Flipkart Internet, company operating the online commerce platform of Flipkart.com, reported a net loss of Rs 2,306 crore for the year ended March 31, 2016, according to company’s filing with the registrar of companies. The losses doubled from Rs 1,096 crore during FY15.
During FY16, e-commerce companies including Flipkart and Snapdeal were under pressure to curb losses by reducing cash-burn and make sales profitable. However, heavy discounting during the sale period and aggressive marketing across traditional and digital channels seems to have led to a two-fold jump in losses during the period.
For FY16, Flipkart Internet reported total revenue of about Rs 1,952 crore, which also rose more than two times from Rs 772.5 crore in FY15. Flipkart Internet earns revenue via commission which seller pays to the company on every sale. Flipkart India operates the wholesale arm of the company while Flipkart Internet is the customer-facing platform of Flipkart.com.
Among the major changes in the business model to make the company profitable – Flipkart abandoned its app-only strategy for Flipkart and Myntra, opening its logistics services Ekart to other e-commerce companies, and launched advertising services for brands, according to a report by Kotak Institutional Equities.
In FY15, leading e-commerce companies Amazon, Flipkart, Snapdeal collectively reported total losses of Rs 5,000 crore on back of heavy discounting and large marketing and promotional expenditure. Flipkart Internet’s rivals – Amazon Sellers Services and Jasper Infotech are yet to release their financials for FY16. During the year foreign investors also tightened their purse strings which made the companies focus harder on unit economics and profitability.
In 2016, Flipkart witnessed a series of markdown from investors such as Valic Co 1, Fidelity Rutland Square Trust II, Morgan Stanley Mutual Fund, T. Rowe Price Group Inc, Vanguard which validates the lack of fresh investment in the e-commerce major since its last round in July 2015. However, Sachin Bansal, co-founder of Flipkart termed markdowns as theoretical exercise.