Is Profitability Still a Distant Dream for eCommerce Biggies in India?

According to a report published by Goldman Sachs, Flipkart and Snapdeal collectively need to raise Rs 1.27 lakh crore over next five years to sustain growth.

While raising funds may not be difficult, investors are enamored with Indian e-tailers, the estimate indicates they would need to continue achieving top line momentum of more than 100% growth even as profits elude.

As predicted by Goldman Sachs, India will be the second-largest digital market in the world, after China, with the ecommerce market estimated to grow 15 times to $300 billion by 2030, accounting for 2.5% of the GDP by then. The report states, the Indian internet ecosystem “will leapfrog traditional tech themes and embrace new disruptive technologies with greater ease.”  Adding further, it also said that the  domestic online retail industry is “evolving into a hyperlocal, on-demand market,” reports ET

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Although the eCommerce industry is expanding at an accelerating pace, its growth graph still shows major fluctuations.

ET in a recent report claimed that Lifestyle online retailer Jabong more than doubled its revenue to Rs 811 crore during calendar year 2014 but deep discounting led to a five-fold increase in losses to Rs 160 crore.

Last year, the Rocket Internet-incubated company had posted a gross loss of Rs 32 crore on sales of Rs 344 crore, as per its annual report released on Tuesday. But with an EBIDTA loss of Rs 454 crore, the company burns about 55 paise to get one rupee of sales. This has come down from 68 paise loss for every rupee earned in 2013.

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The company’s average billing size during the year increased to Rs 2,238 through 5.9 million orders, compared with Rs 1,966 in 2013 when it had 2.6 million orders, according to the annual report. While the numbers might start looking hopeful, this Kinnevik and Rocket Internet backed company is still far away from churning profits.

The unstable stats evoke a seminal question, ‘Is profitability still a distant dream for eCommerce Biggies in India?’ To know what these eCommerce players perceive of this situation, read here.

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  • David ABIKZIR

    The problem is not when the main 10 e-commerces in the Indian market will become profitable but more how can we stop small e-commerces to shut down by lack of profitability! By resolving that question we will help the entrepreneurial ecosystem to be better and encourage people to launch their e-commerce venture without the fear to shut down with a model deemed not profitable.
    A solution is given by the model used in the mass distribution market, that is the back margin model. By implementing that new model in an e-commerce platform, entrepreneurs will be able to finance their marketing costs and shipping expenses by generating new revenues and thus reach profitability with their e-commerce inventory led model.
    The book ‘Flash Winners – a new e-commerce model for success’ develops that solution for the Indian market.

  • http://fuckedupstartups.com Anubhav Aggarwal

    The major problem with indian e-commerce players is that they are just focusing on capturing the market base that too on a very small scale (majorly urban market)
    Rural market base is still untapped.
    http://www.fuckedupstartups.com/fs-analyser/e-commerce-untapped-customer-base-problems/

    Other sustainable solutions includes profitable product base and profit base.
    http://www.fuckedupstartups.com/fs-analyser/better-flipkart/