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Flipkart Internet’s net loss widened 40 per cent to ₹1,625.7 crore for FY19 thanks to spiralling logistics and customer acquisition costs.
Total income of the company — which runs Flipkart’s e-commerce platform — rose 57 per cent to ₹4,804.7 crore. This includes other income of ₹570 crore, which more than doubled compared with the previous year, according to documents sourced from data intelligence platform paper.vc .
The e-tailer’s continued customer acquisition costs, rising supply chain and logistics costs, and the government’s amendment of e-commerce regulations earlier this year, have all contributed to the e-commerce major’s spiralling losses.
“While Flipkart is making margins at the product level, it is losing a lot in logistics and warehousing costs, payment gateway costs, cash handling and returns costs. Costs associated with Press Note 2, from the government earlier this year, created extra costs for Flipkart as it had to create many intermediary entities and billing structures with additional losses incurred toward reconstructing contracts to comply with the new regulations,” said an e-commerce analyst from a top management consulting firm, who did not wish to be named.
Fighting Amazon
A large part of Flipkart’s losses in FY19 can be attributed to costs incurred to compete with its arch rival Amazon, especially in its entry into the food retail business. Add to this the continued customer acquisition cost, which is around $20 per customer, and customer retention costs, and it doesn’t paint a very pretty picture, said another analyst.
E-commerce companies in India haven’t yet figured out the right financial business model and will continue to bleed till they figure it out, said Arvind Singhal, CMD of Technopak.
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