Flipkart reports a loss of Rs 2,000 crore due to discounting

Investing heavily in discounts and back-end operations Flipkart, has yet again posted a loss of about Rs 2,000 crore in the year end March.

Investing heavily in discounts and back-end operations to woo customers and stay ahead of its rivals, domestic eCommerce marketplace, Flipkart, has yet again posted a loss of about Rs 2,000 crore in the year end March.
As per a Registrar of Companies filling, Fliupkart Internet, which owns the consumer-facing portal, registered a loss of Rs 1,096.4 crore while that of Flipkart India, the wholesale arm was Rs 836.5 crore. Last year, the units had posted a combined loss of Rs 715 crore and combined sale trebled to Rs 10,390 crore.
Flipkart will have to sustain losses as it eyes at grabbing the market share by offering the best prices."Flipkart could post between 35-50% of its sales as operating loss due to its high logistics cost and discounting," said Ruchi Sally, Director, Elargir Solutions. "The only way to reduce (this) is to diversify in higher-margin product categories such as apparel and home," she added.
The eCommerce giant expects sales to scale upto 6 times this year. As per Mukesh Bansal, Head of eCommerce, Flipkart, told a leading daily that the company was on course to sell goods worth $10 billion in fiscal 2016. Flipkart is also looking to double its seller count by March from 60,000 now in an effort to convert itself into a pure marketplace similar to rival Snapdeal. At the same time, the company seems to have been hiring aggressively as reflected in employee benefit expenses that rose threefold to Rs 476 crore.
In order to strengthen their balance sheets, eCommerce companies are said to be more prudent towards discounts. Both Flipkart and Snapdeal have ample amount of cash as the Silicon Valley investors in the compabies look to get a piece of a market that is set to surge further.
Meanwhile Amazon India has indicated that it may exceed the $2 billion mark that CEO Jeff Bezos had pledged to spend last year, with sales growing more rapidly than expected. A recent JP Morgan report noted that Indian Internet companies will likely need to chart a longer and more tortuous path to profitability than some of their Chinese counterparts, and will likely see much greater consolidation for scale and better pricing power.
India's ecommerce market is set to rise to $103 billion by FY20 from $26 billion now, according to Goldman Sachs.

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