none of the players like Flipkart, Myntra were ever invested in seller side technology.

Snapdeal, known for its hustler culture, ended up accumulating a lot of technical debt because it waited too long to start fixing its technology platform – it was burning too much on advertising on the front page of the Times of India and creating its brand.

It wasted so much on beautifying its facade that its core backend systems remained unstable for too long – an unforgivable sin for an ecommerce company.

The API problem: Companies like Unicommerce and Primaseller have worked very hard to build SaaS products which allowed merchants to sell online. This involved integrating with multiple third parties to keep inventory and order data synchronised in real-time and avoid errors. For this, they rely strongly on APIs for a smooth integration.

Flipkart’s seller APIs continue to be unstable even today and Snapdeal didn’t even give their partners an opportunity to use the poorer alternative of scraping its data for very long because it kept on constantly changing its UI. Although it released its APIs later in 2016, Primaseller is wary of attempting to use these anymore today – once bitten, twice shy!

Basically Paytm initially provided seller APIs to players like Primaseller to integrate. But when they found out that Unicommerce was acquired by Snapdeal they were afraid that their data was going to Snapdeal and, hence, blocked the APIs not just for Snapdeal but for everyone. Later when Unicommerce tried to scrape the data from their UI, Paytm sent them a legal notice.

Primaseller understood this threat (having had a bad experience with ShopClues earlier, who never managed to solve the API issue), and therefore decided to focus globally, instead of just trying to acquire Indian merchants. However, Unicommerce never had that chance, because they were locked into the Indian market by Snapdeal,

A marketplace as a model itself was not sustainable for small sellers: With COD returns at a 30% rate, there are very few categories for sellers that have the margins to support a marketplace model. Tens of thousands of sellers across Indian marketplaces have delisted their products from 2015-2016 after looking at their cash books and realising that they are bleeding cash. None of these small merchants had the funding that Snapdeal and Unicommerce had. Even Amazon continues to lose money in India, so this is hardly surprising.

The Indian seller is unforgiving: There are hardly any successful SaaS B2B, SMB products focussing on the Indian market for a reason. Such products are built based on low pricing and low support models and this is the only way they could be made viable. However, while Indian merchants refuse to pay market rates, they expect a much higher level of support – perhaps because they are still not technologically savvy enough to use a self-serve product. They adopt a DIFM (do it for me) attitude rather than a DIY approach, but are not willing to pay for this support and hand-holding.

Today, Unicommerce is a shadow of what it was – bruised by the market and its customers. Unfortunately, its fortunes are now tied to those of Snapdeal which definitely look bleak. I hope more product companies are able to learn from the mistakes of others and understand their markets and limitations, while planning for meteoric growth.

[This post by Dr. Aniruddha Malpani first appeared on LinkedIn and has been reproduced with permission.]