After the euphoria of the Big Billion Dollar Sale in which Flipkart made a record number of transactions, claimed a record number of sales, and celebrated its success by splurging crores on a party that featured Akshay Kumar, comes a sobering note from the accounting department. The company registered a loss of Rs. 2000 crore this year.
Flipkart had incurred losses of Rs. 715 crore last financial year. Flipkart has been hiring aggressively and providing generous employee perks, which caused its employee expense benefits to rise to Rs 476 crore. Flipkart’s sales though increased threefold, from around Rs. 2800 crore in 2014 to Rs. 10,300 crore this year.
Flipkart, Amazon and Snapdeal have been engaged in a brutal price war in a bid to attain a bigger slice of the Indian e-commerce market. All three retailers have been attempting to draw customers through extravagant promotions, heavy discounts, and flexible return policies. All three retailers are currently running in losses.
“The current model of Flipkart doesn’t make any economic sense as any company selling goods below manufacturing cost without any margin will always attract customers. But a sustainable business can’t run like this and Flipkart needs to look for alternate revenue models such as advertising and data selling to make money,” said the CEO of a leading retail group told Times of India.