Flipkart vs. Amazon: A Never Ending Loss Streak for Investors?

India’s biggest e-retailer Flipkart.com is facing turbulent times. Its net loss is widening as compared to the previous years and its turnover is unable to match the losses. The blame goes to Amazon.com, the company that has forced this e-commerce giant to slash its prices at a rate which seems to be unfeasible. So, what do you think it is this the only reason why Flipkart is facing a crisis? Well, let’s evaluate it in detail:-

Why Flipkart is facing losses?

As per the reports, Flipkart has registered a loss for Rs 3,222 crore (a rise of 71%) as compared to the earlier year (the company reported loss of Rs 1,883 crore). The reasons cited are increase in the employee benefit expenses, increase in finance cost, increase in other miscellaneous expenses and a loss incurred during the acquisition of Myntra- the fashion portal.

Though the company is aggressively building its footprints in the e-commerce business by associating itself with the companies like Bajaj Allianz (insurance for its mobile phone), Airtel (to offer customized services to the subscribers), with Google (for the launch of Shopping Tab in India for product listings), the retail analytics company Upstream Commerce  , and by roping into famous celebrities like Amitabh Bachchan, Virat Kohli, to tout their sales to the next level and  to generate high revenue, but the company is still unable to battle out its rival Amazon.com.

The company has even gone to an extent to raise money from SoftBank and Tencent followed by US giant Walmart, yet it seems the company is unable to smash the records.

Further, as per the news, it is predicted that both the companies are expected to spend around $300 million in three months starting from October towards marketing of their products, discounts levied and hiring of sales staff. Last year, Flipkart spent $100-150 million, but now it seems the stake is high.

Survival of Fittest?

We think that the aggressive discounts, mindless acquisition, lucrative discount offers will not help the company to rattle its competitor and in this way, the company will definitely balloon its losses further.

Hence, the company should think a strategy to improve its sales (maybe by giving off-season discounts), quality of products and logistics otherwise Flipkart would soon become a distant dream.