Do E-Commerce Giants Like Amazon and Flipkart Make Any Profit in India?


A lot has changed for the booming e-commerce industry in India over the last decade or so. Leading the e-commerce sector are the huge online retail behemoths, Flipkart, and Amazon, which put together hold about 80% of India’s e-commerce share. It goes beyond debate that they hold the crown of one of the most prominent digital businesses in India.

With services ranging from selling fashion, home essentials, skincare, electronics, and so on, they’ve made a name for themselves for being one of the most popular and trusted brands in India. But with all that being said, it is still interesting to note that, as Forbes India puts it, profits for Flipkart and Amazon could be a distant dream. So, the question emerges, despite being one of the largest names in the e-commerce business, do online giants like Amazon and Flipkart make any money in the Indian market? 

A Look at the Losses


Even with business flourishing, losses remain a part and parcel of life for e-tail players in India. Despite having an increase in sales and revenue, the losses still overshoot for e-commerce giants like Amazon and Flipkart. In FY16, Flipkart reported a revenue of Rs 1,951.7 crore while the loss was Rs 2,305.7 crore. For Amazon India, the revenue was Rs 2,275.4 crore with a loss of Rs 3,679.9 crore. Even recently, for FY19, the revenue surged but the losses remained at a whopping Rs 5,460 crore and Rs. 5,800 crore, for Flipkart and Amazon respectively. 


In the same year, as FDI in e-commerce rules were implemented, Amazon shares fell by 5.38%, losing $45.22 Bn in market capitalization. Brian T. Olsavsky, senior vice president and chief financial officer, Amazon said in March 2019, “We did make some changes to our structure to stay in compliance with all regulations. There were a few days of downtime for some of our selection. But for the full quarter, the impact was minimal and we’re in compliance and we’re very happy with our business in India.” 


Regulatory Hurdles Put Pressure


There was some minor destruction in the e-commerce space when in late 2018, the Indian government introduced the draft e-commerce policy and implemented new foreign direct investment norms to curb deep discounting. Predatory pricing has always been a topic of discussion between the government and e-commerce companies. Time and time again, trade associations and online sellers’ bodies have criticized big e-commerce platforms for selling products at dirt cheap rates that are near-cost prices, to boost sales and volumes.


Piyush Goyal, India’s commerce minister, has also emphasized in the past that platforms like Amazon are there to trade and offer opportunities to consumers and sellers and should not indulge in predatory pricing or use the power of large capital to buy users through discount.

 

Under the rules, e-retailers have to compulsorily display details about return, refund or exchange warranty, guarantee delivery, shipment modes of payment, grievance redressal mechanism as well as the country of origin of the product.


Now, companies are not allowed to directly or indirectly manipulate the prices of products offered on their platform and unreasonable profits or discrimination between consumers cannot be made. These rules are were in the interests of small retailers and create some sort of parity between the local retailers and large e-commerce companies such as Amazon and Flipkart, which have huge financial arms. 


Do They Make Any Profits in India?


Despite the huge growth in the Indian market, huge e-commerce companies like Flipkart and Amazon have proven to not be profitable. In fact, it seems like none of the e-commerce companies have been successful inaptly handling growth as well as profitability at the same time. For instance, Cloudtail and Appario reported revenues of Rs 8,945 crore and Rs 6,049 crore, respectively, but their profits were just Rs 29.4 crore and Rs 12.2 crore. 


Amazon’s India B2B arm, Amazon wholesale, suffered in both losses and revenue. While the revenue saw an 8% drop from last to last financial year and stood at Rs 11,250 crore, the loss widened to Rs 141 crore in FY18-19. Even the digital payments platform by the company, Amazon Pay, saw manifold losses of Rs 1,160.8 crore in FY19, as compared to Rs 334.2 in FY18. 


“We may have 100 million people buying online at least once a year, but this is not a big number for a market like India. There have to be more buyers shopping online and spending more for companies to make profits. I don’t see them making a profit before 2025,” says Sateesh Meena, senior forecast analyst at Forrester, a market research company.


So, it’s clear that despite being one of the biggest and most popular brands in India, the scope of profits for Amazon and Flipkart remains uncertain or in the distant future. The losses are likely to continue as both the companies focus singularly on expanding market share rather than eyeing profitability. 


Written By- Radhika Rathi

Edited By- Vaibhav Sharma 


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