Even as their revenues skyrocket, Indian e-commerce firms continue to see their losses mounting.

Flipkart, the largest homegrown e-commerce marketplace, witnessed a whopping 750 per cent increase in its losses at ₹2,064 crore in FY18 as it intensified its battle to take on the local unit of global behemoth Amazon. Last fiscal, Flipkart’s losses had stood at ₹244 crore.

Paytm Ecommerce’s losses increased 150 times to ₹1,800 crore even while its revenues rose 100 times to ₹775 crore.

Amazon India is yet to file its 2018 earnings report. But its largest seller, Cloudtail (a joint venture between Amazon and Narayana Murthy’s Catamaran Ventures), saw its losses increase four times and expenses rise 26 per cent though it posted 27 per cent revenue growth for FY18 at ₹7,149 crore.

Flipkart, in which global retail giant Walmart Inc made a $16-billion investment in August, saw a 40 per cent jump in its revenues to ₹21,600 crore in FY18, according to information sourced from business intelligence platform Tofler on its annual filings with the Registrar of Companies. This is the total amount of sales the company garnered during the fiscal as people thronged the platform for hefty discounts and cash-backs offered through its mobile wallet PhonePe.

The company, however, saw expenses, at ₹23,700 crore, go beyond its revenues, as it adopted a cash-burn strategy to acquire more customers, built more fulfilment centres and warehouses and pursued acquisitions. In April 2017, it bought the India unit of eBay for $500 million in cash.

Changing scenario

“Most of the companies are relying heavily on consumer durables and electronics, as that is the fastest moving category in the online space and requires a different kind of physical infrastructure compared with apparels. Each distribution centre requires an investment of a few hundred crore rupees. I expect the losses to grow for the next three-four years,” said Arvind Singhal, founder of retail consultancy firm Technopak. In the coming years, the losses will come from categories such as food and grocery, he added.

Singhal further said the increased losses are due to the continued investment by the companies to expand the market, acquire more customers, and enhance distribution, logistics and physical infrastructure as they seek to reach smaller towns and rural markets.

The e-commerce companies have not even touched the tip of the iceberg in terms of reaching customers,” said brand consultant Harish Bijoor. “They understand that it is best to ramp up advertising and reach large numbers and create indispensability,” he added.

“I think there is too much capital available to buy marketshare, as if it is the fight-to-finish for the Indian consumer’s wallet,” said Devangshu Dutta, founder of research and consultancy firm Third EyeSight. “The companies are trying to grow their revenues at rates that well exceed the market growth rates and they are still sacrificing margins for that reason.”

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