» Business » India's e-commerce startup losses rise to Rs 78,840,000,000!

India's e-commerce startup losses rise to Rs 78,840,000,000!

By Alnoor Peermohamed
February 11, 2016 07:51 IST
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Higher advertising spends to grab customer eyeballs take a toll on startups across segments

Image: Will India's top startups ever be able to join the 'Unicorn club'? Unicorn is a term in the US investment and venture capital industry that denotes a start-up company whose valuation has exceeded $1 billion.Photograph: Sean Gardner/Reuters

India's top 22 online commerce start-ups reported a 293 per cent growth in losses at Rs 7,884 crore (Rs 78.84 billion) for the financial year ended March 2015 on combined revenue of Rs 16,199 crore (Rs 161.99 billion). Losses soared due to bloated advertising spends as start-ups rushed to grab customer eyeballs in the face of growing competition.

Combined revenue growth was up by 191 per cent for the period, with marketplaces Flipkart, Snapdeal and Amazon India leading with revenue growth of 475 per cent. The marketplace firms were the only one among online commerce services to post a decline in loss margins, to 158.4 per cent from 197.9 per cent in the previous year, a study by brokerage Kotak Institutional Securities found.

Real Estate

The real estate category, thanks to marketing spending by, posted the biggest growth in loss margins, up to 738.4 per cent during FY2015 from 325.2 per cent in FY2014.

Housing, which is backed by Softbank and witnessed a management change after founder Rahul Yadav was evicted following a boardroom battle last year, posted a loss of Rs 279 crore on revenue of Rs 12.7 crore, up from Rs 48.9 crore in the year earlier period.


While the top three e-tailers -- Flipkart, Snapdeal and Amazon -- posted a massive combined loss of Rs 4,984 crore (Rs 49.84 billion), revenue growth outpaced growth of losses. These companies, which are often seen as the torchbearers of India's start-up sector, do seem to be slowly moving towards building sustainable businesses, something which has become more apparent in the past few months.

Both Amazon and Snapdeal posted individual revenue growth of 500 per cent, and as per the report, hit gross merchandise values (GMV) of $2 billion each. Flipkart saw slower growth during FY2015 with revenues going up by 400 per cent and an estimated GMV of $3 billion.

“Further, we also note that Flipkart seems to have lost market-share in FY2015, as Amazon and Snapdeal ramped up sales. We believe recent initiatives of the company such as adding sellers aggressively, greater focus on its logistics business and opening it for third party business, and introduction of new categories (Flipkart Nearby, second hand goods purchase and sale) is intended to help it maintain its lead over its peers, as well as add new revenue streams," wrote Kawaljeet Saluja and Garima Mishra in the report.

Online classifieds

In the online classifieds space, three major players Sulekha, AskMe and Quikr, showed marginal growth in revenues. Quikr's revenues grew to Rs 24.8 crore (Rs 284 million) from Rs 20 crore (Rs 200 million).

Sulekha went to Rs 98.5 crore (Rs 985 million) from Rs 80.9 crore (Rs 809 million) and AskMe's revenues grew to Rs 43.4 crore (Rs 434 million) from Rs 42.7 crore (Rs 427 million).

Losses, however, went up massively, with Quikr and AskMe posting a combined loss of Rs 704.9 crore (Rs 70.5 billion) during FY2015, up from Rs 380.9 crore (Rs 38.1 billion) in the previous year.

Sulekha's profits for the corresponding period were not available. The report suggests that the massive rise in losses despite lack of revenue growth in the classifieds sector was due to high investments in employees, technology as well as on advertising.

Food technology

Food technology is one of the sectors has seen quite a few players resort to cost cutting and layoffs during 2015. Zomato, which posted revenue of Rs 96.7 crore (Rs 967 million) during FY2015 had an employee cost of Rs 130.3 crore (Rs 13 billion), while FoodPanda, with revenue of Rs 4.6 crore (Rs 46 million), had an employee cost of Rs 5 crore (Rs 50 million).

Undercutting costs, investing in growing their businesses and high employee costs led these companies to layoff employees and even shut operations in a few locations.

Medical technology

Medical technology startup Practo was "the standout performer” as revenues increased 1,000 per cent+, while loss margin declined meaningfully, the report said. The company posted a loss of Rs 12.9 crore (Rs 129 million) during FY2015 on revenue of Rs 25.4 crore (Rs 254 million). The revenue and loss figures for the company during FY2014 stood at Rs 2.2 crore (Rs 22 million) and Rs 9.9 crore (Rs 99 million) respectively.

“Going by heavy discounting as well as advertising intensity by various e-commerce companies over the past few months, we believe FY2016 losses for our sample set would be higher than FY2015 losses,” wrote Saluja and Mishra.

Housing has reduced its staff and cut costs on advertising, which should prompt competitors to do the same. It's a similar story when it comes to food tech firms such as Zomato and TinyOwl, which could lead to more stability in the sector. Lastly, e-tailers such as Jabong and Myntra have begun to focus on in-house brands that provide better margins.

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