2016 seems to be a year when the entire retail troupe will look for revamping their business models in order to cut down on their losses. Till last year, many retail/etail players were betting big on the massive investment raised either from investors, or other sources. But 2016 might not be the same as now there is increasing pressure from investors to cut down on discounts and concentrate on making profits.
The year 2015 moved upward in terms of sales revenue and customer acquisition in both the formats of retail. During the festive season, both retailers and eRetailer launched big sale campaigns to lure more and more customers despite running in loss. But 2016 will not be the same for sure. It’s high time for the retail landscape to tighten the shackles as a company can’t run unprofitably for long. One has to earn profit to be sustainable.
Here is the list of 5 retail/eRetail giants whose fiscal reports will amaze you like never before:
Aditya Birla Retail
Retail arm of Indian multinational conglomerate Aditya Birla Group has recently reported a 15 percent increase in its sales in FY 15-16 and has reduced its losses to 5 percent y-o-y at 571 cr. Aditya Birla Retail is amongst those few retailers that have managed to cut down on its losses.
Though the retail giant has managed to cut down on losses as a percentage of sales, they still have to find balance in terms of store location and margin mix. The company’s collective losses stood at around 5,300 cr after eight years of operation.
For Aditya Birla Retail, the market is very tough with retailer like D'Mart, Reliance and Future Group holding most of the market shares.
Future Lifestyle Fashion Limited
Retail wing of Kishore Biyani-led Future Group, Future Lifestyle Fashion Limited with its exceptional fiscal closing posted a nine-fold jump in its net profit during the third quarter ended December.
The Mumbai-based fast fashion retailer’s net sales scaled up by 18 percent at 857 cr compared to 723 cr in the same quarter last year. FLFL’s combined expenses increased by about 15 percent at 817 cr during Oct-Dec period compared to about 700 cr a year ago.
Flipping the side of the coin, eCommerce landscape is too under the same pressure of start making profit. A lot of eCommerce majors in country have shown some exceptional results in terms of ramping up their regular loss streaks. One of country’s largest online market place, Amazon India has recently revealed in one of investor’s meet that the company has yet again managed to tilt up its business in India. Though the company did not disclosed the exact numbers but claims that its fourth quarter sales were greater that a full year 2014 (Indianretailer reported earlier).
No doubt the year 2015 was loud for eCommerce as it managed to nab exponential sales figure with its most trusted weapon ‘discounts’. The festive seasons sales in Diwali and Christmas boomed up their sales to a multifold level. Amazon’s Great Indian Sale campaign, launched during the Diwali festival drew huge traffic to its website. Amazon was also declared the top eCommerce website during country’s shopping season.
Online marketplace for fashion and casual lifestyle products, Myntra has reported a loss of about 740 cr during the financial year 2014-15. This is more than four-times compared to 173 cr during the previous fiscal.
Yet again, this horrendous loss is one the back of heavy discounting and promotional costs. The Flipkart-owned company has been betting big on its deep discounting mechanism to lure more customers but have recently decided to ditch this model and trim down on its discount offerings. (Indianretailer reported earlier).
“Myntra dropped its discount rate to 6 percent during the Diwali quarter, but discounting won't go away entirely. Fashion works in that manner, there are always going to be some discounts in the system,” said Prasad Kompalli, Head, eCommerce platform, Myntra.
Continuing the tale, Bengaluru-based eCommerce firm Jabong has too decided to cut down discounts further to reduce its y-o-y losses. Though the company crossed 1,000 cr sales mark in the last fiscal, but its net loss scaled to 43.6 cr from 16.6 cr a year earlier (Indianretailer reported earlier).
Commenting on the same, Sanjeev Mohanty, CEO & MD, Jabong said, “We will bring down discounts by selecting better products and assortment of products. We are looking at creating efficiencies at various levels such as warehouse, supply chain and other aspects.”
This stock watch clearly indicates that the entire retail universe (both online & offline) has now arrived to a stage from where the real fight begins. It will be interesting to see how these firms manage to keep the balance between customer acquisition and at the same time grooming up their balance sheets.