Although revenues rose sharply, Ecommerce in India experienced losses in 2016 as discounts, advertisements and expenses on employee increased very steeply than that. E-commerce business has not seen any great buoyancy as the increase in revenues in FY16 matched the growth in FY15. According to Kotak Institutional Equities
, for a clutch of 14 companies, which included e-retailers, furniture sellers, travel portals and food ordering and delivery players, losses ballooned 138% to R10,670 crore.
Between them Amazon India, Flipkart and Paytm contributed 70% of the total losses during the year; losses at Paytm went up fourfold. Amazon India reported the highest advertising spend of R2,163 crore — the American firm has been going all out to gain market share and has committed $5 billion to the Indian market. Paytm’s tab was R1,115 crore as it spent a fair amount on advertising its marketplace. Flipkart ran up a more modest bill of R923 crore.
While the number of online shoppers is estimated at 35 million and buyers do recognise the convenience of having goods delivered to their doorsteps, purchases on the Internet, it would appear, have been driven by discounts and freebies. This is probably true even for the payments business. With few businesses showing a smaller cash burn, investors appear to be reluctant to fund ventures at what are undoubtedly lofty valuations.
Data from Tracxn Technologies predicts that between January and November, just $3.7 billion has been invested in these ventures, about half the $7.5 billion which came in during the comparable period of 2015. KIE
reports funding for e-commerce ventures from PE and VC firms is down 72% year-on-year between April and November to just $1.2 billion. KIE believes that the consolidation in certain spaces following shutdowns and mergers may lead to smaller losses for some firms in FY17 and thereafter.
However, sector experts point out, FY17 has been a tough year so far given the economy has been sluggish. Moreover, e-retailers have been hamstrung by the government’s regulations on price discounts. In late March, department of Industrial Policy and Promotion ( DIPP) issued guidelines for players that were funded by foreign direct investment (FDI). These allowed marketplaces to function with financial support from FDI. However, marketplaces are disallowed from influencing prices on the platform. Moreover, an e-commerce marketplace should not allow a single seller to contribute more than 25% of the total sales on the platform.
News Source From : http://www.financialexpress.com/industry/ecommerce-in-india-awash-in-losses-amazon-flipkart-paytm-contribute-70-of-total-loss-of-rs-10670-cr/488403/
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