Increased growth, losses and expenditure – Flipkart’s big game in the online retailing sector

In what seems an irony, Flipkart India Pvt Ltd, the country’s largest online retailer saw the losses rise nine times in 2017-2018. Owned by US based Walmart Inc., the company’s marketplace unit, Flipkart Internet Pvt Ltd narrower losses comparatively along with a noticeable increase in growth, as per the regulatory documents from Tofler and Paper.VC.

The business model for Flipkart Internet revolves around commissions on each sale via the app or website. The wholesale unit on the other hand sources the products and sell them to third-party sellers, who further sell them to shoppers.

The reports and results belong to the time when Walmart had not stepped in and spent a whopping $16-billion. However, the challenges that have surfaced after the revelation of these reports highlight the issues and challenges that lie ahead for the group. In a direct competition with Amazon, Flipkart will have to spend money more money to develop and maintain a lead in the market.

Flipkart’s revenue rose 39 per cent to $ 21,658 crore from $ 15,569 crore I March 2018. The net losses however, widened nine times to $ 2,065 crore.

The losses have been attributed to an increase in the operating costs which include employee benefits, finance costs, and a higher purchase of traded goods.

Flipkart Internet’s revenue, in the same period rose 36 per cent to $ 3,030 crore from $ 2,253 crore in the last fiscal year. The losses reduced from $ 1,639 crore to $ 1,159 crore.

After its inception in 2007, the business model that Flipkart had followed revolves around accommodating all its subsidiaries, since FDI in the online retail sector is banned in India. Flipkart India and Flipkart Internet, the two companies generated around $ 24,718 crore in 2017-18 compared to $ 12,822 crore during the last fiscal.

Walmart, after purchasing the Indian retail giant, Flipkart disclosed that Flipkart Group (Myntra and PhonePe) had a gross merchandise value of $7.5 billion with net sales of $4.6 billion, in the last financial.

In October, Walmart cut its earnings forecast with the expected losses at Flipkart.

In May this year, Mint reported that Flipkart is likely to burn $2 billion in cash in the next 1.5 years, clearly indicating sales growth, instead of cutting down on the losses, which remains a top priority for the online retailer.

In the coming 5 – 10 years, Flipkart and Amazon both are likely to spend billions in order to develop a hold on the Indian market.