Updated: Jul 16, 2021
"For E-Commerce, the most important thing is trust"
The quote mentioned above has now become a cliché and is one of the motivating factors for those who want to do e-commerce start-ups.
Lately, e-commerce has become the most convenient and fastest growing form of business. It is evident from the fact that there are more than 1 lakh e-commerce websites registered in India but the two e-commerce giants account for more than 60% of the market share.
However, the reality is harsh and demotivating. Most of the e-commerce start-ups are incurring heavy losses. This is not just the case with the e-commerce start-ups but also with some e-commerce giants such as Amazon and Flipkart.
Now the question arises “WHAT IS THE REASON BEHIND SUCH LOSSES?", even though e-commerce is swiftly becoming the most popular and accepted form of business across the globe.
According to many experts, it has been observed that start-ups fail because they spend a huge amount of the funding they receive on advertising and hiring brand ambassadors. But what is with firms such as Amazon and Flipkart, Why do they put huge sales and discounts even after incurring such huge losses? The answer to this is the urge to acquire market and gain more customers. Over the past 4 years, despite facing heavy losses, Amazon and Flipkart have seen a surge in their operating revenue and the percentage of their losses have seen a downward trend.
For example, Flipkart Internet, the marketplace business, in FY16 reported a revenue of Rs 1,951.7 crore while the loss was Rs 2,305.7 crore. In FY19, the situation had reversed: the revenue was touching Rs 4,234.5 crore while losses were at Rs 1,625.7 crore.
At Amazon Seller Services, revenue in FY16 was Rs 2,275.4 crore with a loss of Rs 3,679.9 crore. By FY19, the revenue had reached Rs 7,594 crore while the loss was Rs 5,685.4 crore.
This has been largely due to a combination of two factors: efficiency at scale and the inroads that the e-commerce industry has made into India’s retail industry.
These e-commerce platforms have made rigorous efforts to reduce these losses and make the e-commerce industry a profitable business in India. It was forecasted that the contribution of e-commerce to the Indian GDP would be approximately 4% in FY 2022. E-commerce has faced several challenges, whether it be government rules and policies or consumer satisfaction, E-commerce has done a commendable job.
Will E-commerce be a profitable business in India? According to the experts, if we look at the current trends, the signs are quite positive and the consumer response towards adapting e-commerce especially, when we are in a middle of a pandemic makes it a promising venture.