The battle for the top-spot in the e-commerce space has been raging for many years now. The winner, it seems, will be decided by a war of attrition.
Latest estimates suggest that Amazon India lost over Rs 3,572 cr in the 2015-16 fiscal year. At the same time, its revenue doubled, going from Rs 1,022 cr in 2014-15 to Rs 2,275 cr this year. The loss is mainly attributed to its efforts in ramping up spending to go past market leader Flipkart and invest in its infrastructure.
The increase in losses from Rs 1,723 crore in the previous financial year indicates that Amazon Seller Services, which earns revenues from commissions and other services to sellers, lost $44 million or about Rs 300 crore per month during the last financial year.
Amazon’s rivals, Flipkart and Snapdeal, are also struggling to make ends meet. These companies are bleeding money at the rate of hundreds of crores a year and are yet to make a profit.
Amazon Seller Services also saw its revenues jump 123% to Rs 2,275 crore for the year as well, even as total losses for the unit since it was set up mushroomed to Rs 5,637 crore at the end of FY16.
The aggressive spending of Amazon has started showing some results. Compared to Amazon, Flipkart Internet’s sales increased 153% to Rs 1,952 crore during the same period. Both units earn revenues through commissions, advertisements and shipping fees that they charge sellers. But these numbers don’t include revenues of Flipkart’s fashion subsidiary Myntra.
The pace of spending by Amazon India has only increased in the current financial year, as it introduced its global subscription service Prime and has also made an aggressive push into the grocery space.
Amazon recently invested Rs 2,010 crore in Amazon Seller Services, as its monthly losses increased to about Rs 1,000 crore in October in its battle for market leadership against Flipkart during Diwali. Amazon India has been losing about Rs 600 crore during every non-sale month as well, ET reported last week citing sources.
This pace of spending is not expected to stop.”Amazon is in a full-fledged customer acquisition mode right now and they will continue their pace in 2017. While till now market share shift to Amazon has been from other players like Snapdeal, in 2017 it could be from Flipkart,” said Satish Mena, forecast analyst at Forrester Research.
The major expense item for Amazon Seller Services was its advertising and promotional expense, which went up 54% to Rs 2,163 crore during the year. Legal expenses were the other major item, with lawyer’s bill increasing 136% to Rs 522 crore. Salaries and wage expenses also almost doubled to Rs 348 crore during the year.
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